Since the industry’s beginnings, Godfrey Weston co-founder John Godfrey has had a vision for full-service financial consulting that includes keeping consumers and advisers well informed.
As John Godfrey sits down to talk to Professional Planner, he hands over a letter dated May 2, 1973. It is addressed to the then-chief manager of investments for the Commercial Banking Company of Sydney (CBC) – an antecedent of the National Australia Bank. In it, a young J.A. Godfrey sets out a vision for a “personal merchant banking operation”. The document is, for all intents and purposes, a blueprint for full-service, holistic financial planning.
It reads: “Such an organisation would employ specialists as a team, who, for a fee, would appraise a client’s assets and liabilities. Recommendations would then be made for the more efficient use of those assets and liabilities.”
It states the team would consist of a taxation consultant, an accountant, a solicitor, a security analyst, a real-estate specialist, an insurance consultant, an estate planner and a superannuation consultant. It goes on to outline a consultation process that would be instantly familiar to anyone working in financial planning today.
Godfrey’s idea of what a financial consulting process could look like was formed early in his career and helped make up the basis for the firm he co-founded years later. He got his start in stockbroking, where he managed a client service department, advised private clients and managed discretionary portfolios before moving into a research and institutional advice role.
He left stockbroking for Development Finance Corporation’s underwriting department, then became financial controller of Mercantile Credits.
Mercantile Credits was partly owned by National Mutual (before it was acquired by a French insurer and rebranded AXA Asia Pacific and before AXA Asia Pacific was acquired by AMP). In 1973, he took a “personal merchant bank” idea to National Mutual that was similar to his outline in that 1973 letter to CBC, but the company declined to act on it. Instead, Godfrey linked up with stockbroker Max Weston and Godfrey Weston opened its first office in December 1981.
Godfrey says his concept of full-service advice “had never really changed” between 1973 and the time Godfrey Weston was launched.
“Three years after we started, in 1984,” he recalls, “National Mutual came along and said, ‘You’ve done all the things you said you were going to do; we’d like to buy a holding in Godfrey Weston.’ They came up with 60 per cent and Max and I ended up sharing 40.”
He says Weston brought his broking expertise to the new business and “I probably brought the ideology”.
“Max was very good on detail and I have a broader view of the world.”
It was a fertile time for the fledgling financial planning industry. Within about three weeks of Godfrey Weston opening for business, it was joined by David Bleakley & Associates and Blewitt Goodman & Associates – a forerunner of RetireInvest – all in Chatswood, a suburb to the north of the Sydney central business district.
“If you were going to look for somewhere to set up a financial planning business, Chatswood was probably best,” Godfrey says. “In the eastern suburbs, people owned businesses and ran businesses and had a view about wealth and how it was created. Whereas [in Chatswood], we had a lot of people who were senior employed people, who were in businesses. We had clients like Coles, and people who retired from being sales manager or district manager – it was a logical place for us.”
Paying our own way
Godfrey Weston may to this day still be the only financial planning business ever to have an exhibit at Sydney’s Royal Easter Show and, what’s more, to have won a prize for it. Godfrey says the aim of the business was “crassly, to make a profit”.
“We actually paid our way from the first month,” he says. “I’d go looking and then I’d be doing business the following month. And the other thing is, we did actually set a fee for people to come and see us, right from the very beginning: $75. The merit of it was that people who were not serious never bothered us.
“We also recommended products that didn’t pay us commission. I can remember distinctly the Perpetual Property Trust and the Westpac Property Trust. Neither paid us anything. And I think we earned some sort of trust and reassurance with clients that we were trying to be balanced about the whole thing. That’s not to say we didn’t run it the way everyone else did it, but that’s the way it happened in those days.”
Godfrey Weston wasn’t above borrowing a good idea when it saw one. As the financial planning process became more formal and structured, it was necessary to gather client information on which to base recommendations.
