We do not accept payments or incentives or gifts or things like that; we don’t use much managed product, so we don’t get any benefits out of the products that we recommend.
“But I suppose the conflicts arise where, for example, we use a particular online broking platform. It’s price-competitive and efficient, but we’ve contracted with this [provider] to do that. So, if you like, there’s some sort of conflict that it’s convenient for us to use that, [but] there could be a cheaper one.
“I don’t think fiduciary duty goes that far, but we put it on our register just in case. It’s not really a conflict. Clients would not see that as a conflict. Everything we do is all about our client. That’s our job – that’s the business.”
Strong relationships, ongoing advisory service contracts, and being paid by the client directly for services rendered are all “strengths of the business”.
“Our long-term relationships with clients – our extremely close relationships with our clients, because we’re dealing with them on a day-to-day basis – and the fact that we control the revenue stream for our own business, make it more valuable,” Hewison says.
‘The writing was on the wall right then and there; anyone who didn’t see it was just stupid’
Not that valuation is necessarily an issue, given Hewison’s succession plan and the fact that he has “no plans to retire at all”.
“I’m enjoying myself,” he says.“It’s good.”
“We’ve talked about appointing a CEO or a general manager to replace me, but we’ve come to the point of thinking that this business is pretty simple. It does not have stock and debtors; it’s a matter of the planners forming relationships with clients and servicing them so that we retain them.
“The whole emphasis is on long-term relationships. So the planners do the planning and focus on the relationship, and then we have all of the internal administration responsible for doing all the day-to-day administration work.
“The business could in the future get complicated enough so it needs a general manager, but right now we don’t believe it does. No need for it. It’s just not a complicated business.
“All we do is look after the clients. Simple.” Hewison is a fiercely independent operator, and he believes this structure helps the firm avoid the worst of the potential conflicts of interest that can arise for planners who work for institutionally-owned dealer groups.
“In some ways it’s a shame that the professional advice industry in this country is institutionalised, and in itself there’s a conflict because most of the institutions are product manufacturers in their own right, and there’s got to be a difficulty in juggling what is completely unbiased financial advice, and product manufacturers,” Hewison says.
“That’s not meant to be a criticism of the institutional bodies, because I know a lot of them are very dedicated to what they are doing, but I think it’s a problem.
“The removal of conflicts is important – commissions and hidden payment arrangements like volume incentives, platform fees and all this stuff. It’s about time we stood up and accounted for what we do. But there’s always been this crossover of incentive payments for one reason or another.”
Hewison says it’s not enough for planners to rely on – or, more likely, hide behind – a veneer of disclosure, and then to argue that this discharges their obligation to manage conflicts. As has been said many times before, Storm Financial was big on disclosure. Disclosure didn’t protect clients at all.
“We have clients come in here and say,‘We don’t pay any fees for what’s happening’, and we say,‘Well, someone’s paying’. And then we dig into it and they say,‘Oh that’s where [the costs] are’ – and they realise they’re paying big amounts of money they didn’t know they were paying,” Hewison says.
Hewison is an advocate, a self-confessed idealistic one, of a simple and straightforward system of charging clients for what they get.
“If a fund manager charges the fee that they need to make a profit, and the dealer group charges their agents the margin they need to make a profit, and the professional adviser charges what they need to do to make a profit, then everyone would be happy,” he says.
