Adapting and evolving, how this industry leader views the Licensee sector and pending changes to the Financial Planning landscape.
Matthew Brown is Executive General Manager of Advice at one of Australia’s leading financial advice licensee groups.
The newly merged group, who has recently launched their new group brand Entireti, has two core AFSLs in market, each with their own unique heritage, identity and value propositions – Fortnum Private Wealth (FPW) and Personal Financial Services (PFS).
Matt recently navigated the transaction & transition of the PFS licensee business within wellbeing giant Australian Unity to sit alongside Fortnum in the separate Public Unlisted company, Entireti.
We sat down with Matt to discuss the transition, the evolution of Licensee services, what lies ahead and his journey in the Financial planning industry.
Section 1 – Matt’s Journey
How and when did you first become involved and what attracted you to the Financial Services sector?
I started in financial services in early 1990’s. Had a broad range of roles & experiences – superannuation & rollover & annuity fund administration, trustee delegate, life insurance underwriter, product manager and product compliance, advice technical strategist, business strategy & innovation, AFSL operations, and AFSL CEO roles across 5 licensee businesses now … wow I sound old…
The reason I zero’d in on advice years ago was a personal family experience. My father-in-law had terminal lung cancer (a victim of asbestos – outcome from decades in the building game). We were talking, he knew I was in financial advice, and he said that the one thing he wanted was to make sure “his girls were looked after” – his wife and three daughters. He asked for my help. I introduced him and my mother-in-law to a trusted financial adviser who did a wonderful job – like so many, more than just financial planning, he was a real counsel to them. The look on my father-in -law’s face to know that all was set up and they’d be fine = priceless!
Section 2 – PFS transition
The catalyst to transition the PFS licensee out of Australian Unity was positioned in the media as a medium term requirement for investment to continually upgrade and enhance the services for Advice businesses.
Why do you feel the business is better placed to service Advisers as a stand alone licensee?
Australian Unity is one of Australia’s oldest mutuals – it’s been around for over 180 years. It’s purpose is to deliver services and products focussed on wellbeing. Today it has something like 13 business lines across a wide spectrum including health insurance, home care, aged care, social infrastructure, and wealth management. It’s a large business. All of that is great. And it also means that its focus needs to be across a wide range of complex areas.
For financial advice, that had some benefits of being part of. It also came with realistic challenges of being able to focus, invest and support.
Now, it is my view that financial advice is on the crest of a wave of opportunity the likes of which we have not seen in my 20+ years of being the in the industry. Demand is high and growing, supply has (sadly) diminished, and legislative changes are turning so as to have fewer head winds (last year the PM was on the record in the press as saying more Australians need to get access to advice – first time in my working life that I can recall a PM of any persuasion saying something so positive about us), and market dynamics are that there is more capital to innovate and grow. Exciting times!
It is clear to us that in order to ride that wave of opportunity, that a business needs a few things:
- Be clear about who you are and why you exist
- Clear about what you want to do
- Have scale & capacity to get things done (execution is key), and
- Have the capital backing to accelerate.
With that as a backdrop, then yes. PFS as an advice business, joining forces with FPW gives us all those elements.
One thing that sets our group up well is our ownership. We are public unlisted. Fortnum’s origin and heritage was that it was established by Advisers for Advisers. That remains today – the owners of Fortnum are predominantly the Advisers, management and staff. That will continue into the future. We are in it together.
What are these expected areas of investment and how will they benefit Advisers?
A simple way we think about it is what drives practice success? We can zero in on a simple formula success = clients x productivity / risk management. Having the right number of the right clients, building capacity (productivity & efficiency), and manage risks so that you don’t blow up.
So for us our investments align to those things. Given that there is high & growing demand – finding clients is not typically the key challenge for practices – so the focus is on building capacity and embedding great risk management practices.
We are investing our time, efforts, and money in four broad areas on capacity:
- Practice process improvement
- Application of new technology
- Application of artificial intelligence (and machine learning), and
- Application of centralised support & utilities
Section 3 – AFSL’ s in Australia
It is fair to say the pre Royal Commission dealer group commercial model in Australia was effectively broken with the backlash over vertical distribution in the industry.
What do you view as the key deliverables and value add for Licensees in this new environment?
The old ‘dealer group’ model has no real life left in it. Our focus is on being a business services group focussed on & specialising solely in financial advice.
