Ten years from now, financial planners will be legally distinct from their product-selling counterparts. The financial advice space will also be a huge opportunity particularly favouring independent planners, according to the founding director of Sentinel Wealth, Justin Hooper.
Hooper’s business celebrated reaching its 10-year milestone last week, an occasion that prompted his thoughts on where the industry will be in a decade.
“The biggest issue in the next 10 years is the difference in labelling between adviser and agent or broker. I’m actually okay with people selling products; I just want them to be [clearly identified as salespeople].
“If your focus is on the client, well, then you should be called a planner or an adviser, but then you should have seriously onerous requirements, including fee-based remuneration, high education standards et cetera. That’s what I would like to see, because that will change everything,” Hooper says.
He started the business from scratch in 2004, alongside Bob White, after relocating from South Africa, where he had built up a successful financial planning business.
Celebrating a decade in business
Hooper, his staff and more than 200 clients threw a party at Luna Park last Thursday, just down the road from Sentinel’s Milsons Point headquarters. During a brief speech, he emphasised the core focus the business places on clients and acknowledged the efforts of his team.
He also hinted at Sentinel’s growth strategy, saying, “We need to be bigger than we are to do what we want to do.” However, he has no ambitions to grow the business into a large dealer group. “I wouldn’t want to set up anything too big. I don’t want to be a Shadforth’s. I mean, they did a wonderful job, but there’s only one [former Shadforth CEO Tony Fenning,” Hooper says.
Part of his expansion strategy involves selling equity in the business to his planners. One of Sentinel’s authorised representatives, Gavin Fineff, became the first of these recently when he took a 10 per cent share of the company.
“The plan has always been to sell down much more of the equity than that. In five years time, hopefully I’ve reduced my equity even more,” he says.
Hooper hopes to gradually take a step back from the day-to-day planning work and take on more of the strategy. “I think there’s a difference between a financial strategist and a financial planner. The strategist deals with a front-end problem…they don’t know what’s going to come up. They need a financial planner who is really good at all the analysis, the advice writing, and all the normal stuff like super, investments and estate planning,” he says.
“I want a sustainable planning business that is completely client focused and I want it to last well beyond my lifetime. I need really good people younger than me, who are ambitious, and Gavin is one of them. But there will be others.”
New growth, new models
Hooper has already formed a business model, envisaging that as good people come out from under the umbrella of banks and large institutions, he needs to be able to offer various models to cater to different demand.
These include an employed model with an equity offer and a franchise model he calls a financial network as opposed to a dealer group, because licensing may or may not be part of it. A third option will enable principals to operate under their own brand but taking advantage of Sentinel’s systems and processes.
Some of the details are yet to be decided, such as what share of revenue Sentinel would take under the franchise arrangement, but Hooper is confident there is demand.
“I’ve had a number of people asking me when we’re going to be setting up a dealer group – the demand seems to be out there.
Banks to go robo
More broadly, Hooper also anticipates the divide between the financial advice provided by institutions and independent planners will widen further.
“It will be an exciting time. The institutions are going to go heavily into robo-advice. If you want personal advice you’ll have to look for operators like us,” Hooper says.
He believes banks will adopt robo-advice, largely in response to the difficulties they have faced in policing the behaviours of individual advisers. “They’ve burnt their fingers so much, they probably think it’s difficult to control advisers when offering personal advice; you don’t know what [your advisers are] saying, what they’re doing. I think the institutions are going to struggle and move more toward robo-advice.”
“They’ll be tightening up on things. There will be some really good planners there, who want to provide personal advice, they’re going to be looking for a home. We don’t need too many to make a big difference to us.”
Hooper has a much more upbeat outlook for financial planning over the next decade, a refreshing change from many practitioners, such as risk planners who fear the impact of the Trowbridge report.
His perspective stems from what he sees as the huge benefit education expectations have on the younger generation of planners.
“I think there’ll be a much bigger proportion of independent advisers. The future looks pretty good. In 10 years’ time, the industry will have a big group of independent, high quality, very professional financial planners. I’m really looking forward to that time.”