From start to finish, it took the North Sydney-based financial planning business Plenary Wealth about three months to complete a move from one Australian financial service licensee (AFSL) to another.

Plenary co-founder Julian Nowland says that while the move from Financial Wisdom to Fortnum Financial Group has gone about as smoothly as it could be expected to, it has still been a very significant disruption to the business, and any practice contemplating switching licensees has to be prepared for that.

But they believe the disruption will be well worth it. Their motivations for moving, the process itself, and their expectations for the business in their new home serve as a case study for any planning business considering moving house.

Nowland and co-founder Joshua Cratchely had a clear reason for wanting to move to a new licensee and it was not driven by dissatisfaction with the existing licensee, but rather by what they saw as business growth opportunities with a new one.

Cratchley says a move has to for the right reasons and it is a mistake to “go into it for negative reasons or [because] you’re sick and tired of your existing licensee”.

“It has to be a positive move, not a negative move,” he says.

Good terms

Nowland says Plenary wanted to leave Financial Wisdom on good terms.

“If you can not make it antagonistic, that’s key,” he says.

“We sat down and had lunch with people from FinWiz and let them know there are no hard feelings and we appreciate everything they did up to that point.”

Cratchley says a business has to be prepared to do the hard work to make a transfer happen smoothly.

“The sooner you do it the better, as well,” he says.

“You need to be prepared for the move, and when things need to be done, if you say, well, I’ll get to that when I have a moment, it’s going to get dragged out. When we’ve needed to get things done, we get them done within 24 hours.

“But that’s how we run our business. We don’t return our clients’ pone calls a week later and say, oh, sorry. It’s not the way we operate.”

Cratchley and Nowland first met at a Financial Wisdom young advisers’ forum. They were working in separate Financial Wisdom practices, but soon realised they had similar business and advice philosophies.

“One of the biggest things is to continually improve,” Cratchley says.

“We’ve both been in very stagnant businesses that were very reluctant to change. We’ve both worked for some pretty lousy bosses over the years, and you learn a lot from the people you work for and work with, and we never wanted to run a business like that.

“We wanted to run a really great business – not just a great financial planning firm, but a great business that gives advice.”

Nowland came up with the name for the new firm; Cratchley struck out on his own first, creating Plenary Wealth in July 2013; and Nowland joined him in the business a few months later.

Growth plans

Before long it was clear that the growth plans they had for Plenary were not going to be realised at Financial Wisdom, and so the process of assessing alternatives began.

Cratchley says he and Nowland were “pretty open to the entire market”, and didn’t have a preconceived idea of what structure might work best.

“I’ve got a spreadsheet with about six different options; we did have a good look at everything, and weighed up everything: the pros; the cons; the fees; everything,” Cratchley says.

Nowland says a key element of the decision was access to an adviser community.

“We want to meet other advisers to bounce ideas back and forth,” he says

“That’s an important thing for us. It’s not just for a catch-up – though that’s always nice – but to share business ideas.”

In the end Plenary narrowed down the field to four – or five, if staying with Financial Wisdom became the preferred option.

Three-phase move

Cratchley says the move ended up happening in three phases.

“It’s the things you need to do before you tell your existing licensee that you’re leaving; then you have a transitional period whilst you’re still at Financial Wisdom, during which you’re moving across to Fortnum – that’s the stage…after you’ve resigned, and all the things you need to get done; and then there’s once you’re over at Fortnum, there are the things you need to do to come across and settle in,” he says.

Nowland says one of the biggest tasks “in a practical sense and a time sense, is to make sure you’ve got some things like files, and all that, paperless, so when you have to hand over all your files it’s there ready to go and that’s not going to be a hold-up”

“I still had a fair few paper files, whereas Josh less so,” he says.

“It was a bit of a process for me. You’ve got to scan all those files.”

Cratchley says the reason is that “the exiting licensee wants everything wrapped up”.

Fortnum national sales manager Joel Taylor says such a request is not unusual.

“Every licensee asks for it, and that tends to be the biggest hurdle,” Taylor says.

“If [the advice business is] not expecting that, particularly, they go and resign and then they get the transfer deed that asks for electronic copies of client files. “They’ve got an expectation that they’re going to be in their new home in three or four weeks. It can take weeks or months [to prepare files]. It can become quite a disruptive and arbitrary process.”

Internal compliance check

Nowland says that in the end this aspect of the transfer acted like “a bit of an internal compliance check” for the business.

“The dealer group’s going to do an audit of you – the old one – and then the new dealer group’s going to want to see the audit as well to make sure everything is above-board, too,” he says.

“We had a paraplanner predominantly doing that, and it was a two- to three-week process, around doing plans and SoAs as well.”

Cratchley says Plenary was fortunate in this regard, because “if we had been in business for 10 years and we had a thousand files, then that in itself is a big stumbling block”.

Nowland says it’s important to make sure that all data in the practice’s planning software is as clean as complete as possible.

“You don’t want to be doing that afterwards,” he says.

Added headache

Cratchley says that Plenary’s move brought with it “the added headache of not only moving licensees but moving software as well” – the move means a switch from Coin to Xplan.

“We’re having to get all of our Coin data which we got yesterday [January 22, 2015] on a file and then sent off to Xplan to be converted across,” he says.

Nowland says software training is a big part of phase three of a move.

“You want to be actually looking at that in the second phase, because you need to hit the ground running and you need to be able to start writing SoAs,” he says.

Nowland says the success of a move also relies on staff being involved early on. One of Plenary’s key staff is a paraplanner.

“We wanted her to have a say in that as well, because we value her very highly, as part of our business, not just an employee of it,” he says.

“She takes the same role as us: wealth strategist. She’s just not client-facing. She’s highly educated and highly knowledgeable and her role will probably diversify out of paraplanning and strategy into more business management and process management.”

During the transition phase, Nowland and Cratchley have had to make decisions about deferring the provision of advice to clients to avoid having anything on foot when the move happened.

Nowland recommends all outstanding SoAs be comepleted well before a move.

“If you haven’t got work completed and [the clients] haven’t signed off on it, you’re going to have to do all that again with your new licensee,” he says.

“That can be an unnecessary burden.”

Contained to three months

Nowland says the firm will “probably contain this whole process – starting with the client files, right through to finishing – to about three months”.

But Cratchley says the experience could be very different for other firms.

“If you had an office full of paper files, and you’d been around since the 80s, god help you if you wanted to make that move,” he says.

“It’s not just an income thing; that would be a disruptive thing – probably 12 months.

Cratchley says that once the move is completed, the biggest tasks include “getting up to speed on differences between especially the advice documentation”.

“ What we call ‘financial needs analysis’ at Financial Wisdom, Fortnum have a different form,” he says.

“The statement of advice looks different. We have to redo our website because it’s got Financial Wisdom on it. Business cards. New financial services guide – that needs to be signed off. We have to redo our emails. Little things, but they all have got to be done.”

Cratchley says the transition will also be smooth for clients.

“When they get advice from us instead of having Financial Wisdom on the SoA it’ll have Fortnum,” he says.

“They’ll come to the same office. Initially they’ll feel very little, but over time we think they’ll feel everything.”

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Simon Hoyle is head of market insight for CoreData Research.