Accountants often view financial advice as a way of boosting practice values and adding a product-led revenue stream, says Michael Rees-Evans, director, Libertas Wealth Consulting.
“I’ve spoken to accountants…I think the motivation for a lot of them getting into advice seems to be the attraction of what they perceive as easy money…It simply gets them asset-based fees,” says Rees-Evans, who is also an accountant.
He launched his self-licensed financial planning business in the Sydney central business district two years ago. This followed a career in financial consulting with Accenture and a financial planning practice operating under the Australian Financial Services (AFS) license of AMP’s Hillross Financial Services.
“We nearly went to our own license there back in 2007, when we had a conversation saying we wanted clients to pay the net administration fee rather than the gross administration fee,” says Rees-Evans, noting that platforms have now recognised this.
“We thought that was a little bit conflicted.
“We were perhaps a little ahead of our time, but everyone’s thankfully caught up.”
Instead, he launched Libertas Wealth Consulting in 2012, having realised his passion lay in helping clients achieve financial freedom and wanting to move away from what he views as a conflicted model of financial advice.
Self-licensing
Despite the perception that self-licensing is overly complex and expensive, he decided to pursue this option.
“I think a lot of the bank-owned institutions try to make having your own license look scary and expensive, but particularly when I’m the only authorised representative at the moment, adviser supervision isn’t an issue for me,” Rees-Evans laughs.
He sees this as one of the biggest risks faced by bank-owned financial planning businesses.
“But a lot of the other independents I network with, we’re all small, we know intimately the people that are part of the practice and are sure that everyone is passionate about non-conflicted advice,” he says.
The accounting partner
He chose to co-locate the business alongside an established accounting practice, Lockwood and Ward.
Rees-Evans explains the financial planning opportunity comes when clients are dealing with an accountant and ask something that falls within the parameters of financial advice.
He says Lockwood and Ward wanted to round out its own offer by being able to provide advice to a client base composed mainly of accumulators, the 35-55 year-old clients. The head of the practice, Steve Lockwood, was dissatisfied with referring clients to other firms to obtain financial advice.
“So the benefit to the client is they’ve got more of a one stop shop, can see the accountant for their annual tax, and quite a lot of them have businesses as well.”
Fee structure
Under the business model adopted at Libertas Wealth, the business enters a 12-month agreement with each client and sets outcomes over the following year.
Rees-Evans then quotes a fee based on the complexity involved.
“Often it’s behavioural complexity, like spending too much, or irrational things like having a large credit card bill and a large term deposit, and not wanting to pay the card off,” he says.
In most cases, clients pay this in monthly installments, though Rees-Evans says some pay the annual amount upfront, and others pay quarterly.
“If people are paying every month, they tend to be more engaged,” he adds, explaining this is inspired by Jim Stackpool’s approach to financial planning.
Do independents charge more?
Being an independent practitioner, as a sole trader with a smaller pool of clients than most advice businesses that charge a mixture of commissions and fees, Rees-Evans says, “If you look at the visible fee the client pays an adviser, it would appear higher, because insurance, for example, is usually charged via an in-built commission.”
“So what they pay us visibly is higher, but in what we actually get in our bank accounts as advisers, it is probably the same as it was everywhere else,” he says.
Rees-Evans refers to the less obvious fees charged by clients of mixed remuneration model financial planners, conceding these fees are legally disclosed to clients, but are less well understood by consumers
Social media inspiration
His venture grew out of a chance encounter on Linked In, having joined a ‘Buying a financial planning practice’ group on the social media network.
Steve Lockwood, principal of Lockwood, had been looking for an adviser to come into the business as an owner rather than an employee
“We didn’t want any cross financial ownership. Most accountants getting into financial advice are attracted by the asset-based fees
“What I liked about Steve [Lockwood] was that he wasn’t motivated by getting a personal financial benefit, so much as being able to provide a fuller suite of service to clients of the firm.”
This article was amended on November 14 to clarify a quote that incorrectly suggested clients of Lockwood and Ward were dissatisfied with the advice they received. It was instead Lockwood and Ward that was dissatisfied with the financial advice their clients were receiving from previous external referral partners.