Of course we are and will continue to hold the AFLS and deliver licensee services (due diligence, onboarding, risk management and supervision & monitoring, ASIC requirements, training & education / CPD, core advice technology, APLs, paraplanning business insights & coaching, etc.), and on top of that we provide diversity in a broad range services.
Providing fundamental business services tailored to advice effiiency is core to our approach.
How has PFS & FPW adapted to this new environment remaining relevant to advice businesses whilst remaining commercially successful?
We listen to advisers, we consider the world around us, and we act.
We exist only to partner with good advisers and facilitate help to deliver great advice; We have scale, we have a first class team and community of advisers, and we have access to capital to innovate and grow.
We see ourselves as being more than an old school ‘dealer group’. Yes we have at our core AFSL’s and deliver some of the best licensee services in market; and beyond that we are a services group. We deliver broader services that financial planning practices need to succeed – investment & product solutions, insurance advice expertise, small business utilities.
Section 4 – Advice Register
I often ask industry participants why there is not a central switching mechanism within ASIC for Advisers to change Licensees. A simple recoding of the Adviser AFSL number and letter sent from ASIC informing clients of the switch.
For compliance reasons associated with PI Insurance and contingent liabilities the burden is left with the Adviser’s.
Not withstanding these liabilities do you see any pending or appropriate changes to this process that could be implemented?
If life was as simple as mere registration we’d all be happy! Sadly it is not. You’ve touched on some of the complexities we need to deal with. They’re real – the transition of obligations, PI, redirecting revenue streams are all detailed. Yet perhaps more important is the client. They must be at the centre; they must have clarity, control, and choice, so need a system & process that ensures they are central to things.
The so called ‘foundation SOA’ is a laborious task for Advisers, and potentially confusing for clients. How does PFS address this challenge for advice businesses?
Our due diligence is careful. We get to understand how the practice operates. This is important as it enables us to make decisions and apply a process that is pragmatic and balanced.
Foundation SOAs are not codified in the law; they are however an approach licensees take to manage risk transfer and get as clear as possible on where lines stand.
So that gives us the ability to provide sensible flexibility and timelines. For instance, where we have high confidence in the robustness of existing files, for example we will provide longer timelines and flex to continue doing ROA’s (where appropriate)
Section 5 – AFSL Services & Xplan
Another barrier of switching we often hear is the difference in account services provided by Iress for Xplan, service levels, threads and price.
How has PFS / FPW addressed this concern for Advisers?
We are a very large client of Iress. Our support from them in addition to our substantial internal Advice Tech team mean we have this well in hand. For example, our expertise in data migration onto our version of Xplan is first class.
Has PFS / FPW sought to differentiate as a Licensee in the market with other value add services?
Our focus is on being a business services group focussed on & specialising solely in financial advice.
Of course we are and will continue to hold the AFLS and deliver licensee services, on top of that we provide diversity in a broad range services, for example – practice back office admin functions. We also provide specialist consulting and delivery in areas like HR, technology innovation and cyber, change management and succession.
We regularly look across the services & value chain to understand where advisers need help, and where it makes sense for us to work with advisers. Where we can deliver aspects faster, better, cheaper, then we look to do it. Areas like investment portfolio management and related controls make a lot of sense.
Section 6 – The future of Financial planning
It is well heralded the industry has taken a back step in recent years from around 26,000 Advisers down to circa 15,500.
As a Captain of industry what do you say to current and future Advisers about the health and prosperity of the industry?
The next 5 years never better!
As mentioned above, it is my view that financial advice is as the crest of a wave of opportunity the likes of which we have not seen in my 20+ years of being the in the industry. Demand is high and growing, supply has diminished, and legislative changes are turning so as to have fewer head winds.
Market dynamics are that there is more capital to innovate and grow. Exciting times!
Utilising a crystal ball, what is the single biggest change you see coming to the market in the next 10 years?
The biggest gamechanger for advisers and their business is capacity – and the acceleration of new tech and AI.
Plus consider the macro drivers of increasing demand. Ageing population, gov driving up spending in retirement, longevity risk, market volatility, asset protection, emergence of wealth for Gen Next…
To finish on a personal level…
What are the personal or professional drivers that have kept you involved over a long period of time in the Financial Planning industry?
I’ve seen so many times the positive impact it makes on people’s lives (and sadly how devastating it can be when people don’t have it). My driver is to make as big an impact as possible. So rather than be an adviser, I chose to drive AFSLs.
What would Matt say today if he went back 20 years and spoke to his younger self?
Have fun. Make a difference. Life is good!
