The rise and rise of Associated Planners

Associated Planners Financial Services(APFS) will turn over $55 million this financial year through its nationwide network of 200 advisers in 90 member firms.

If you’re talking turnover, this makes the group among Australia’s largest — possibly putting it into the top five.

It will also turn over an additional $10 million in subsidiary companies. Funds under advice is approaching $4 billion and funds under administration $1.1 billion.

While Money Management’s Top 100 Dealer Group Survey ranks it 25th by adviser numbers, general manager Andrew Creaser argues: “We generate more income per adviser than any of the larger dealer groups”.

Established in 1989, APFS is mostly adviser-owned, employing 67 people, of whom 25 have equity.

And while Creaser accepts that it is not the only adviser-owned group in the country, he argues “ours is the purest model with 70 per cent owned by members and staff and the first to deliver real value to shareholders”.

The only outside shareholder is Zurich, which has a 30 per cent stake in the group. No other shareholder owns more than four per cent.

While Zurich has had its share of troubles in Australia, Creaser is not concerned by them.

“We are not dependent on them [Zurich]. Their investment is committed to us irrespective of their future in Australia. As long as we provide a sound return on their investment they will continue to be happy.”

There is no fee to join APFS, however, all member firms are required to purchase between 10,000 and 100,000 shares in the group at the current market price of $1.70. Excluding share splits, the price is $35 compared to $2 in 1997, which values the group at around $86 million. The current exit strategy for members is to sell their equity to other member firms.

APFS member firms vary in size from $300,000 annual turnover to $2.5 million, averaging $600,000 and two advisers. The group looks for profitability of 30 per cent on turnover.

“Our aim is for members to see one-third of their turnover go on salaries, one-third on overheads and one-third towards profits,” Creaser says.

In line with the times, the business has moved away from transaction-based businesses to a fee-based system.

“This has happened over the last six years,” says Creaser, “and has involved changing the basis upon which most intermediary businesses have traditionally received their income. Given our expertise, clients pay fees as long as they can see the benefit — the value added by the adviser.”

Creaser outlines the group’s two critical success factors as being its “ability to keep promises in a consistent manner” and focus on lifestyle planning rather than financial planning.

“We go beyond investment advice to integrate financial planning with debt management, wealth creation, tax planning and estate planning. We are geared to deliver now and are not a future proposition waiting to happen.”

He describes APFS’ client market as the up-scale affluent — cash flow rich, asset poor and time critical. “Like the cramped high-net-worth market, these people are already successful, typically self-employed,” he says.

As for the relationship with member firms, he calls it a “quasi-franchise”.

Member firms trade as APFS, use APFS’ systems and processes and are APFS trained. They are “comprehensively” audited twice a year.

The service proposition includes extensive best practice procedures including business coaches for each member firm, fully integrated IT systems, technical support, compliance procedures, administration services, brokerage and, more recently, human resource advice to help identify and manage employees.

“We focus on the entire practice, not just the advisers,” Creaser says.

“The objective is that a well run dealership frees up the advisers to service their clients. Instead of focusing on the back-office they can focus on their clients.”

In addition, APFS set up the AP Academy last September to train members and their staff. Some 400 people have gone through over the year. Creaser says $2 million has been spent on developing best practice procedures in back-office systems and a further $2.5 million annually on IT.

“Many dealer groups are now talking about both of these areas. We have actually spent the money and three years developing it.”

Research is outsourced but then assimilated with an in-house methodology overseen by an investment committee. Creaser argues that “through the buying power of the group our cost effective resources ensure our member firms deliver to their clients”.

Estate planning and risk management make up one-third of the group’s turnover.

“This proportion has been gradually decreasing but has more recently started to increase due to greater global uncertainty,” Creaser says.

For the past three years, APFS has offered six model portfolios for members to use. Some 70 per cent of new inflows are invested in one of the portfolios, which vary according to risk profile. Each has eight to nine managers.

Assessing overall performance is thus complex. For this reason, Creaser is uncomfortable talking about performance.

“We have exceeded the benchmarks across the board. Besides, we are not focused on performance but our service offer to members.”

Creaser believes APFS now has scale but is only one-third of the way towards reaching its critical mass and is looking to grow turnover to $150 million over the next few years.

He identifies four approaches to achieving this growth:

1. Recruiting new financial planning firms — increasing the number of firms in the group to 150 by June 2004. Creaser argues that the APFS infrastructure is geared to justify this growth.

2. Buying middle-sized groups — earlier this year, APFS bought Queensland-based group Synergy. Creaser says the trend will continue, with APFS buying groups that are “culturally aligned”. He says the group is cashed up to buy following the Zurich deal.

3. Introducing dealer-to-dealer services for boutique planners — Creaser says the model will offer services “with a more strategic outlook that are not price driven”.

4. Global expansion — the group is currently launching a financial planning firm in Singapore that will, Creaser says, “allow us to leverage our intellectual property”.

As for the future, Creaser says that merger opportunities are being explored with the larger dealer groups. The group also has plans to list around 2006, depending on market circumstances.

“We are in no hurry and will wait for the stock market bubble in financial services to work itself through, boost our profitability and enhance our revenue security.”

But there are no plans to move into asset management or risk underwriting.

“The focus will remain on distribution and administration.”

And on the future of the industry, Creaser is convinced that Australia’s financial planners are heading for a big shake-out that will see only five planning groups remain plus a few boutiques.

“The middle ground will be like a desert. Only the strong and innovative will survive. We plan to be among them and offer a home to dealers who recognise they have to respond to the looming shake-out in the industry and how this affects them.”