Survivor: The legacy of too much synergy

Ahhh summer. That time of year full of booze, cricket and colour. Particularly those spots on the back of your hand that change from pink, to red, to brown, to pink again, then green, then black. (I once had a spot like that — I eventually scraped it off and it fell onto the ground. A couple of days later it grew into a lawyer.)

Welcome to the new year, punters, the year when FSR becomes a reality, when the remaining staff at theFPAcan all share the same taxi, when Paul Resnik adds a question on bungee jumping to his risk profiling questionnaires and when the key word in my business will be ‘expansion’.

Some of the more unkind among you will be tempted to suggest that I’ve already started along my path to expansion, helped by a generous serving of Christmas pud and a couple of slabs of Swan Draft.

Not so, the kind of expansion I’m talking about is where we put on a couple of hundred authorised reps and let them loose on the unsuspecting public.

Once we get to that size, we can then start to use some of the buzzwords that only large dealers get to use. Small dealers have to use words like ‘overdraft’, ‘PI premium increase’, ‘boutique’ and ‘your Honour’.

For those thinking of ditching their AFSL AR (hmph — see how some of us have embraced the new terminology with ease…the French version is better — Licensé Australien Financiers de Autorisé Représentant Services or LAF ARS), I thought it timely to introduce you to some of the terminology that you will face when you too become an expanded licensee. (By the way, just be glad you don’t operate in Italy, your title would be L’Autorizzazione Australiana Di Servizi Finanziari Ha Autorizzato Prespresentative. By the look of things, you’d be permitted to service used cars as well.)

So this terminology includes words like ‘synergies’. This is a word that gets bandied about when two organisations combine, and pre-empts ‘rationalisation’. Synergy is often touted as meaning that duplication exists between two separate entities and that these can be combined effectively into one.

Steve Irwin’s baby Bob and crocodile farms are obviously synergistic. Baby-sitting while at work is an example of synergies in operation. I can think of a few nominations to replace Bob if Steve ever slips up.

We have synergies in my office too.

There are synergies between PS 175.85 (the bit dealing with client factors relevant to the giving of advice) and the small electric devices installed in my office chairs. These send 140,000 volts through my clients if they disagree with me. And I have found if they seem confused about their financial objectives and our advice, a quick flick of the switch soon brings them back on track. It synergises a few other bits too, but if you’re old and not using them anyway — what the hell?

Synergies can also mean the price the suitor paid for the target firm is way above what’s reasonable and to justify the figures to the board, needs to cut expenses by half. That’s when ‘rationalisation’ kicks in. Rationalisation is another big dealer word.

Rationalisation simply means you sack every bugger that’s never drawn breath, leaving every bugger that’s ever drawn breath behind — the type that draw breath making a kind of sucking, vacuum-like sound, just as you did when you were 12 and sitting in the back of the class.

Of course, having rationalised, you can then seek the advantages of ‘scale’.

Scale is the complete reverse of synergistic rationalisation and can only happen when you have too many staff and are too scared to rationalise because the buggers who have never drawn breath gang up with the buggers who ever drew breath.

Scale is also referred to as ‘growth’ and sometimes, if you’re lucky, ‘exponential growth’. Not surprisingly though, you want to avoid any scale showing exponential growth. If you get that, your fruit trees will die and parts of you may synergise like the old people in my office chairs and drop off. The bits that drop off are also likely to become lawyers.

Big dealers sometimes have ‘legacy’ problems. Usually, they are the older bigger dealers and in human terms, it’s probably like a prostate problem. Lots of pain and little activity. This is surprising given that many of the big older dealers tend to be involved in the activity that medical science recently flagged as being a preventative for prostate problems. We hope we never get a legacy problem.

In dealer speak, it means their entire client database is being run on a Commodore 64, dot-matrix printer and a cassette drive and the person that programmed it is either dead or involved in the software that steers Beagle 2. If you have a legacy problem, it means you can’t then make use of a ‘platform’.

A platform is another word for an altar and everything has to revolve around it. If you don’t have a platform you’re basically stuffed and might as well get a job with Steve Irwin as Bob’s (or the Chook’s) double. Your platform can be a wrap or a master trust or can even be based out of Nigeria and operated by Colonel Steven Mugabwe (retired). The idea is that you have access to an account, take out regular amounts and then explain why the balance has gone down regularly.

Occasionally, you may get hassled by someone that started with you when the organisation was small and is questioning the expansion in light of what you said originally about being a ‘boutique’ dealer.

You can usually explain this apparent about-face by stating that it is part of the ‘value add proposition’, which is enshrined in the ‘new paradigm’ that is sweeping through the company at all levels. With lines like that, you won’t have prostate problems either.