Defining Your Success – 2018 Conference Highlights

It was fantastic to see our advisers at our 2018 Fortnum ‘Defining your success’ conference last week in Melbourne.

There was the usual great vibe amongst everyone in attendance and we have received some amazing feedback from a number of our practices. We love hosting these events as we understand the importance of catching up with each other, learning from some great thought leaders, and sharing ideas with your peers.

This year, the Fortnum conference provoked our thinking and provided practical solutions to help us not only define our success, but plan towards it. As success is not one dimensional, we were able to reflect on personal and business success, guided by some great speakers including body language expert – Dr Louise Mahler, owner of Your Geneius – Dr Cam McDonald and our MC and author of Game of Inches – Nigel Collins.

We would also like to take the time to congratulate our 2018 award winners:

  • Educational Excellence Award – Harold Braakhuis

The Educational Excellence Award is awarded to an adviser who has shown educational excellence through proactive study and also has a true mindset for education and learning.

  • NextGen Award – Paul Dobbrick

The NextGen Award recipient has had significant involvement in the ongoing success of the NextGen program and are highly collaborative, always willing to share their ideas with others to help them grow and develop.

  • Business Growth Award – Stratus Financial Group

The Business Growth Award is awarded to a practice that has had significant revenue growth over the past 12 months.

  • Principal Practice of the Year – Dobbrick Financial Services Ipswich

The Practice of the Year continues to grow and develop their business, is highly collaborative, and willing to share their business initiatives with other practices.

  • The Guy Carrington Award – Guyon Cates

This award symbolises outstanding commitment and contribution consistently to the Fortnum Community and provides the opportunity to publicly thank people who have made a significant contribution to the greater good.

The Power of the Collective



“Sometimes the obvious is not so obvious” – Anon

Whilst it has been obvious to most people for a long period of time, the outcome of the Royal Commission so far has provided at least one clear message. The Agenda of the institutions has always been in conflict with the best interests of their clients and their aligned practices. In fact, many of us in the industry wondered how it was possible for practices in the vertically aligned institutions to truly comply with best interest duty. It has become evident from the Royal Commission that they were probably not able to do so.

The institutions were playing an agenda that did not involve any benefit to clients. One ponders the question of what will happen when these vertically aligned businesses are sold or spun out from the big banks. The problem will still be the same. The knock-on effect of this is that because the vertically aligned institutions have dominated the Advice space for the last 20 years, their effects have damaged everybody in the Advice industry. The true effect of the vertically aligned system has been enormously expensive for both clients and advisers attempting to work in the IFA space.

How do they do that?

One of the likely recommendations, amongst a raft of many, is that advisers will need to be individually licensed to ASIC. The second message is that there will likely be much greater intervention from ASIC across all parts of the industry. The self-licensed area to-date has been largely unsupervised by ASIC because of a lack of resources. One of the shocks that came out of the Royal Commission was the fact that ASIC only has 60 people in the supervisory area to manage an industry with 25,000+ Advisers. That was mission: impossible. Therefore, ASIC fees will become much higher for the direct licensing regime, increasing the cost of being licensed.

For many, the thought of having their own licence, and therefore being deflected from their current advice focus, is daunting. There is a significant amount of work and responsibility around licensing that many have to-date outsourced. Many of the those in the self-licensed arena will say that it’s easy enough for them at the moment – and it is. But will it be in the future, if ASIC gets the resources? It is counter-intuitive to suggest that it is cheaper to run your own licence than to run through a licensee that specialises in providing all the necessary support and resources around giving advice, such as:

  • Approved product lists
  • Model portfolios
  • Advice framework technologies
  • Compliance framework
  • Compliance auditing
  • Professional development
  • Business development

Individual practices (apart from really large ones), have no scale or buying power unless they completely focus their business on a single platform provider. This means they are likely to fail best interest duty because one platform provider cannot be the best solution for every client. But dealers do The problem is that it is not being used for the benefit of advisers or clients. This is the overwhelming reason the licensee model is broken. If the benefits of scale were used for the practices and their clients, both would be significantly better off. So, how could that happen?

Firstly, this is predicated on ASIC getting resources so the self-license cohort is also supervised by ASIC (and not just the big end of town). That changes everything. If it doesn’t, however, it is easier and cheaper to be self-licensed.

