Thirty years in the business has helped Dennis Bashford learn what works, and what doesn’t.
In 1977 Rod Stewart, Abba and The Electric Light Orchestra were atop the music charts. The big movies of the day included Star Wars , Saturday Night Fever and The Spy Who Loved Me . And a financial planning firm called KAR Investments opened for business in Sydney. Dennis Bashford traces his involvement in the financial planning industry back more than 30 years, to the establishment of KAR. Since then, he’s seen a few changes in the industry around him.
He says the biggest change has been “in the level of professionalism – it has moved from being a sales- and product-driven industry into a profession”. Today Bashford is at the helm of the Brisbane-based Futuro Financial Services. It’s been through two distinct phases of development. The first, two-year phase saw it grow to 14 planners with $85 million of funds under advice (FUA). But in the two years or so since then, it’s grown to now have 70 planners in 40 offices, and FUA nudging $1.5 billion. Bashford says that what has changed, and underpinned its more recent rapid growth, is the ability to attract “big hitters” to the group – planners who started their careers and found success with institutional financial planning groups, but who want to strike out on their own. Integral to this success has been the development of a system of generating referrals.
It’s not uncommon for financial planning firms to have informal links with other professional firms, but Bashford says Futuro has developed a system that puts the relationship on a formal, business-based footing. Bashford says that when Futuro embarked on its expansion plans, it surveyed planners inside institutions to learn what their three main concerns were about. “The first was where they are going to get their clients from,” Bashford says. “The second thing, they want to have a good idea of how much money they are going to make in that first, pretty difficult two-year period. “And the third one was the amount of money it was going to cost them to set themselves up in private practice.”
Being able to accurately answer all three questions meant the recruiting task became easier. Bashford expects to have 85 planners in place by the end of the year. Recruiting planners from institutions isn’t difficult, now that Futuro can answer their main concerns and has a track record. While an institution might be an ideal place to learn the ropes, he says many planners eventually come to regard the working environment as dissatisfying. institutionally-owned financial planning firms, because their focus is on product,” Bashford says.
“As soon as they have got the client or got their money, there’s not that much interest any more. “For a financial planner, the fiscal value is in looking after the clients year on year; the fiscal value is what you make year on year. And you only make money by looking after the people you have got.” It seemed obvious to Bashford and his cofounding partner, Paul Kelly, that the institutions might be fertile recruiting grounds. But it wasn’t until they knew what the institutional planners’ concerns were, and how to address them, that things started to move.
“But just to preface what I’m about to say, one of the problems with an institution is, because of the way things are structured, and the way employed planners are managed, they have very little opportunity to actually look after and [give] ongoing care to the client. “So when we started out five years ago we had a hard look at where we were going to recruit from. When you are building a new business, with a clean sheet of paper, you are not going to get the big hitters. The institutional planners who you want to recruit are the big ones, and they’re earning $150,000 to $200,000 a year. “But at the end of the day they put their lunchbox in their briefcase and they go home. A number of planners in that situation are very dissatisfied with their lot. A lot of that relates to the fact that they want to look after their clients.”
Bashford says it has been critical that the relationship Futuro planners have with other professional firms be placed on a firm business footing. So before any deal is struck, the potential relationship is analysed very carefully. “When it’s done like that, everyone knows what the deal is,” he says. “We go into a relationship with specific objectives, in terms of the dollars we want to make. “Some of the planners [we recruit] from institutions have relationships with accountants. We survey [those relationships] and we say, this is what has to be done to maximise the value. It puts your relationship on a much more professional basis. One of the problems with a casual relationship is you end up walking into their office, cap in hand, and say: ‘Jeez, mate, there must be someone you can refer me to’
“The business has gone very well. Where we are now is where we intended to be if you’d looked at our strategic plan before the business kicked off.” In fact, Bashford says not much has taken place in the past five years or so that has been unexpected. “We’re probably one of the few financial planning practices that’s run by professional businessmen – and not too much has happened by accident,” he says. “The infrastructure for referral business isn’t rocket science, but it’s not something that many of our competitors have done.” Although Bashford was licensed as an adviser up until 1999, he had already stepped back from face-to-face dealings with clients, settling instead into a business management role, honing his ability to creating an environment where practising planners can flourish, and building the support structures they need to do their jobs efficiently.
“We’ve chosen to make sure we maximise the value for the people involved in the business,” he says. “That means we all do the stuff we’re good at. If you put me in charge of paying the planners, it would be the biggest shitfight of all time, instantly.” Bashford says a reliable referral model and a tightly managed business have meant the group has begun to attract to its ranks some larger and profitable firms. He says there has also been significant investment in practice development. Between 2005-06 and 2006-7, Futuro advisers increased revenue by between 50 and 100 per cent. Most Futuro practices charge clients based on funds under advice.
While it’s not quite as pure a model as some would like to see planners adopt, Bashford says “there’s no fiscal value in using [say] BT against AMP”. Another aspect of the business that Bashford says was very closely researched was which platforms to use. “Almost exactly this time a year ago we undertook a very extensive survey, which had a look at some of the platforms that were around,” he says. “The information we collected was in much greater depth than is available from normal research houses. “We drew up a short-list of six [and] sent a team of planners into the various offices, and they picked three. “They spent a day in each of the six offices. The survey they were undertaking then wasn’t just related to the obvious and hard data, but [was also] looking at administration, morale, the way people were promoted, the longevity of employment of the key people.”
From that process, Futuro settled on three platform providers: NetWealth, Aviva and BT. However, Futuro advisers are not precluded from using other platforms – for example, if they already have a relationship with a platform provider. “One platform cannot properly cover the requirements of all investors, and while [selecting] three goes a significant way towards doing so, there are still gaps,” Bashford says. “This is the reason why the other platforms have not been culled and why disincentives are not in place to discourage planners from using them. It also reinforces our market positioning as an independently owned licensee who is more interested in providing clients with strategic advice rather than promoting a particular brand.” Bashford says the management of Futuro is focused on helping planners grow their businesses – “
We are not interested in having anyone on board who doesn’t have aggressive aspirations for the growth of their business,” he says – and making sure the management team remains close to its planners. “We have an impressive track record of growing our planners’ businesses,” he says. “Our recruiting is very selective so we have a network of like-minded individuals who actually like each other. It means that our planners operate in an environment that sees us with the closest, happiest and most interactive network in the country.”
