Practice Management – Parting is such sweet sorrow – the breakaway phenomenon

Since this time last year, four dealer groups have split off from some of Australia’s most well known financial planning outfits. Jason Spits investigates the reasons behind this phenomenon.

Over the past year, a raft of new dealer groups have hung out their shingles, including Matrix, Berkeley, Lynx and Premium with advisers who came over from Financial Wisdom, Godfrey Pembroke, IFMA and Count respectively.

What drives planners to leave an established dealer group and set up shop again under a whole new structure?

Lynx general manager Stuart Abley says planners will leave a dealer for a variety of reasons but won't go to another dealer unless there is solid management behind it.

"In our situation, the security and knowledge of the management team was very important for advisers. This is not a light decision, especially for planners with over 15 years' experience in the industry," Abley says.

VIEW ALL

View all

"Our main drive was to be adviser focussed and to work on a number of areas to move ahead."

For Abley and Lynx, which is part of the Mercantile Mutual group, these areas included technology and compliance, which he says are costly without the support of a major company.

The need for technology is what drove a number of ex-Count accountants to set up Premium Accounting Group. Gordon Hrnjak & Rae partner Brian Hrnjak says the technology issue was very important in the decision to set up the new group.

"We wanted a high level of usability and we have outsourced that in the new group. We feel confident as advisers that we have the best and most up-to-date working tools," Hrnjak says.

In setting up the Berkeley group, executive director Glenn Castensen says ensuring a common approach and keeping the process open at the same time was crucial for all concerned. Setting priorities and transparency at each level with the current dealer and clients was paramount.

"Having an open system helps in building the new group and ensures the basic structure is put down right. This is important when clients make a decision about which group to stay with," Castensen says.

"They can make the decision based on the transparency and processes involved and we can then set about meeting their new expectations."

Extending this to other professionals was also important he says, as the external relationships with legal and tax professionals can be called upon for advice and compliance for the new dealer's business.

Since setting up new dealer groups both Abley and Hrnjak feel that the move was justified and exceeded expectations with Abley stating that Lynx is well ahead of its business plans in funds under management and adviser numbers.

Hrnjak says it has allowed Premium advisers to head in new directions and service clients in ways that had not previously been possible.

Providing service and value for the client is what setting up a new dealer group is all about says Abley.

"Clients will only respond positively to a change in dealer if they can see the benefits and the standards in place. Their main focus is to continue to get service and value from their relationship with the planner," Abley says.

Berkeley strikes out on its own

A need to redefine the relationship between dealer, planner and client inspired advisers with the Berkeley group to reassess their situation before making the move to strike out on their own.

Now that they have, Berkeley executive director Glenn Castensen says the group seeks to create an alignment in interests between all stakeholders in the planning and advice process.

"The key thing is that advisers are seen to have a relationship with clients and not be a distribution channel for either the dealer or fund managers," Castensen says.

"We are always seeking the common relationship between dealer, adviser and client rather than our business being involved with another."

However Castensen says the decision to start a new group did not represent a clash with Godfrey Pembroke but a stage of development for the planners involved.

"We reached a fork in the road and had different agendas from there. To term it a breakaway move implies clandestine action but we were completely transparent in what we did," he says.

One of the benefits in starting the group is the wider range of relationships it can now form as Castensen says there are almost no limits on who the group can deal with.

This has lead to a more equitable process with all views considered, he says, and while this may take more time it has also led to a greater flow of ideas and information.

To date, the group has 17 advisers, $1.1 billion funds under advice and more than 80 staff.

Yet Castensen says even with those comfortable figures the group is looking to the second stage of its plans and growing the business in its own style.

"We would rather be small with a large funds under management than widespread with funds all over the place. The key thing is we will not sacrifice quality for growth as we don't want to be all things to everybody."