So, assuming ASIC applies equal supervision across the industry, what is the best outcome for advisers? There is no doubt that the rise of adviser-owned licensees with scale is the best outcome for the following reasons:

  1. Scale – The benefits of scale have never really been evident across the industry but are beginning to become apparent now. A well-known, high-quality dealer group that was sold into the institutional space a couple of years ago, was buying one of the major Wrap platforms off the institution at an average of 8bps for their clients. When you consider that the rest of the market was paying somewhere between 40bps and 60bps on average, it gives you some idea of how scale could begin to work. That same licensee was buying funds at between 1/3 and ½ of the typical costs shown on the platforms. But scale can be applied not just to platforms and asset managers but also to technology, PI and a raft of other services.
  2. Governance – Despite all of the revelations of the Royal Commission, the facts are that “the big end of town” had significant corporate governance and compliance around its procedures and systems. Whilst in their compliance areas, they tended to cater to the lowest common denominator, nonetheless, at “small end of town”, governance and compliance will become a serious issue if the area comes under the focus of ASIC. There is no question that one outcome from the Royal Commission will be a requirement for all parts of the industry to have genuine levels of corporate governance, systems and procedures and compliance advice frameworks that will stand the scrutiny of a difficult regulator. The thought of that, at an individual practice level, is daunting, at the very least.
  3. Resourcing – If there has been any criticism of the self-licensed industry over the last few years, it has centred around the problem of resourcing in those practices. The clear outcome of that from a client point-of-view has been a series of failures in the research function of the practice when it comes to their approved product list (or lack of it). We all remember the product failures of Westpoint, Bridgepoint, Great Southern, Timber Corp, etc. With one exception, none of these products were ever on the approved list of any of the larger licensees (including the independently owned ones). They were universally sold out of the self-licensed practices and accountants being licensed direct to the product provider. The results of it were catastrophic to the client but also ensured the destruction of the advice business attached to the advice. Resourcing applies to other areas such as business development, technology and advice frameworks. It is possible to outsource much of that – but it always comes with a cost.
  4. Collaboration – We have often heard people say that in a truly collaborative environment, 1 + 1 = 3. This has been proven over the years because there have been a number of adviser-owned licensees that have been very successful and collaboration has been an integral part of that success. The advice business is a lonely industry if you’re out there by yourself. In an adviser-owned licensee, everyone in the licensee has an interest in helping everybody else in the licensee to grow. Everyone benefits from the scale and the buying power that it brings to both the practices and the clients. Most of all, the greatest benefit to anybody is the capacity to access like-minded practices, to learn the lessons they’ve learnt, from the mistakes they’ve made. No matter what problem you have in your practice, someone else will have solved the problem somewhere else. The true art of an adviser-owned licensee, is to collect that information and share it, so everybody wins.

Everyone agrees the licensee model is broken. Everyone seems to think the only solution is to get your own AFSL. The truth is, the vertically aligned licensee model is broken and anything copying that is also surely broken. But the licensee model itself is not broken if it is applied for the best interests of the practices and their clients. In that scenario, the licensee should be stronger than it ever was before. If you can imagine for one minute, an adviser-owned licensee with the buying power of the institutions.  On an example given above, such licensees would be buying platforms at ¼ of the cost that self-licensed practices would be paying and would be building better portfolios at probably around 25%-50% of the cost being paid in the self-licensed arena. When you apply that scale game across all the parts of the value chain and then you resource the licensee with enough funding so that it finds the next generation of technology to provide efficiencies inside the practice, then you get some idea of the power of taking control over the advice industry for the benefit of practices and clients.

We have not yet measured the cost to clients of the vertically integrated system, but in the US, they have. The difference between conflicted and unconflicted advice in the US has been measured between 1.2% and 1.3%. In fact, there is a digital clock in Washington that’s projected onto some of the Washington monuments that shows the cost to America of this differential. It’s called the “Retirement Rip-Off Counter”. The current number is shown below:

It’s not hard to imagine that that cost differential is likely to be mirrored in Australia. To give you some idea on what that means, for a client with $1million to invest in the conflicted system in America, the cost of that over 20 years, at an average earning rate of 8%, to the end result is over $1million. In fact, at 1% difference, not 1.2% or 1.3%, it is over $1million. That means, for a practice in Australia managing $150million, the cost to clients for this system is between $1.5 million and $2million per year. You can pay a lot of dealer fees with $1.5million-$2million a year or you could, in fact, protect your advice fees significantly by reducing that level of cost to your clients.

So, as you consider how you deal with the results of the Royal Commission, keep your mind open to what the end result is going to look like in a few years’ time. Australia needs at least one very large adviser-owned licensee to right the financial services ship.

As an adviser owned licensee, Fortnum enables great advisers to deliver the best advice. If you are a practice looking to join a collaborative community and benefit from the power of the collective, then please call Ray Miles on 02 9904 2792 or email Ray at to arrange a suitable time to discuss your future as a Fortnum adviser practice. You can also leave your contact details below and we will get back to you.



