For reasons perhaps best known to itself, earlier this year the Financial Planning Association asked Professional Planner to take part in judging three finalists in its FPA Professional Practice of the Year Competition. Really, it might have been easier to be asked which of my kids I love more – there are only two of them.
The members of the judging panel were given a Business Health report on the businesses – ipac Western Australia (the eventual winner), Enlightened Financial Solutions, and Capital Partners Consulting; given some time to digest the findings and do a bit of poking around, and then met to make the decision. It was a lively and entertaining discussion led by the FPA’s head of advice partnerships and memberships Jason Tattershall, along with other members of the FPA leadership team and Mark O’Leary of KRA Wealth Management, and it very quickly became clear that there really was not very much between these three firms.
One observation is that there’s clearly something going on in Perth – ipac and Capital Partners are both located there. Enlightened resides in Mackay, Queensland, and it was refreshing to see practices from well outside the Melbourne-Sydney axis leading the way.
I’m reasonably familiar with the Business Health approach to assessing financial planning businesses, having worked with Rod Bertino, Terry Bell and Ray Henderson on a number of articles and events over the years, including, most recently, the Professional Planner/FPA Best Practice Forum in August. And in 2013 we worked on (or rather, Business Health worked; we just reported) the Best Practice Competition, which was won by The Wealth Designers, Troy MacMillan’s practice in Perth (Perth!).
That competition threw up a similar issue to he recent FPA contest: we had six finalists, each of them was a first-rate business, run by highly professional and capable individuals, delivering outstanding service to clients – and making the call on the winner was tough.
The best Australian advice businesses are world class. Rajini Kodialam, co-founder and managing director of the New York-based Focus Financial Partners has built a $US500 million business by acquiring equity stakes in Registered Investment Adviser (RIA) firms – the US equivalent of the Australian non-aligned practices. She says the quality and potential of the best Australian firms is second to none.
In May this year, Focus did its first Australian deal, buying a stake in MW Lomax, which has offices in Melbourne and Sydney. There are other deals in the works, which Kodialam says are likely to be finalised in the first or second quarter of 2017.
It’s instructional to note the characteristics Kodialam says Focus looks for in its partner firms: good, established, profitable businesses, with strong recurring revenue and free cashflow, acting in a fiduciary capacity for clients.
Funds under management is interesting, but not the most important thing – not by a long shot. One of the RIA firms Focus has a stake in had $US7.7 billion under management, and was struggling to work out how to take it to the next level. But it is neither a better nor worse business than any other of the investee RIAs.
More importantly, the firms are fundamentally professional services firms, not distribution arms of institutions, nor product sales machines.
The finalists in the FPA competition shared some characteristics, but also demonstrated some differences, suggesting that while there is more than one way to provide great service to clients, there are some common foundations.
They are clearly professional services businesses. Each has a clear and simple value proposition, and segments its client base effectively. Each has outstanding leadership – a strong entrepreneurial streak married to sharp business acumen and management skills.
But there was also a sense that each of these firms appreciates a broader context for what they do. Engagement with community, philanthropic activities, and a commitment to professional standards – all of these things shone through.
It was an honour to be involved with this competition, but disappointing there could be only one winner. It was a tremendous insight into three great businesses, and a timely reminder that the best that the Australian financial planning industry has to offer is the equal of anything in the world.
TOPICS: Business Health, Capital Partners, Enlightened Financial Solutions, Financial Planning Association (FPA), Focus Financial Partners, ipac WA, KRA Wealth Management, MW Lomax