Suzanne Haddan’s achievements over her 20 year career have been substantial. She has worked closely with CPA Australia and is a past vice president of its NSW Divisional Council. She is also a member and immediate past chair of CPA Australia’s Centre of Excellence for Financial Advisory Services and a principal member of the FPA.
But Haddan lists being able to call herself an independent financial planner as one of her biggest career achievements.
The decision to become a fully independent adviser was easy for Haddan. Already working under her own licence and operating a fee-for-service practice since 1998, complying with the remaining requirements of Section 923A of the Corporations Law seemed like a natural progression.
“Basically what it means is you must rebate all commissions and you need to deal with conflicts of interest so you would have difficulty calling yourself independent if you represent a product provider. There are some other minor requirements within Section 923A but they’re not difficult to meet,” says Haddan.
Change in the Air
Suzanne Haddan started working as an adviser in 1987 when the credit union where she worked decided to introduce financial planning. In 1990 she set out on her own, as BFG, but continued to operate under the Bridges license. “I was happy at Bridges. I still pay them on a fee-for-service basis to deliver some services to my practice. But I wanted to be able to provide all services under the one banner.”
In 1998 Suzanne decided to move towards being independent and applied for her own AFSL, setting up BFG Financial Services, of which she is managing director.
“I wanted to talk as an accountant and financial planner under the one letterhead. We’re one of the few practices that can say we are independent – we’re only paid by fees, we rebate all commissions and we have our own licence. The perception can’t be that we represent a financial institution. We don’t start with the product.
“Being independent means we have to rebate in a timely manner unless we are offsetting the rebate against an outstanding bill. We don’t accept any commissions or anything like volume bonuses. We earn nothing except what the client is paying.
“But that doesn’t mean we’re not a profitable business. I think I would hold my financials up against any in the industry. Our practice is certainly in a position to grow and we aim to grow our profit by a 20 percent per anum minimum.”
She attributes her business success to the way she structures her fees. “We don’t just sell time. What we use is time, the expertise involved, how complex the matter is and the risk involved. Our minimum fee for full service is around $3000 but our average is much higher. We only charge flat fees. We add up all those factors and come to an agreed fee with the client. We reset every 1 July or if something major happens during the year. Fees are collected automatically by direct debit so we have no bad debts, no invoicing and no chasing accounts.”
The Value of Independence
Haddan says the most painful part of the process is having to rebate all commissions. “The requirement to rebate 100 percent is too onerous. It should be based on a commission having a material impact for the client. No one benefits from us having to rebate $1.50,” she argues.
The main problem area is with the historic managed funds that don’t have the capability of sending rebates to clients directly. “In some cases we had to advise the fund manager that we were not acting for the client anymore. That solved the problem of the commissions but of course that meant we no longer received the paperwork for that client’s account and were forced to wait for the client to provide us with the relevant statements.”
Haddan says most fund managers and platforms are now equipped to organise rebates directly to client accounts for their newer products but not for their historic products, so cancelling a commission results in the fund manager keeping the money, not returning it to the client.
Haddan says she loves being independently-owned, operating under her own licence and being able to call herself independent but says the label doesn’t really hold that much worth for her business just yet.
“So far I think there’s only about 20 of us that can use the term independent so it doesn’t have a great deal of significance when spread around the nation. Until there’s enough of us, until there’s enough of a push from professional planners to take the pathway to independence, it won’t be a strong selling point.
“I feel that the term independent will not be relevant until a substantial number of people around the country, say one quarter of all planners, can use it. I think then it will start to be a valuable business asset.”
Obtaining your own licence is the other obvious stumbling block to becoming independent. “It’s difficult to get a licence if you haven’t got the experience but then if you haven’t got the experience you probably shouldn’t have your own licence. We did all the work ourselves because it was quite straight forward in 1998. But there are a growing number of service providers that provide assistance with the licensing process now,” she says.
Two Hats are better than one
Haddan feels it is a business strength that she is able to deal with clients as both a financial planner and an accountant.
“In accounting you have APS 12 to cover the provision of financial advisory services. You may not be under the FSR if you are not giving advice on product but you have a strong duty of care to the client you are advising.”
She says the progression from accounting to financial planning was easy. “I really enjoy working with people, I am pretty good with numbers but I also like giving advice. Financial planning is an obvious career choice for any accountant with personality.