Better together: why the ‘super collective’ is the future for advisers and licensees

Since the early 2000s when Financial Services Reform (FSR) introduced the concept of the Australian financial services licence (AFSL), licensees and advice businesses have generally developed as separate entities. Advice businesses provide advice to individual clients and manage ongoing relationships, while licensees provide licensing and other services to advice firms.

But Fortnum Financial Group managing director Neil Younger says that is going to change as licensees redefine how they support advisers to drive down costs, and deliver high-quality, affordable advice.

Advice and licensing co-exist in a single structure in self-licensed firms, and Younger says the same merging of advice and licensing is inevitable right across the industry as the drive gathers pace to separate product from advice and to remove the cross-subsidisation of licensee services.

Younger says the continued survival of the licensee business depends on supporting advisers to form new kinds of collectives where advice and licensing merge, helping them grow profit margins from delivering advice and sharing in those margins.

“It may be quicker than that as the institutions exit out [of licensing] and you start to see potentially new scale players outside of the distribution models,” he says. Fortnum is laying the groundwork for the transition now.

Fortnum’s focus
1. Creating collectives
“We have shaped the Fortnum Private Wealth business as a collective model where advisers own the licensee. So it’s operating today as a collective.”
2. Economies of scale
“We have set ourselves an ambitious growth target to pass the benefits of scale more effectively on to the consumer, and we do that today.
3. Smart technology
“We’ve got a roadmap for investment in technology solutions that are about changing the cost to deliver advice, in a meaningful way, for advisers and consumers.”
4. Blended P&Ls
“We recognise that within that there’s an opportunity to start to blend the P&Ls of what were two distinct businesses – the advisory businesses and the AFSL – over time.”

Younger says the drive could come from licensees, seeking to redefine the relationship with advice, or from advisers themselves grouping together and then seeking a licensing and shared-services solution.

Enabling advice firms to own and share in the profit of the licensee is a first step, but under traditional equity-ownership arrangements individual advice firms may remain sub-scale, and not pass on the full cost benefits of scale to clients.

Younger’s strategy includes investment in technology to reduce costs, growth in adviser numbers to generate economies of scale and, ultimately, a financial merger of advice businesses and the licensee.

To an adviser, Younger’s views might sound like a licensee admitting that it can’t make money from what it does now so it wants to get in on the adviser’s action (see Box 2).

“That’s exactly what I’d be thinking,” Younger says.

“This is where the licensee business morphing into a collective model needs to generate far more value than just licensee services. They have to have scale to transfer genuine scale-related benefits back to end consumers.

“And they have to have the capacity to invest in systems and processes and tools that support the advisers with technology to deliver advice in a more profitable way.”

The licensee of the past
– Holds on to fees where there is no entitlement to do so
– Holds on to margin on legacy products when it’s no longer appropriate
– Is not resourced adequately to address issues as they arise
– Subsidises licensing costs to maintain distribution

The licensee of the future
– Stands alone with a clear separation between advice and product
– Has sufficient scale to manage risk and invest in technology to improve the cost of delivery
– Is a fully integrated advice-and-licensee business, and passes scale benefits to the client

But Younger argues that unless advisers are in an optimal structure they will not achieve the economies of scale necessary to grow margins. It’s the lower costs these structures offer that he says will set the emerging advice collectives apart from the small self-licensed firms that already exist and which will struggle to contain costs as they deal with “the continued separation of the subsidisation of the model of the past”.

“In that case, is that the most efficient model to be running an individualised P&L and an entity to actually generate revenue out of giving advice?” he says.

“I would say maybe not.”

Younger says new advice collectives must be large – as many as 1000 advisers, in what he calls a “super-collective” – organised so each advice firm within the collective is r responsible for its own financial performance, but gains benefits from scale and a shared-services structure to drive down costs.

Younger says that open-architecture advice demands large adviser numbers, to generate economies of scale with multiple investment solution providers.

“I used to think, if I looked at the pure adviser numbers attached to a business like Fortnum, meaningful scale was around 400 advisers. I actually think now that I’ve redefined what that might look like, and it’s much, much larger,” he says.

“The true investment in that collective and the true power to harness value for clients is probably only really achieved at a much larger level than it is today, particularly if you want to be open-architecture around how the advice is delivered.

“And I think the types of businesses attached to you need to be larger as well.”

New advice collectives may take a number of forms, he says, but will resemble traditional partnerships, “[financially] fully integrated so revenue is generated through the business out of the core service of advice, where the value is, and not in the risk-management service of an AFSL or the margin associated with distribution”.

“[Partners] are accountable for generating their own revenue, and effectively running a P&L,” Younger says.

He says the collective or partnership approach to licensing and advice allows the entity to homogenise an advice offering and set high, uniform standards of compliance, client service and technical support.

