While the recent Professional Planner Licensee Owners List revealed a sharp pullback in adviser numbers for most of the top end in the last year, the resilience of the investment brokerage advisory model has seen outfits like Ord Minnett, Morgans, Bell Potter and Shaw & Partners hold their ground.

Shaw & Partners, in particular, experienced a 20 per cent surge in licensed advisers and completed the sale of a 75 per cent stake to Swiss-based private banking group EFG International, shoring up its capital backing and netting it’s equity holders a tidy return.

In this edited interview, Shaw & Partners co-CEO Earl Evans answers seven quick questions about the current state of the firm, the future of international investment into advice and the intricacies of remuneration and governance.

And to be clear, Evans begins, they’re not a broker driven business.

1 – You have a predominantly broker-driven advice model, how differently does Shaw & Partners operate from a traditional advice firms?

At this point I don’t necessarily think of it as a broker-driven advice business, it’s a wealth business with a blend of full-service holistic advice, but it also has a domestic and international stockbroking execution side which is equally important. Over the last 30 years Australia has rapidly globalised and our business has tried to do the same as well, we started as a genuine long-only stockbroking business, but like all things you have to evolve over time. If we had of maintained an equities-only model over all this time we’d be dead, you know? The old model of buying and selling shares… anyone can do that.

What we have now, an analogy I like to use is that it’s like a good football team; some are forwards, some are centres and some are backs. Some of our guys are good at equities, some are tax experts, the list goes on. It’s all very much client driven, and in a lot of cases the adviser is the conduit for a client to the skillset of another adviser. You can’t just have a team of champions, you need a champion team.

2 – In our recent Licensee Owners List we saw firms with that brokerage DNA like Shaw, Morgans and Ords holding up well compared to other cohorts. It kind of runs against the narrative that advisers aren’t investors anymore and it’s all about strategy and soft skills, doesn’t it?

I think it’s a good observation and broadly true, but there’s another level to it. The days of the massive bulge brackets, the vertical and horizontal selling of product, is all somewhat coming to an end. People are also looking for more of that personalised boutique access with no call centres, they’re not interested in voicemail integration, they don’t want that, they’re looking for comfort of a firm that has some kind of size and structure but they’re moving away from the institutional firms. To some degree it’s what the banks tried to do but they failed massively. Firms like ours, Ords, Morgans, Bell Potter… they have the size and the domestic reach and the skillset but it’s got to be a personal enterprise. You’ve got to be hands-on and nimble.

3 – Have remuneration models for advisers evolved at Shaw in recent times or are they pretty static?

We have a blend, some advisers are on salaries, some are on revenue-based deals. In a lot of cases it all works out the same. We’re happy to discuss remuneration methods, it’s about what works for the advisers but also what works for the firm. In the end the most important thing for us is transparency, we don’t want people driven by commissions.

On the client side, some like a fee-for-service while some people believe that the stocks should be monitored all the time so the prefer to pay on a FUM basis. Other people say they haven’t transacted for the quarter so they shouldn’t pay the fee. It’s really the client that drives it, both models work great.

We can play around the edges with salary and commission, but I don’t think it’s the issue, I think it’s more about corporate governance and how you monitor your advisers and partners. Shaw and Partners hasn’t had a single regulatory breach in 30 years. Why? We’ve always taken a corporate governance approach to the business. I think plenty of people who have changed their model in the last 30 years come out with this great rhetoric about changing to help their client but they fall down on the governance side inside the firm.

Our view is very much an approach of loose-tight. We like a little bit more freedom at the front end of the business and then you keep it tight at the back. So that means flexibility with clients but rigorous governance on the back end. It’s also our job to touch base with the client independent of the adviser and check they’re happy with the advice.

4 – Obviously big news for Shaw & Partners in the last year or so with EFG purchasing 51 per cent and then topping up to 75 per cent of the company just last month. Are they actively involved in the business or are they relatively hands-off?

