If strategic advice is the cornerstone of a financial plan, then sound technical knowledge is the foundation on which it’s all built. But for many planning firms, recruiting and keeping competent technical people can be both costly and risky. When the starting salary for a decent technical person is $120,000 a year, and can easily exceed $200,000 once employment on-costs and bonuses are factored in, it’s easy to see why many firms, and not just the smallest ones, are often tempted to get what they can from other sources. Louise Biti, co-founder and director of Strategy Steps, says a potential pitfall of relying on the inhouse technical expertise of fund managers, for example, is that the technical advice and interpretation is often too difficult to separate from product push.
“In most cases, what you’re trying to do is take a piece of legislation and trying to sell product,” she says. “Rightly or wrongly, that’s the focus.” Biti says most institutions’ technical teams do try to build relationships with financial planners, but “whether you’re producing strategy papers or doing presentations, they are going to be geared around trying to sell a product”. “I know myself that when I did case studies comparing various strategies, you can get whatever result you want in most cases, by varying your assumptions or by varying what you assume about how a client will act,” she says. That’s not true in all cases, but in enough to convince Biti and Assyat David, the other cofounder and director of Strategy Steps, that there was a gap in the market that needed to be filled.
The firm has been established to provide “competitive financial planning strategies to complete the quality of advice offering”. Specifically, David and Biti believe there is a place for technical services that put the client, not the product, at the centre of the universe. They argue that this approach gives a planner a different perspective and potentially opens up other avenues of advice. “That whole focus, about looking at the client first, rather than the strategy first, means an adviser can think about other strategies for the client,” David says. “That can help advisers expand into new, growing markets, that they may not have had the confidence to move into.
Hopefully, [access to good technical support] will give them the confidence to expand into these new markets, and help expand their business overall.” Biti says a common reaction to a potential new opportunity is for an adviser to say “that’s interesting, but I just don’t have the time to think about what that means”. “They can miss a lot of opportunities and their business may not grow as rapidly as it could otherwise grow,” she says. Biti says buying-in technical expertise can also shelter firms from the risk of losing key people. She says there’s a high demand for competent technical people, and “there’s always someone a little bit more desperate than you are, who can throw a little bit more money at them”.
“No one else is doing this,” Biti says. “The closest they have got is what they can get for free from fund managers. I know there’s value in this, that there’s a market for it.” The concept of an outsourced, independent and client-focused technical service grew out of conversations between Biti and David over a number of years. “We were talking about what was missing as being an ability to take information and make it applicable,” David says.
“A lot of people hide behind just having information for information’s sake, without thinking about what it means for clients. We were thinking about that 10 years ago, and we kept on talking about it through the years.” Biti says the pair eventually resolved to “make it work or stop taking about it”. “From having managed technical teams for a number of years, you get an idea of how to structure it, and how many people you need,” Biti says. “As demand builds up, I’ll start discussions with other people in the industry who could join us. I know who I will target and who I will not target.”