After more than two decades under institutional ownership, Godfrey Pembroke is now formally back in the hands of its advisers.
When Insignia Financial (then IOOF) acquired MLC and the Godfrey Pembroke (GPL) licence along with it in 2021, GPL advisers, represented by the Practice Development Group (PDG), negotiated an option to buy back the name and the licence from Insignia.
As part of that agreement, Insignia has provided Godfrey Pembroke with an undisclosed sum of capital that the business’s newly appointed chief executive Mark Fisher says is “sufficient enough capital that the business is well capitalised and has no financial stresses”.
Godfrey Pembroke fell into institutional hands in 1999 when it was acquired by MLC. Fisher, previously chief executive of the Westpac-owned Securitor Financial Group and general manager of GPL under Insignia’s ownership, tells Professional Planner that returning Godfrey Pembroke to adviser ownership is a return to the firm’s independent-minded origins (see breakout).
Fisher says GPL will be a lean licensee, with just four full-time staff supporting a network of 60 advisers and a range of functions outsourced to third parties, including Lonsec for investment research, the Perth-based 3Lines for compliance, and Umlaut Solutions for advice tech.
“If you look at the way licensees within large institutions like us are plugged into a very large infrastructure internally, that was very costly,” Fisher says.
“We’ve built a model, which is largely an outsourced vendor relationship. We’ve got a smaller number of staff internally, large vendor relationships for which we pay set fees for subscription services, and we run the license much more lean than it could have been run inside a large institution.”
Not where it’s at
Fisher says the move by GPL’s advisers is symptomatic of a broader view within the advice community that “institutional advice is not where they want to be”.
“They see that their preference is to be not aligned to a large institution, they want to be in a well-run licensee that has… the ability of making their own decisions, charting their own direction, and is not dictated to by a large institution,” he says.
“The big difference we’re going to see is that the way we engage with our current advisers and prospective advisers that want to join our license, they’re really clear that advisers are the decision makers in the licence, not an institution.”
GPL’s extraction from Insignia initially created some uncertainty, with both PDG and Insignia laying claim to ownership of the GPL license. But Fisher says the relationship with Insignia remains strong and the licensee departs on good terms.
He says former Insignia CEO Renato Mota, newly appointed CEO Scott Hartley, and Rhombus (the official name of Advice Services Co, formed via Insignia’s planned divestment of its licensee business) CEO Darren Whereat were kept abreast of PDG’s plans.
“They’ve supported us where we’ve needed to be supported and they’ve helped us where we’ve needed help,” Fisher says.
Not a strategic ploy
In August last year the listed Clime Investment Management announced an exclusive non-binding heads of agreement with the PDG to create a strategic operating alliance to offer AFSL services to Godfrey Pembroke advisers, and to advisers in the Clime-owned Madison network.
However, that agreement lapsed, Fisher says, and it wasn’t a strategic ploy to get Insignia to play ball.
“I can understand why people saw it that way, but it certainly wasn’t,” he says.
“In fact, there were a number of parties that approached us. [Clime wasn’t] the only one; we had discussions with probably three or four parties at the time, all of which Renato and Darren were aware of.”
Fisher says PDG and Clime had “a series of discussions, we reached what we thought was a heads-of-agreement that we could proceed forward with”.
“But after the heads-of-agreement was reached, it was apparent that both parties had stuff that they needed to deal with, outside of the heads-of-agreement,” he says.
“The heads of agreement, obviously, just then expired.”
Fisher says the idea Insignia would seek to ensure GPL is adequately capitalised even as it heads out the door is only surprising “if you don’t believe” that Insignia want to see it succeed”.
“If you believe that they want Godfrey Pembroke to succeed as an extracted entity, it’s not a huge surprise,” he says.
“You’d want it to succeed, you want to make sure it has the right services, you want to make sure it’s got the right people, you want to make sure it’s there for a long term. Therefore, you seed it with capital to make sure it does.”
Insignia’s Hartley tells Professional Planner that GPL’s departure from Insignia is “a natural step in the professionalisation of the advice industry”.
“I have great respect and admiration for the GPG advisers and fully support their desire to govern their own destiny,” Hartley says.
“It was important to Insignia that they were set up for success as a standalone licensee business and that included providing sufficient working capital for the business to operate. We look forward to a close and supportive partnership with GPG going forward. As such, I plan to be a regular guest at their board meetings.”
A healthy ongoing relationship with GPL might also be in Insignia’s interest to protect the client funds that GPL advisers have on Insignia-group platforms.
