Mapping out the journey ahead

Having a loyal client base and a good range of products is not always the recipe for instant success. Events can result in a company losing direction, sometimes with terminal results.

For Royal Automobile Club of Victoria (RACV) Financial Services, an outsourcing deal withINGresulted in a couple of years of inertia in the company.

The deal offered benefits for both organisations. ING would have access to RACV’s client base while the Victorian organisation would have access to the global financial services company’s products. But the deal was never consummated.

RACV Financial Services executive general manager — sales and marketing Phil Turnbull says the deal fell through about a year ago. “We parted amicably,” he says. “We couldn’t agree on a value of the (RACV Financial Services) business.”

The outcome was the RACV had to rethink what it would do with its financial services division.

“I went to the (RACV) board with a paper to reinvent the business,” Turnbull says. “The paper said we should bring in a new general manager to redesign the operation and grow it.”

The board accepted the plan and injected more funds and resources into the financial services division.

“There was also a focus on building up expertise and the appointment of a new general manager quickly,” Turnbull says.

“The aim was to have fewer advisers but for those who remained to become more productive.”

To achieve this, support infrastructure for the advisers had to be enhanced, Turnbull says.

“We needed better platforms and products,” he says. “But whatever we did, we had to deliver value to the members.”

The RACV has 1.3 million members, but the customer base is about 2 million, as it includes non-members who buy RACV products such as house insurance. Almost every customer is in Victoria and the RACV only markets its products within the state.

“That will stay the same for the present,” Turnbull says.

The first move in the plan has been to hire a new general manager — financial services, Tim Coulson, who is a former long-term senior executive atAXA.

This has resulted in a complete review of the business process at the financial services division, already resulting in significant savings.

“Our first aim is to save money and then bring better services to the members,” Turnbull says.

The ultimate outcome of these moves is for the RACV to set up a life company with a distribution company.

“We could manufacture our own products in the future, but we are looking at the entire product range we currently offer,” he says.

“But if we did go down that route, it would have to be a profitable manufacturing company.”

Turnbull says the financial services division attracts great volumes of risk business, which is marketed through direct mail.

“The consumer credit side of the business is a highly profitable side of financial services,” he says. “We have a very loyal customer base and a personal finance company that does well at cross-selling.”

Coulson says any new risk products would have to be built for direct marketing.

“We would not build an adviser life product, but one that could be direct marketed to a segmented client base,” he says. “We are spending a lot of time segmenting the client base, so we can deliver the right product to them.”

Coulson says it is the consumer credit business that underpins risk product sales.

The financial services approved product list has about eight manufacturers on it, and this is used by the RACV Financial Services dealership. Turnbull says the dealership is independent of the risk business.

However, he says the risk company doesn’t manufacture enough product a year to generate organic growth in the division.

“We would limit the manufacturing business, so we would only generate about three products out of a list of 70 — and that will not grow the business,” Turnbull says.

There will be both new risk and investment products, but Turnbull says some will be rebadged existing offerings.

Coulson says growth has to come from the adviser force. “This is why it is important to have fewer advisers, but more quality advisers to grow the business,” he says.

RACV has 20 advisers and they do not rely on the organisation to generate the leads.

“This is the fundamental difference between the individual contractor model of running advisers and the banc-assurance model,” Coulson says. “We expect our advisers to go that bit extra to be professional, as we could not provide the number of leads to support our existing team.”

All the advisers at RACV are salaried and are committed to staying in a boutique organisation, Turnbull says. “Their reason for being in the organisation is to provide good financial planning to the members,” he says.

Most of the RACV advisers use the Asgard platform, although some use Navigator.

“When looking at most of our clients, the cost of using a platform is prohibitive, so many clients remain in retail products,” Turnbull says. “If we find a cheaper platform, we might look at rebadging it, but we won’t develop our own.”

Compliance of the adviser force is currently looked after by the in-house solicitor at RACV. However, Coulson adds that the organisation is about to advertise for a compliance manager. The current compliance plan is annual and it dictates how often advisers are audited.

Training of the advisers is undertaken by IntegraTec and there are professional development days every month.

“IntegraTec conduct adviser audits when we run professional development days,” Coulson says. “The advisers have to sit exams at the end of each professional development day.”

RACV encourages all staff to become DFP or CFP qualified and all fees incurred to achieve these qualifications are reimbursed by RACV.

The future direction of RACV Financial Services has now been mapped out and will be implemented in the forthcoming months by the new team.