“My job involves dealing with people, putting together strategies for them and solving their problems. I work in partnership with my clients. I try to be the centre of their financial services world.”
There are some areas where Haddan is happy to outsource. She will readily refer clients with specific estate planning or insurance needs and regularly finds herself working closely with clients’ solicitors from a tax and accounting point of view.
She is also happy to buy in services from larger dealer groups on a fee basis. “I don’t believe planners who argue that they can’t get the services they need under their own licence. If you’re big enough and able to pay you can get the services,” she says.
“I’m not necessarily always good news Annie,” says Haddan. She often finds herself explaining to clients that it will be hard to get where they want to go. Sometimes she has to be blunt and tell them they are not going to achieve their goals for the amount of money they’ve got.
“I find they would rather know that at the beginning so I can give them choices to increase their odds,” she says.
BFG Financial Services must be pretty good at doing just that, as virtually all new business comes by the way of personal referrals. Haddan requires new clients to do a fair bit of homework before attending their first consultation.
“We send out a pack before they come in for their first appointment to get their mind thinking financial. We ask them to copy their tax return, prepare a budget and to complete an online risk profile before they come in. We send out a flow chart so people know the schedule of appointments and at what point in the process fees are charged. Haddan uses the new client’s online response to the risk profile to set the agenda for the first meeting.
She has strong beliefs about the role a financial planner should play. “What planners should do is help clients make smart decisions about their wealth. Strategy is number one. It is not professional to focus on the product. We should be looking at strategy, whether it is from a taxation, Centrelink, debt or income perspective. My job is to explore all the variables and come back with an appropriate strategy.”
“My recommendations can be quite complex and probably not the norm.” However, there is a tried and tested process that she goes through to arrive at the best solution for each client. The starting point is for the client to know exactly what their goals are. Haddan is a stickler for making goals very clear, quantifiable and with a timeframe.
She is emphatic that the client-planner relationship is a two way street. “We don’t seek to give advice to people who aren’t going to tell us everything about their situation. Trusting us and being completely open is an important part of the process.”
Haddan regularly monitors her clients’ achievements against the strategy she has designed for them and charges an ongoing fee for advice.
“Most clients on full fees commit to meeting a couple of times per year as a minimum, plus regular phone contact. We have 13 people in the practice and we make sure each client knows more than two so there is a high likelihood that someone with comprehensive knowledge of their affairs can assist at all times.
Haddan believes this team approach protects her business because clients are being serviced by BFG rather than an individual planner.
“Our people are all employees so ownership of the client is clear. We have lost one partner and one representative during the past 10 years but the impact was insignificant. They only took a handful of clients with them because the client is serviced by the practice.
Transparency the key
Haddan believes that being able to explain the cost of advice upfront is the key to putting the client’s long-term interests first. “A lot of people don’t understand how financial planners get paid, so being able to give them a schedule of fees in dollars and cents is completely transparent. We can say ‘we represent you’ – no matter what you choose to invest in, I get paid the same amount.”
Haddan believes that all truly professional planners should be independent and that the move towards full independence for the profession will involve “getting rid of” conflicts of interest.
“A conflict of interest is anything that could be perceived or in reality puts your interests before the client and the big one is remuneration. Some conflicts of interest just can’t be disclosed away.” For instance, BFG uses a platform “because it makes your business efficient but we only want to be involved with a platform that has no volume override, no commissions, no fee sharing and if any of those are paid, the platform will rebate them internally directly to the client.”
She thinks operating as a fee-for-service practice actually insulates her business. “If the only thing you get paid is from the client, you are insulated if there’s a change to commissions, if there’s a pressure squeeze on MERs or if a government makes a legislative change to ban volume overrides. And these are the best of times, so why wouldn’t you take steps to insulate your business now?”
Suzanne Haddan is confident that more planners will see that the road to independence is achievable and essential if they want to be seen as professional financial planners. She doesn’t think everyone necessarily has to be independent and sees a continuing role for commission based advice. However,
“There’s room for everyone in the industry but there’s not room for everyone in the profession.”
Name: Suzanne Haddan (formerly Baldry)
Position: Managing director, BFG Financial Services
Years as a planner: 20
Qualifications: Bachelor of Business, Accounting, UTS Sydney: Fellow and Financial Planning Specialist of CPA Australia; FPA Certified Financial Planner