Let’s stay together

Bringing new advisers into any financial planning business can be a bit of a gamble, but it’s a chance that every growth-oriented practice has to take.

Keeping peace in a two or three-person bou­tique might be relatively simple, but as advisory firms expand into dealer group territory the odds of maintaining internal harmony progressively worsen.

Witness just about every merger and acquisi­tion in the history of the Australian financial plan­ning industry: buy-outs are generally followed by walk-outs, followed by lawsuits.

But the marriage of financial planning practices needn’t be so conflict-ridden, according to Mark Spiers, head of the Westpac-owned dealer group Magnitude, if the potential partners undertake a proper engagement before walking up the aisle.

To cut down the risk of an early divorce, Magnitude, which has grown from zero to 38 advisers in two years, ensures any financial planners wanting to join the group are “a good fit”. While the Magnitude engagement period doesn’t quite reach to living together, it certainly takes a prospective relationship well beyond the eye-contact phase.

Spiers says the key to Magnitude’s success in selecting advisers who will stay with the group for the long-haul is having a clear idea of the qualities it desires in any partner.

The group specifically targets the category of advisers that he labels the “growers” – one of the four sub-groups of advisory businesses that Spiers says define the industry. Typically, “growers” have built their practices up to a healthy stage but are looking for a partner to help them expand further. This group tend to still be enthusiastic about their busi­nesses and remain open to new ideas about how to improve – for example, they would be amenable to Magnitude’s “Springboard” practice transformation program, which introduces new systems, processes and products into the mix.

The other three categories are self-explanatory: “the sinkers” – advisers who are struggling to stay afloat; “the coasters” – who are doing very nicely thank you and not looking for change; and, “the retirers” – who just want to sell up at the best price possible.

“We’ve done what every financial planner should do with their client base – which is segment the market,” Spiers says.

With its ideal partner in mind, Magnitude is then able to filter out any unsuitable matches at a very early stage, he says.

“It’s a very structured process,” he says.

Firstly, Magnitude will conduct an in-depth interview and fact-find to establish whether the interested party meets its “grower” specifications. If an advisory firm makes it past this stage, Spiers says subsequent interviews and research will “peel off the layers” to confirm first impressions.

He says to date Magnitude’s assessment has “resonated” with all the practices that have been through the process.

“No-one has disagreed with our findings,” Spi­ers says. “Some of them have said ‘well I can see I’m a coaster but I want to be a grower’ – they’re very dynamic models.”

But however snugly an advisory firm fits the Magnitude model, he says the feelings have to be reciprocated. And just as the dealer group demands a high level of transparency from prospective part­ners, Magnitude “pops the bonnet” for them.

“Advisers will even come in for a day and spend it with the company – they can see the good, the bad and the ugly,” Spiers says. “It’s a different ap­proach. Even the language we use is collaborative. It’s not ‘what we can do for you’ but ‘what we can do together’. "

If it doesn’t work out for any reason both par­ties can walk away – no hard feelings, no legal fees.

While the current batch of 38 Magnitude ad­visers obviously met the criteria, almost “five-times” that figure were not deemed suitable for the group. So far, not one Magnitude adviser has left in a huff – however, Spiers says “inevitably” someone will exit the group as circumstances change.

“But having this screening process reduces that risk substantially,” he says.

According to Spiers, the same selection prin­ciples would apply to any small business, “whether you’re running an accountancy firm or a milk bar”.

“Getting the right fit strategically is essential,” he says. “Any employer needs good selection tools to make sure that the people they bring on don’t just have the necessary skills but also share the values, behaviour, and cultural fit of the group they are joining.”