Angus Benbow has spent the best part of the last 12 months talking to advisers about their futures. What he’s found is that for every adviser he’s encountered feeling under pressure or under duress, there’s another buoyed about what’s ahead.
Benbow, the CEO of listed wealth business Centrepoint Alliance – previously the CEO of IOOF’s Shadforth and a GM within listed funds management and private clients business, Perpetual – started the process of talking to advisers almost immediately when he took the top job in April last year.
“The first year as a CEO of a listed company is difficult in any environment, clearly the last year, even more so. But for me the timing was fortunate because what the Hayne royal commission did is it set the perfect backdrop to challenge pretty much every aspect of the business and to drive change faster,” Benbow said at Professional Planner’s Licensee Summit in June as part of a case study highlighting Centrepoint’s revenue model transition.
What Benbow was faced with when he joined Centrepoint was a company with 30 years of legacy “old world” businesses stitched together lacking a clear or single purpose. Centrepoint famously acquired Gold Coast headquartered advice aggregator Professional Investment Services back in 2010.
His goal quickly became shifting the business to an entirely fee-for-service model, free from cross subsidisation.
Benbow used the Licensee Summit platform to call out the enormity of the task ahead of him, considering more than an estimated 80 per cent of the company’s current revenue is made up of rebates sourced from external providers and margin from in-house product. He shared a slide characterising the company’s revenue mix moving from mostly conflicted revenue where it is today, to a business with revenue almost entirely made up of service fees paid by advisers by 2024.
Advisers at the centre
Communicating clearly and purposefully with advisers was an essential part of Centrepoint’s transformation, Benbow said.
“Absolutely, advisers are under pressure, we will see quite a few advisers from our network go as a result of what we’re doing. But it’s brought forward certain decisions as well. Advisers have been hanging onto a business they know is not profitable and they probably can’t turn it around. It’s generated a lot of conversation around succession planning,” he continued.
In March this year, Benbow told Professional Planner Centrepoint began “socialising” its new authorised representative fees earlier in the year, with the plan to implement its new pricing arrangements from July 1.
The socialising process involved actually defining what fees they already pay and for what services before the business could even start increasing AR fees or changing the services it provides, Benbow explained.
“We had to outline what is it was actually costing to provide advisers a service. Because so much had been subsidised in businesses like ours, because it’s so old, we were charging a certain fee coming out of a P&L, but that wasn’t how we were getting the revenue back. We were getting a legacy rebate here or a margin somewhere else,” he said.
“We’ve transitioned to a place now where we can say ‘here is what the fee is and what it’s for’,” he said.
Being transparent to advisers about costs is an essential part of the catharsis the industry needs to embrace, Benbow believes.
“We are all in the business of enabling more Australians to get good quality advice. Transparency is the key to that, it’s the foundation of a trusted relationship. So the way we make it easier for advisers to give transparent advice is create a transparent fee for service model,” he said.
Facing into the challenge
While it has finalised its first stage of new pricing, Benbow admitted Centrepoint is still very much at the start of a long journey. But he added that now is the right time to be facing into the challenges.
“These are massive changes we are forcing through the whole industry. We created it all, the industry did. We can’t just sit there and say ‘suck it up’ because this is the way things are heading now,” he said.
“We are stepping fees up incrementally, and the reality is we are continuing to get rebates through next year but what we doing is transforming Centrepoint from what was very much a legacy business to a contemporary business,” he described.
One thing advice businesses can’t do is put their heads in the sand and pretend disruption of business models is not on the cards, Benbow said.
“Throughout history, companies have transformed because their leaders were able to see the environment changed and were able to leverage the business’s strengths… businesses fail when leaders fail to see change, whether that’s legislative change, consumer expectation, technological change or new entrants coming to the market. There’s no doubt in my mind the advice industry is going through all those four of these,” he said.
Centrepoint’s challenge now is how does the business help financial advisers to be financial advisers in an incredibly challenging world, Benbow said.
“When you go back to your businesses, think about whether your clients or those you provide a service to will miss you in six months time if you’re gone,” Benbow said, setting a challenge to the room full of his peers and industry leaders.
“If you think your clients can find someone else who can provide just as good a service in six months then that means you have to change.”