About five years ago, Brett Taggart faced a situation unenvied by any director: He was fairly sure he was going to go out of business.
The head of the licensee, Bell Partners, crunched the numbers, looked at his processes, considered his various options and kept drawing the same conclusion.
“Five years ago, we said, ‘Something’s got to change or we’ll be broke,’ ” Taggart says. “[We were] doing our clients a disservice and eroding our productive time.”
The situation he’s describing was this: Taggart and his Sydney-based firm had about 800 clients and a handful of advisers (they now have a team of 20, including advisers and support staff). The advisers were investing on behalf of clients and producing a Record of Advice (ROA). The reproduction of ROAs every time an investment change was made cost the firm hundreds of hours a year and made executing more complex strategies difficult, because of the time that was required to complete the paperwork.
“We spent most of our time in the back office putting together ROAs and the compliance regime. It started to eat into our time talking to our clients,” he says, describing it as an “inefficient business”.
“An adviser cannot run an advice business, be an HR manager, run a P and L and say, ‘I’m doing the best thing by my client.’…You just can’t do it all.”
Having said that, Taggart said he believes the role of the adviser – as a guide and coach for clients – is something that won’t be made obsolete. Rather, it’s the process that has to change.
“Jobs don’t disappear, tasks do,” he says. “People who are going to survive in the future and thrive are those who are adaptable.”
With that mentality, the firm has since transitioned from asset managers to “asset gatherers”, Taggart says, using model portfolios built by a third party (BlackRock/iShares).
He says it has changed the client experience, by freeing up advisers’ time.
“We had to distill down what our job [was],” he says. “If we’re spending our time, as advisers and staff, doing all the mechanics, it comes at a cost.”
The perennial licensing question
Before Joe Stadler joined Bell Partners last year, he was disenchanted about working for a big dealer group and thinking of getting his own licence.
“My first consideration when leaving was, ‘I don’t want to see my licensee’s name in the newspaper’ [next to a negative story],’ ” he says.
It’s a theme Stadler expects to become more prominent in the next few years, with advisers realising the potential harm that could be done to their own business if aligned to a brand that suffers reputational damage.
What dissuaded Stadler from getting his own licence was the compliance costs and what that would mean for his face-to-face time with clients.
Taggart adds: “The volume of compliance is high and the expectations are the same, whether you have eight advisers or 80.”
Over the next five years, Stadler says, he expects many advisers to follow his lead and move from the big dealer groups to smaller licensees.
“The big licensees will still be there, but we will start to see a lot of growth in the ‘under 100 [licensed firms] space,” he says. “My advice for advisers who are in the same boat I was would be, don’t go and get your own licence. It’s too costly and too time-consuming. Find a like-minded licensee.”
Stadler has been an adviser for 15 years with some of the bigger firms and said it’s also easy to fall into a trap of focusing purely on investment and forgetting how it fits into the broader picture of achieving clients’ goals. He wanted to focus on the client experience, be product agnostic and reduce the time he spent scouring the ASX for investment updates.
“I’ve always loved what I do…[but] for me it’s about spending time with the client on strategy,” he says.
As head of the Sydney arm, Stadler says part of his focus is making sure the firm captures adviser talent that will meet or exceed the new education standards, which the Financial Adviser Standards and Ethics Authority is in the process of setting.
Taggart says the “writing was on the wall” in terms of the development of professional standards more than a decade ago.
“We picked up 10-15 years ago that this was the way the industry was moving and we said we may as well work on that now,” he says.
Advisers at the firm must either have a degree or be working towards one in a relevant area, he adds.
The future is connected
As the advice industry evolves into a profession, Stadler and Taggart hope it will foster a cross-generational culture of connectivity between advisers, where the sharing of best practice is common.
“I think a community currently exists, but it’s primarily dominated by people in their 50s and I’d like to see that change,” Stadler says.
He explains that he believes the incoming professional standards have already made planning an attractive career path for young advisers, but the onus is on employers and the industry to show young people sustainable career paths exist.
“The people have to be inspired and motivated to join an industry that has bright growth prospects,” Stadler says. “The recruitment of talent is going to need a shiny new direction.
Taggart says the key challenge in the next 10 years would be coming up with solutions to problems to make sure businesses can serve the growing client demand.
“We’re all facing the same challenges,” he says. “At some point, we’re going to have to put our egos aside and share our best ideas. I don’t currently see a lot of collaboration. If adviser numbers keep going the way they’re going, we’re going to have to talk to one another.”