To be frank they’re really hands off and myself and Allan Zion run the business as chief executives. We weren’t looking for someone to buy the business, we were looking for a partners and someone to open doors on an international level.

The deal wasn’t anything to do with selling EFG product, we’ve got no interest in being aligned to one particular group and we did not want to lose our independence. They just really liked our growth story, our model, how we approached the business. Our assets under management were at around $6B five years ago and have grown to about $20B today; a lot of that has been organic growth and some has been advisers joining us. The combination of the two is what EFG liked about us.

5 – Can you see international private equity investment into advice becoming more common?

International ownership has come and gone in this country many times. Look at Merrill Lynch -they’ve come and gone three times. I can see international players coming into the market but more so in a partnership model, you’ll see them relying on domestic partners to have skin in the game and retain that accountability. Compliance can be tricky when its paired with globalisation, often they have a hard time because they put a global compliance footprint and it might apply in the UK or China but not here. So, I don’t think sole international ownership come back like it once was.

6 – Given the brokerage DNA of Shaw & Partners, you’d have an interesting view on how the ban on stamping fees associated with LICS will affect the market for listed investments. How do you think that might shake out?

My only commentary on that is that water finds its natural level, and it’s not the end of the sector. I genuinely think that with the restructure of the LIC market, people will get accustomed to it and life will go on. It might mean a different method of getting to market for some of these products, but it won’t be the end of the sector.

7 – Regarding FASEA’s adviser exam, brokers are similar to insurance advisers and accountants operating under a limited license in that they don’t have the traditional adviser skillset and can be at a disadvantage given the course material. Has there been any consternation about the exam in your ranks?

Over the last 30 years there’s always been consternation and concern whenever change becomes apparent. There’s always some nervousness. But I think once you get past that sticker shock you just get on with it. Education is a wonderful thing and what the industry is trying to achieve is brilliant.

When I started 30 years ago… to be frank it was abhorrent, you could license someone to manage millions with hardly any qualifications. I think there are still some things to fine tune around the education mandate and smarter people than me will make that happen, but while that’s going on you’ve got to just get it done.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at tahn.sharpe@conexusfinancial.com.au
One comment on “7 questions with Earl Evans, Shaw & Partners CEO”
  1. Avatar Jeremy Wright

    Shaw & Partners are a full service, holistic advice firm, though as Earl states, “we have specialists in different areas”.

    This is the Crux of how they operate and if a Business is well funded, has large reserves and can “shore up” with capital backing, then it can survive the up’s and downs.

    Shaw & Partners sold most of its Business to EFG International. Giving up 51% of your Business, then 75% is also, a loss of control of the Company.

    The second point which is so true, has been a narrative that has been around for 50 plus years.
    Everyone wants personalised service and a feeling that they are genuinely being looked after.

    The banks failed and the last opportunity they had to make it successful, was when the Bank Managers knew their customers and did provide personalised service.

    The Banks already had their client’s loyalty. It was lost when the advice model was corporatised and personal advice and service became lost in the void of, “growth at all cost”.

    Shaw says their clients choose their preferred payment option.

    This is interesting, considering clients seem to have been overlooked in this discussion, as other entities viewpoints were aggressively promoted, to the detriment of clients.

    This is clearly apparent with the Life Insurance, “conflicted remuneration” argument, that has NIL merit.

    Earls comment in 7, regarding FASEA, is a neutral, “sit on the fence” position. FASEA has been a distraction, was and still is a hodge podge of contradiction, with conflicting views on what should be the future direction, from all and Sundry.

    When the Corporations Act, conflicts with FASEA, how are the thousands of advice Businesses working so hard to keep their clients afloat and on an even keel, supposed to work it all out?

    There are many thousands of great small advice practices, who do not have the capability to move forward, based on the current maze.

    If they go, it is Australia’s loss, with NIL gain for anyone.

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