“You could take that view; I don’t,” Fisher says.
“We have a reasonable amount of money with the group, that’s accepted. But the decisions we’ve made are very much about this is a new paradigm of advice.
“We’ve moved away from large institutions owning 60 to 70 per cent of the adviser market. AMP is the last group really. Once Rhombus divests from Insignia, you’re left with one large group.
“The proposition for us has been around how do we reframe advice, from an institutional advice perspective to a standalone model, or a supported-not-owned model? That’s been the conversation. I can understand your view, but we don’t see it that way.”
Growth plans
Fisher says GPL now has plans to grow adviser numbers “but not massively”, and it has set no formal targets, but will be selective about the firms it takes on to ensure they fit the picture.
“Our businesses are more [in the] high-net-worth, affluent space,” he says.
“Our average client balance is significantly higher than [industry] average, and we have a lower number of clients per business. They’re the kinds of businesses we want to partner with going forward, and that’s not everyone in the market.”
In practice, no firm can join the GPL network without the explicit imprimatur of PDG, which Fisher says has always been the case.
“The board, or a member of the board, will meet with any prospective practice or adviser, and they will have final veto or approval rights as to who joins the group,” he says.
“We want to create and really foster a great community that people want to be part of, and then get that message and that word out to other advisers through [our] advisers about what we’re trying to do.”
Fisher says that through all the different institutional owners and structures Godfrey Pembroke has been through, “its DNA hasn’t changed” and it remains an adviser community.
“It’s very tight, a very strong community, with great bonds between the advisers and practices,” he says.
“The history is deep and rich and that is that is still there. That’s something that that we’re going to rely on to take the business forward. It’s not a new business.”
| Breakout: Daring to be different
Godfrey Pembroke has always been a bit different. Over the years, through mergers and institutional ownership of different flavours, it has maintained an independent – some would say stubbornly contrarian – attitude towards serving both clients and its institutional masters. To understand the attitude prevalent among its advisers, it’s worth briefly considering the licensee’s long and storied history. It was formed in a 1995 merger that brought together two advice groups with fiercely independent outlooks of their own. One was Pembroke Financial Planners, whose founders included Jim Clegg and which was for a time backed by Larry Adler’s FAI Insurances. The other was Godfrey Weston, co-founded by John Godfrey and Max Weston, and for a time majority-owned by National Mutual (which itself was later acquired by AXA, then absorbed into AMP). By the time of the 1995 merger, NM’s stake had been diluted to 30 per cent, with 35 per cent owned by Godfrey, and 35 per cent by advisers. The merger with Pembroke was, in its day, a very big deal. It was in many ways a meeting of minds. In an interview with Professional Planner in 2017, Clegg recalled that Pembroke launched fee-based financial advice in 1989, after a visit to the US and the UK gave him an insight into how such an approach could work in Australia. “[The thinking was] the whole basis of commission-based advice was not consistent with doing what’s in the best interests of clients,” Clegg recalled. “We became very wedded to the idea of having the intent to do the best thing you can for clients. At that point, commissions just don’t hack it.” For his part, Godfrey was onto full-service, holistic financial planning as far back as 1973. A letter written by a young Godfrey to the then-chief manager of investments at the Commercial Banking Company of Sydney (a forerunner to NAB) sets out what amounts to an organisational blueprint for what we recognise as financial planning today. “Such an organisation would employ specialists as a team, who, for a fee, would appraise a client’s assets and liabilities,” Godfrey’s letter says, in part. “Recommendations would then be made for the more efficient use of those assets and liabilities.” It’s clear to see why the entity resulting from the 1995 merger, Godfrey Pembroke, stood as a beacon of independent thinking. While the ownership independence ended when MLC acquired Godfrey Pembroke in 1999, the mindset survived and lives on among its advisers today. MLC itself had been acquired in 1985 by property developer Lend Lease, leading to scratching of heads and scepticism about what a business run by a bunch of civil engineers knew about financial services. That wondering quickly evaporated as the engineers’ business discipline drove MLC from strength to strength, and it was sold to NAB for $4.6 billion in 2000. Godfrey Pembroke went with MLC to NAB, and then with MLC to Insignia (then IOOF) in 2021 as NAB abandoned financial advice in the wake of the Hayne royal commission. Now, Godfrey Pembroke has broken away from institutional ownership and is owned by its advisers. Free of institutional ownership once more, and still wedded to the ideals of independence and the client’s best interests, Godfrey Pembroke is headed back to the future. |
