The route to financial planning for Alan Dixon was not quite as direct as some people might imagine. Dixon’s father, Daryl, a doyen of the industry, built his reputation on providing advice to public servants in Canberra. The younger Dixon was attracted to the finance industry, but on leaving the Australian National University (ANU) he went into the world of corporate finance and investment banking. He recalls working on “a really good deal” while at ABN Amro, involving AMP, General Property Trust and the Darling Park office buildings in the Sydney CBD.
“I was one of 50 professionals working on that deal. It was a great result for them, and you … go out and have a big celebration lunch,” he says. The money involved in such deals would make the average person’s head spin, but at the end of the day, while it was an exciting time, Dixon says it was ultimately unsatisfying. “At the end of the day, you’ve just made a couple of rich institutions even richer,” he says.
Eventually, Dixon’s financial expertise would be applied to helping individuals, rather than helping faceless institutions. “My father started giving financial planning and superannuation advice in 1986, which made me a teenager [at that time]. “I did some work in his office. He’d explain what he was doing, and so forth. “I went to ANU and from 1994 to 2000 worked in corporate finance and investment banking. I started learning a lot about how money markets and capital markets worked. “During 2000, we started talking about how Daryl had created a reputation in the industry. Working with your family is always interesting and challenging, so we said, is there something we can do together?”
The aim was to apply Dixon’s financial expertise to helping individuals, rather than lining the pockets of institutions. “You can help make [an individual’s] longterm life materially better,” he says. “You’ll have saved them tax; reduced their risk and volatility; you get to meet real people, who you can help. “If you like people, that’s why I think financial planning is more rewarding. I’d have ended up in the finance world anyway, but the difference between wholesale and retail is helping real customers.” Dixon says that in 2001 “our key idea was to launch a SMSF [self-managed super fund] administration service”. “It was a very strongly growing segment and, as it even is today, extremely fragmented,” he says.
“There’s no one dominant provider.” It was not a big step from there to providing investment advice to SMSF members. And the philosophy that underpinned the provision of advice, and the growth of the business from its administration origins, was based on two principles: first, put your money where your mouth is – the advice given to clients would reflect what the firm’s principals were doing with their own money; and second, rather than have clients referred to a procession of outside service providers, Dixons would establish itself as a one-stop shop.
“It started with our investment philosophy,” Dixon says. “It’s exactly what our two chairmen, Daryl and Max [Wash], have done with their own money. I think people warm to that. If you come to an investment update seminar, we will talk about what we’re seeing in the market and Making sure clients’ interests fit squarely with the firm’s is one of Alan Dixon’s guiding philosophies. Simon Hoyle reportswhat you should be doing with your money – because that is exactly what we do with our money as well. “More and more people are looking for one trusted source of advice.
When we very first started we may have said, ‘You find a stockbroker, or we will recommend you one’, or ‘You need a personal tax agent, or we will recommend one’, but now we try to have these services in-house.” For example, Dixon Advisory has three inhouse estate planning specialists. These specialists can service the practice’s entire client base, because estate planning is a service that clients use relatively infrequently. However, Dixon says it’s important that clients maintain relationships with external service providers if they want to; about 75 to 80 per cent of Dixons’ clients use the firm’s in-house stockbroking services while 20 to 25 per cent still prefer to use the services of a broker that they already have a relationship with. But the core of the business remains SMSF administration.
Part of the Dixons process is “the traditional, two-appointment” approach to new clients. Clients have to understand what they’re getting themselves into – that running an SMSF requires some application and hard work. “You want to avoid anyone having an SMSF who should not have one,” Dixon says. But assuming an SMSF is appropriate, the practice’s range of services is then opened up to the client to use as appropriate and as needed. “On investments, again, you do not have to use our advice. We have a strategic approach and a model portfolio,” Dixon says. “It varies significantly from the standard ‘balanced’ fund that’s available in the market, based on our own views of where we want our money.” A feature of Dixons that sets it apart from its peers is the ability to create bespoke investment products for clients.
“It’s emerging for us,” Dixon says. “The issue was size. Ideas we are not short of – it was critical mass.” Dixon says for a customised product to be viable it needs to attract at least $20 million of client funds, and probably closer to $50 million. “A lot of planning groups may not be able to do that,” Dixon says. “The planning networks, the bigger networks, in a sense [can], because they have their own portfolios, but it still seems to be driven top-down to planners. I don’t think the planners at Commonwealth Bank are telling Colonial First State what products they want.” The genesis for any customised product is what Dixons’ own planners and directors would invest their own money in. “That’s what it comes down to,” Dixon says.
{sidebar id=20} “This is something we want to invest in; why can’t we invest in it? We’re now getting to the bottom of the [sharemarket], we think Australian shares are looking cheap historically … and so we did a raising for a share fund [a few] weeks ago. “That was an existing share fund, but if a product does not exist we can produce it. The key test is that we do not recommend anything that we would not want to invest in ourselves.” Before the firm reached the size where creating a new product was a feasible option, Dixon would approach the managers of existing funds and listed investment companies to arrange issues or placements for clients. But more recently, it has established a standalone fund to invest in bonds, and one fund-offunds vehicle to give clients exposure to Asia. More of these products will follow, as Dixon identifies client demand and spots specific investment opportunities which aren’t being filled by existing funds or products.
But the philosophy will remain the same: the firm will not recommend a product to clients that its staff and directors do not also invest in. Dixon says a planning firm must demonstrate through actions as well as words that it puts clients’ interests first, and that staff and directors have bought into the concept. Dixon Advisory is 66 per cent owned by its advisers. “I think that most of my senior advisers have an economic interest [in Dixon Advisory] equal to if they were running their own business,” Dixon says. He says these ingredients help enable a firm to charge a fair price for its services, and build a viable, sustainable, long-term business. “The way I like to equate it is that you want to run a business where you don’t feel the need to give your cousin a special price,” Dixon says.
“You want to have a service that you’d be happy to use at the price you charge. If you think it’s a valuable proposition for everybody, then you don’t feel like you need to discount it for friends and family.” Further alignment of firm and client comes from the fact that even the youngest Dixon advisers have their own SMSFs. That way, they know first-hand the trials and tribulations, as well as the benefits and satisfaction, that their clients feel running their own funds. And the firm’s advisers invest their money in exactly the same products that they recommend to clients. “And another thing that does align with our clients’ interests is … you will never find a Dixon Advisory adviser doing anything different,” Dixon says.
So if, for example, an adviser happens to be unavailable when a client phones, whoever takes the call will have a good understanding of the client’s basic situation and strategy and can generally deal with the enquiry on the spot. Even though Dixon is servicing a large and growing market – SMSFs have assets of about $300 billion and have shown healthy double-digit growth for a number of years, the latest equity market downturn notwithstanding- it has no plans to move outside its established markets in Canberra, Melbourne and Sydney.
Dixon himself remains involved in providing advice, in addition to managing the business, and believes retaining a hands-on role will be central to the firm’s success in future. “I run a half client load, of 75 to 80 clients,” he says. “I think it’s important to have both sides of it. “You find out what clients do and don’t like about the approach you have to … everything, really. Even things like, ‘Don’t start your seminars at 5.30, start them at 6, because I can’t get there from work’. “I recommend staying in touch [with clients] – but [a lot of firms] make the mistake of segmenting management away from clients.”