“In order to find a client questionnaire, we actually wrote to Barclays Bank requesting a copy, because they were offering it,” Godfrey says. “I was reading The Economist and they were advertising that you could get one of their questionnaires, so we wrote to them and that was the starting point.
“Then it was a matter of preparing portfolios, so we bought two amazing computer machines called Datapoint. We had a dot-matrix printer. We had nice big A3 paper, or whatever it was, and we’d put these things on and predict for five years what was going to happen. And the recommendation would disappear with the client and they’d come back and say Mr Bleakley has got the same investments but he’s offering me a bigger return.”
Godfrey’s second job after leaving university was in the research department of the stockbroking firm Ord Minnett. It introduced him to the idea of fundamental analysis of stocks and other securities. After Godfrey Weston was set up, the firm began producing research into investment products, one-page summaries that “looked at the elements, descriptions, of what the particular product was about”.
Godfrey also filled a slot on radio station 2CBA FM talking about investment issues. “I’d go in on a Friday morning and pre-record the next seven days, and away we went,” he recalls.
Thanks to that role, along with his time at Ord Minnett, as the universe of available investment options began to expand, Godfrey Weston was already in the habit of conducting research and explaining what the new products and markets were.
“It meant that we did have some more grounding in what was coming at us,” he says. “Shares were already second nature to Max and me, and we’d done all this other work.”
Years later, this desire to inform would manifest in Godfrey’s current business venture, Informed Investor.
By 1994, Godfrey Weston had about 150 advisers in its network, Weston had moved back into stockbroking, and Godfrey was left in charge. The firm decided to buy back some of what National Mutual owned and a deal was structured that left Godfrey Weston advisers owning 30 per cent of the business, with Godfrey and National Mutual each holding 35 per cent. About a year later, Godfrey Weston merged with Pembroke, and about four years after that, Godfrey Pembroke was acquired outright by MLC.
Since that exit from the financial planning industry, Godfrey has been working on a way to provide consumers the information they need to start making better financial decisions, and provide advisers with information to better understand how products work. The result is the web-based service Informed Investor, which Godfrey stresses provides information not education.
“We see our business as an aggregator of information,” he says. “I set about trying to explain things in reasonably straightforward terms, in a limited number of words, and a quiz. I didn’t know where I was heading on it; I just felt good about doing it.”
He says his approach addressed the problem for advisers that “there was no measure of what the client’s knowledge was to leverage from”.
“So I started doing this and the first thing that came to mind was financial literacy,” he says. “But I’m not sure that financial literacy has the future that governments and regulators would like it to have. I can see a place in [formal education] for teaching some high school-level understanding of how to handle money. But if I want to know something to do with investments, I can go ‘OK Google’, and ask, and it’s there. So reducing the complexity of financial decisions should be the same.”
Godfrey says the best way to protect consumers from making unwise choices or being ripped off by unscrupulous advisers or product manufacturers is to produce “information that is actually understandable”.
“I think this is a prime responsibility of everyone in the wealth sector, to work overtime to reduce the complexity of financial decisions,” he says.
Godfrey’s approach is to provide simple information and then test users’ grasp of that information, to identify areas where perhaps more is needed. He says Informed Investor treats financial products and strategies the same way.
“[The Australian Securities and Investments Commission] supports our digital product profiles as an aid to understanding and sees a lot of value in having the evidence on file that a product investigation and assessment have taken place,” he says.
In addition, the Financial Planning Association has accredited Informed Investor for continuing professional development and the Financial Ombudsman Service “has indicated that they see the value in our approach”.
Godfrey has incorporated short quizzes into the website, which he says is important because “if you can measure knowledge, you know what to leverage off and where the gaps are”. He says ASIC regards the client quiz results as having the potential to help the adviser uncover more details about the client. Informed Investor can also provide the tools to help advisers with relevant websites.
While the tools at his disposal may have changed – the dot-matrix printer is long gone – Godfrey says his belief in the value of providing information to clients has not wavered.
“It may be boring but I haven’t varied in 45 years,” he says.