Taking the co-operative approach

Co-operative style financial planning businesses have copped a lot of flak over the past year after a high profile failure in one venture at the end of 1999. John Wilkinson spoke with one group that has built a robust business based on the co-operative structure - Australian Financial Services.

Ever since Sealcorp was sold and advisers felt they had missed out on a slice of the proceeds, there has been a spate of new dealer groups offering equity for advisers.

Some of the new-style dealer groups have not even got off the ground and it is too early to see the success of others. One of these new-style dealer groups is Australian Financial Services (AFS), which actually pre-dates the Sealcorp watershed.

AFS came into being in March, 1997 as a co-operative of advisers. Each adviser had a shareholding, and Zurich took a majority shareholding to get the enterprise up and running.

The idea of a co-operative dealer group stemmed from two disparate groups of planners and life advisers.

AFS managing director Geoff Moore says it made sense for both camps to join together to form a dealer and broker group that had expertise across the board.

"Our philosophy is a co-operative culture, so it made sense to bring the two groups together," he says.

Initially, there were 20 advisers. To become operational faster, AFS purchased the dealer group licence of McMillan Shakespeare.

The board of AFS reflects the co-operative nature of the company. Zurich has two seats and the advisers have five. The shareholders elect adviser board positions and there is an independent chairman who has no connection to the advisers.

The advisers operate as independent units and are not obliged to use any particular products - and that includes Zurich. AFS has also recently set up its own master trust - Strategy master trust.

The co-operative structure of AFS and the adviser independence is a selling point when attracting new advisers, Moore says. Another attraction of AFS, he says, is the flat fee structure.

The fees are not based on income. An adviser producing $250,000 of revenue uses the same resources as one producing $500,000 of revenue.

The services AFS provides range from compliance to national fleet discounts on popular cars.

Initially, the company outsourced a lot of these services to gain efficiencies, but in recent months a number of these functions have been brought back in-house. The in-house services now include compliance and the appointment of a business manager to help advisers run their businesses more efficiently.

The business development program is also aimed at the younger advisers - helping them eventually become a principal by taking over a retiring principal's practice.

The aim is also to make sure all advisers have a full understanding of the AFS culture, Moore says. Currently, the company is working on an induction program that will last about six weeks for advisers joining the group.

The qualification entry level for joining AFS is that the senior people in the practice must be trained to CFP level or working towards it.

The company runs three professional development seminars a year and an adviser conference. This accounts for about half of the professional development training required, and Moore says advisers get the rest from events such as fund manager briefings.

Growth of the group will come from advisers being referred to the organisation. Moore says he doesn't want to grow the number of advisers simply for the sake of it.

However, he has set a target of doubling the number of adviser principals that AFS has in the next five years.