Piecing together a practice success

One could argue it takes a strong man to work in an office full of women, and an even stronger one to ask his wife how he should run his business. But Australian Private Capital (APC) principal Michael Tratt has done just that.

APC is a successful fee-for-service Melbourne-based financial planning practice, established 15 years ago. Two years ago, he decided to change the operating structure of the practice, covering all aspects of the business, including the team, operations and client relationships.

“In 2002, my goal was to implement an integrated business environment that would deliver greater value for our clients and our business,” Tratt says.

He says in any business there can be a tendency to look at components within the business from a one-dimensional perspective — which can produce a less-than-optimal result.

“I wanted a multi-dimensional approach where all the business components were complementary and serving our value proposition to clients,” he says.

To manage this integration, Tratt turned to his wife Marie, who had been a consultant to financial planning practices for a number of years.

Marie Tratt had the requisite skills and background to focus on the management aspects of APC’s business operations — compliance, marketing, human resources and technology.

“With Marie on board I was free to focus on our clients and to step into the integration process when needed,” Tratt says.

APC also drew on the expertise of consultants ThreeSixty, which assisted with strategy and project management in the integration program.

“Weekly project meetings kept us disciplined and committed to the delivery of our objectives,” Tratt says.

The outcome of this move meant APC, in effect, became two businesses — an advice business and a change business.

The first stage of the change was to create the best possible advice team that could exist comfortably within APC’s business model.

“The team would share our vision for an integrated business environment and ensure all components continued to serve our value proposition to the benefit of both our clients and our business,” Tratt says.

The result was that the entire advice team changed and new advisers were sourced from chartered accounting practices where they were involved in financial planning.

“A primary advantage these planners offered was that they were used to operating in a professional fee-paying business model such as ours, and where the client was a client of the business and not an individual financial planner,” he says.

Getting the dynamics of the team right was critical for the integration program to succeed. Quite by chance, the team — except for its principal — is made up entirely of women.

“At first I was worried about balance — but to tell the truth, I’ve never had such great support and neither have my clients,” Tratt says

“They were certainly the best candidates, they were unafraid of change, and indeed they were welcoming of it.”

An essential part of having the right team is a remuneration package that reflects the skill sets.

“We don’t concentrate on funds under advice and we don’t consider it to be a success measure for our business,” Tratt says.

“One of our key success factors is profit, and the advice team is now rewarded based on the profitability of the business.”

This approach has brought a number of positive effects to the business such as reinforcing the value and importance of a team approach while fostering greater collaboration across the practice to achieve profitable growth.

“The primary purpose of our advice team is to provide professional advice to our clients, and funds under advice may or may not be a by-product of that advice,” he says.

“Linking long-term remuneration rewards to funds under advice would not have been appropriate for APC.”

Tratt says APC offers an ‘advice only’ service designed for clients who choose to manage their own investment portfolios, but who also require sophisticated and ongoing strategic advice.

“We recognise that in some circumstances it is preferable for clients to keep their portfolio management separate from advice,” he says.

The next area that was examined was APC’s business model — how clients pay for advice and how the team charges for advice.

“It was important that all parties were comfortable with a fee-only approach to begin with,” Tratt says.

“About a year ago, we set about a review of our service and pricing in line with our value proposition.

“The result was a broadening of the service offered; more effective pricing to reflect our costs for each service and an improved advice experience for our clients.”

He says another important area of change was the investment process.

“We introduced software that enabled us to analyse direct share portfolios and investment manager performances,” Tratt says.

“After outsourcing the investment process for many years, we decided to bring it back within our business. We adopted an asset class approach to investing, which has been a significant benefit to our clients.”

He says the business also benefited as APC was now the brand, not the external parties previously administering client investment portfolios.

But providing advice was just one part of the story. There was also the need for a support system to back up the advice model.

“Whereas we have always been confident of our ability to provide a high standard of professional and uncompromised advice, we needed to implement an integrated business environment to support and deliver this to our clients,” Tratt says.

But there is danger in not checking your clients’ loyalty, he admits.

“If we took clients for granted, if clients didn’t think they were receiving good value, we would lose them.

“We looked to our clients to confirm our value proposition and to test how each of the business’s operational components were performing.”

The company undertook client surveys which generally validated its belief that it was doing some areas well while others needed to improve.

“Our team spent many hours deliberating over and validating where we added most value to our clients,” Tratt says. “We also spent many hours working through our service offering and our client communications, as well as improving our review process using newly available software tools.”

An important part of improving APC’s operations was the use of technology.

“In 2002, the technology in the business was reflective of operating with a one-dimensional focus,” Tratt says.

“We had a combination of web and software solutions supporting individual components of the business, ultimately providing a sub-optimal result.

“We needed a technology solution that was multi-dimensional and that could be shaped around our own advice processes.”

The outcome was the selection of Xplan software.

“We liked the way this web-based solution was both back and front-end, could be branded APC and interfaced with our registry system and our web site,” he says.

The software provider gave a lot of support as changes were implemented across APC.

The practice now operates a fully integrated paperless work-flow system; all client contact is electronically stored except for the client compliance files.

“The efficiencies that we have gained, and will gain, from a more integrated approach to technology will enable us to double our business with its existing resources.

“We can also deliver a more pro-active and valuable service to our existing clients through automating our advice process and improving client communication.”

The integration program for the business is now largely finished, but Tratt is not contemplating leaving it there.

“Competition is a constant and so is the basic desire to continue improving,” he says.