After seven years developing their craft at Westpac Financial Planning, Gold Coast advisers David Just and Mark Raff had gone about as far as they could within the institution. “We rose into the ranks of senior financial planners at Westpac and decided for a variety of reasons that you just couldn’t deliver the services that you were promising people,” Just says. “You were dealing with people’s lives and establishing relationships with them and we just didn’t feel under [Westpac’s] model at the time that we could deliver on those promises.” As the Gold Coast pair became increasingly frustrated with the institutional constraints, they began searching for a suitable exit strategy.
That search ended three years ago in a deal to open up under the banner of another bank-owned brand – albeit the more sophisticated, high-end planning group in the National Australia Bank’s advisory business stable – Godfrey Pembroke Ltd (GPL). Just says he and Raff were impressed with the deal put on the table by the then head of Godfrey Pembroke, Mark Rantall. “We went to Godfrey Pembroke primarily because they had a solid brand in Sydney and Melbourne, but there wasn’t one on the Gold Coast – so we thought that was an opportunity to establish a presence here,” Just says.
However, the process wasn’t quite as simple as knocking on Rantall’s door and asking for a GPL badge – a fact the duo found reassuring. “You needed some ability to get in – they didn’t just let anybody in the door – and that impressed us as well,” Just says. “We didn’t want to go where there were 10 or 12 of us all over the Gold Coast and the experience from someone down the road may damage what we were trying to build.” Armed with a 110-page business plan, Raff and Just convinced Godfrey Pembroke they were right for each other, with the Gold Coast GPL office opening its doors in October 2005. The new relationship is working well but Just, without resorting to nostalgia, still has some kind words for their old partner.
“I think [Westpac] tries to do a good job and it’s changing,” he says. “And it was a great training ground, but some of the arguments about upfront product placement, as opposed to ongoing advice, are probably fair – at least over the years we were there – and that wasn’t what we wanted to do for our careers or our clients.” Their vision was to create a fee-only advice business which, although still funds under management (FUM)-based, would provide “holistic” advice around their clients’ full financial needs. Except, when Raff and Just left the Westpac fold in 2005, they didn’t have any clients. “We didn’t buy a client base. There was just the two of us and a front door and that was it,” Just says. “We established some business partners with some accounting and legal firms on the Gold Coast and began a fee-based, no-commission investment practice.”
Although he makes the growth of the business sound like a breeze, undoubtedly there were some anxious moments in the early days. “It wasn’t really hard,” Just says. “One begets two begets three. We’re all about service, because we don’t talk about returns necessarily. We don’t get returns, the market does. What we do is ensure your risk management is in place and you don’t make stupid emotional mistakes with your money that wipes you out. “Once you give that service and your clients see it and your business partners see it, they tend to be sticky clients and refer you to other people.” The fee model has been a big hit, too, with clients of the Gold Coast Godfrey Pembroke firm, which operates under the IntegraVest banner.
In its annual survey of clients, the “lack of commissions” always gets an “exceptional” rating, according to Just. Their decision to adopt a fee-only approach was also vindicated a year after launching when Godfrey Pembroke adopted the model for its entire dealer group. Raff and Just are staunch advocates of the fee- for-advice movement and argue that for financial planning to be seen as a profession, commissions will have to go. Just says while this position might put them offside with others in the industry, they reason that commissions taint the value of advice. Even if the end result is appropriate, he says, clients are becoming suspicious of commission-driven financial planning. “The perception that you may have recommended a product because you got paid more commission for it is just intolerable to us,”
{sidebar id=15 align=left} Just says. “Commissions are an inducement by a product provider to put you in it – we don’t like that. We can’t guarantee that every product we put clients into will be an exceptional investment, but we can look them in the face and say we thought it was in your best interests because we were going to get paid our fees regardless of whether we put you in product XYZ or ABC.” The practice charges based on funds under management, which he says is a fairer and more palatable way to bill financial planning clients. “It’s very difficult to charge on an hourly basis – it’s hard to ring up a client and say we spent four hours on your plan looking at the strategy, legislative changes and the markets and we don’t want you to do anything… and here’s our bill,” Just says. “We didn’t agree with that. We let every client know we will be continually contactable and are working in their interests. We may go 12 -18 months and say ‘do nothing’ but we’re still entitled to be paid for that.” Typical of GPL firms, IntegraVest has a highnet- worth client base with average funds under management of $750,000.
The group also offers a wide range of other services such as insurance, estate planning and self-managed superannuation. In keeping with its “no-commission” stance, IntegraVest also refuses any fees for referring clients to other professionals such as lawyers or accountants. Just says they will offer such recommendations because these professionals “do the right thing by their clients, not because they pay us”. “If they do that, then that makes us look good too,” he says, which also promotes referrals the other way. IntegraVest’s fee-only philosophy has shaped the development of the business but Raff and Just have also worked hard to differentiate the practice in other ways. For example, one of the firm’s innovations has been to ensure clients meet with two advisers in every interview – a task made much more achievable after Barry Van Es joined as IntegraVest’s third adviser.
Just admits the “two-adviser” rule is labour intensive, but it has long-term rewards for both the clients and the business. As well as making clients less reliant on one individual, the two-adviser process provides a chance to peer-review strategies in real time. “If I can’t convince the other adviser why we should adopt a strategy, it won’t get up,” Just says. If one adviser is away, clients can also talk to someone they know (and who understands their individual circumstances) immediately. “It rates very highly with clients in our surveys… they love that there are two advisers working with them,” he says. The annual client surveys themselves are also a useful business development tool, according to Just, and are used in the firm’s “forward planning”.
“For example, if clients don’t see any value in the way we communicate with them – some only want soft copy, others want hard copy – we can change how we do things,” he says. “We place a lot of stock in their answers.” The practice also keeps a close watch on its internal development. In part, the two-adviser rule was designed to ensure smooth succession planning should any of the three IntegraVest planners wish to leave. Indeed, succession planning (and intergenerational knowledge transfer) is a prominent feature of the business’s structure. At 34, Just is the youngest in the crew with Raff, 48, and Van Es, 63, spanning the generations. Retirement should be a smooth transition for the practice, but it’s not on the horizon yet for any of the three advisers.
“Barry has said he’d be happy to work to at least 70,” Just says. At the other end of the scale, IntegraVest is bringing fresh blood into the industry by developing its junior staff. For example, Susan Howard, one of the firm’s two back-office employees, has recently completed her Diploma of Financial Planning and will shortly take on paraplanning duties. The receptionist has also indicated she would like to study and graduate through the business into more challenging roles. Just says the plan is to take on “one-and-a-half ” more staff in the coming months to support the growth in the business. “If we don’t grow, it’s hard to create new roles in the business, but we’ve let the staff know we’re committed to helping them progress,” he says.
Free of the Westpac constraints, Raff and Just have quickly built up a business that they hope will be around for a long time yet. In a little under three years, their vision has played out almost exactly according to plan. “That’s the value of starting with a clean sheet of paper… we were able to start off like we mean to finish,” Just says. “This might sound bold, but when I speak to BDMs [business development managers] or listen to international speakers at conferences, I don’t hear them suggest anything that we’re not already doing. Now it’s a matter of fine-tuning.”
