Fresh from reclaiming its independence, the Queensland-based Infocus Wealth Management is gearing up for a bright future. But first, says managing director Rod Bristow, there’s the small matter of the FoFA amendments to deal with.
InFocus Wealth Management was ready to comply with the full measure of the Future of Financial Advice (FoFA) reforms on July 1 last year. In the first half of 2013 it sent out about 4500 fee disclosure statements, and having bought back MLC’s 25 per cent stake, was ready to forge a future as an independent.
The negative media coverage surrounding the stalling of the FoFA amendments has created some challenges.
Bristow says the longer-term outlook for independent licensees remains bright, but “I think we’ve got a bigger issue at the moment”.
“Like them or hate them, the FoFA reforms came in on 1 July last year,” Bristow says.
Sweatshop stockbroking
“We’ve now put ourselves in a position through a new government that those reforms are proposed to be overturned, plus introducing a commission-on-general-advice model, which quite frankly is a return to the bad old days of sweatshop stockbroking in the 80s.
“I think it’s difficult to position in the market as an independent when there’s so much negative press at an industry level at the moment – and I think largely that is self-inflicted.
“Purely from an Infocus perspective, we’re keeping a pretty low profile at the moment, because we think the dust needs to settle around these issues, and that the regulatory environment needs to settle, before we can be in a position where we need to be out there actively engaging with consumers and letting them know who we are and what we stand for.”
Buyback
Earlier this month the advisers and staff of Infocus, led by company founder and chairman Darren Steinhardt, bought back a 25 per cent stake in the business held by National Australia Bank subsidiary MLC.
The Infocus stake passed to MLC when MLC’s parent, National Australia Bank, acquired Aviva Australia Holdings for $825 million in 2009.
“What Aviva brought to the table was some guidance for us around corporate governance, mentoring and lead generation to grow the network, as well as the platform relationship,” Bristow says.
“What we found with the MLC relationship was that it was quite different. We had lots of conversations with MLC around the board table, and it was obvious from those conversations that MLC really wanted to go one way and we wanted to go another, so we’ve probably landed in a place where both parties are comfortable.
“We were used to dealing with Aviva in a certain way, and MLC’s approach was different. From my perspective, when I joined the business in 2011, my experience with MLC was such that we were really clear about our positioning in the market, we wanted to put a stake in the ground, adopt the FoFA reforms, put in place a really go-forward advice business and advice model, one that was very strongly aligned to the independent space, and that led to some discussion that were pretty robust around the board table.”
Flight to security set to reverse
Bristow believes that a pre-FoFA flight by advisers to the perceived security of institutionally owned licensees is poised to reverse.
“There was definitely a flight to institutions in the pre-FoFA period, and that was basically fear-drive, and the institutions making a significant land grab for distribution infrastructure while they had the opportunity to do so,” he says.
“A lot of the messaging we’re getting out of a lot of those people who flew to institutions is gee, the grass really isn’t greener; I am independently minded; and I do want to have a choice of product solutions for my client, for example.
“We’re seeing a lot of people who made those decisions now … we’ve got a number of people approaching us saying look, I’m with institution X, it hasn’t panned out the way I thought, is there an opportunity to join you guys?
“We’ve spent a lot of time making sure our business is robust for the future – governance, risk, compliance, technology – all those non-sexy things but things you cannot grow sustainably with out having in place.
Ready to go
“We’re ready to go now. We’re probably in active conversations with a good 30 or 40 independents who are with institutions at the moment. Obviously you’ve got to kiss a lot of frogs before you find the people you’re looking for, and we recruit very much on a values basis – the same way we recruit staff.
“I imagine a lot of those guys are looking at all of their alternatives, and if we’re on their list there will be three or four other independents who are on their last as well, and I’m sure being self-licensed will be on their list as well.”
Bristow says institutional ownership served Infocus well for a number of years, but as the business evolved it outgrew that structure.
“Darren, to his credit, has always been someone who has been really open to advice around what’s the best way to make Infocus be the best business it can be,” Bristow says.
“Part of that was initially being receptive to the Aviva shareholding coming in, but then over time as the business became more sophisticated – and certainly the regulatory environment became more sophisticated – Darren realised he needed to make some more changes, and that was really when I came on board.
“We worked together with the board to come up with a new strategy which was about where we wanted to be positioned, and really start pursuing that strategy really clearly. And independence was a key part of that.”
They certainly are ‘gearing’ up for a bright future. I wonder if that apt pun was included on purpose.