There will still be room for smaller, stand-alone advice firms “if they are sufficiently scaled to be able to cover their costs”, Younger says.

“But I would suggest their proposition probably isn’t going to be as effective as the bigger players, because they’re not going to be able to negotiate the same scale benefits,” he says.

They might be able to buy and to service providers that give them access to that, but their business risk-adjusted will always be of less value than what’s available in those bigger constructs.”

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Advice stalwart emerges at Fortnum

Leading financial planning dealer group, Fortnum Private Wealth has appointed founder and former CEO of Centric Wealth Glen Castensen in the newly-created executive position to booster up its service offering and help drive the group’s continued growth strategy.

Mr Castensen, who has over 25 years’ financial services experience in financial advice, funds management and investment research, will report to Fortnum Managing Director Neil Younger.
“We are excited to have such a well-respected, experienced executive on board to support Fortnum’s growth initiatives and also work closely with our advisers to drive growth in their underlying businesses,” Mr Younger said.

“Glen’s deep knowledge and understanding of the advice industry amd his experience in building advice capabilities will be very valuable to Fortnum practices and principals.”

Mr Castensen co-founded Centric Wealth in 2005 through the merger of Centrestone Wealth Advisers and Berkley Group. He was formerly Managing Director of Berkley Group, which spun out of Godfrey Pembroke in 1999. He led Centric Wealth during a period of exceptional expansion growing the business to over 400 staff, 10 business line offerings and 15,000+ clients.
Over more recent times, Glen has provided operational and strategic advice to a number of firms operating in technology, investment services and funds management.

“It’s wonderful to be part of such a dynamic and aligned team,” Mr Castensen said.

“I strongly believe there has never been a more important time for consumers or greater value placed by advisers on the need to have an unbiased environment for them to receive and offer financial services. I joined Fortnum with that very much in mind and look forward to working with their planners, existing and
future – over the years to come.”

Christmas is a Time for Giving

With Christmas fast approaching, the Fortnum Foundation has been able to spread some of the Christmas spirit of giving, thanks to all of the Foundation’s supporters.

Love Mercy

The Annual Fortnum Conference has again provided funds to enable us to help those in need.  Julius Achon, founder of Love Mercy shared his story at the Annual  Conference in July. Thanks to the many who have helped fund a doctor in Julius’s village, as well as to Sandy Dunshea who encouraged so many delegates to pledge $25 a month to enable the medical centre to employ a doctor in the village. The centre has treated over 2,000 patients since 2012, and provides maternity services and hundreds of thousands of free immunizations to babies. If anyone is interested in also helping this worthy cause (all tax deductible), please contact Marg.

The Fortnum Foundation has helped the Love Mercy Charity since 2010, with Australian Olympian, Eloise Wellings, founder of the Australian Love Mercy Charity.  As well as the Kristina Health Centre the Cents for Seeds program loans 30kgs of seeds (at an Australian cost of $30) to women giving them life changing agricultural training to enable them to provide for their families.  In 2017, ten thousand women received Cents for Seeds loans, and 25,000 children were educated in Cents for Seeds homes.  The goal is now to fund 20,000 women by 2020.

RPA Neo Natal Ward

Matt Fenning, Principal at Fortuity Strategic Advisors, along with some of the Fortnum staff and Fortnum Foundation Board members met a few of our tiniest Australians at the RPA neo-natal ward two weeks prior to Christmas.

Matt is a huge supporter of the Foundation, and has recently given an additional donation to the Foundation as a Christmas gift to his clients.  Matt sent Christmas cards, showing a donation was made in lieu of gifts, thus spreading goodwill to help others at this special time whilst also giving our littlest Australians and their families a boost in life.

The Fortnum Foundation’s donation acquired a camera for one of the baby cribs – which enables families to see their baby in hospital, particularly when there are so many families in rural areas who have to be separated from baby and mum for months.

Moira Kelly

Moira Kelly from the Moira Kelly Creating Hope Foundation is constantly working with a number of children and their families to support them through very challenging circumstances.

One particular child is 4 year old Angel who is undergoing treatment for a rare condition that will require her to stay in Australia for a long time before she is able to return home to Pakistan. She will have lifesaving surgery to treat her severely deformed feet and give her quality of life. Her mother, Sania is with her.  Angel is attending a local kindergarten and Sania is doing vocational training. This is just one of the many children who Moira helps in Melbourne.

Fortnum firm acquires AMP practice

An authorised representative of  licensee Fortnum Private Wealth has announced the acquisition of an AMP-aligned advice practice.

Fortnum-aligned firm Fortuity Strategic Advisors announced it has acquired Just AdviceFinancial Services – an authorised representative of AMP-aligned licensee Charter Financial Planning.

In a statement this week, Fortuity Strategic Advisors said the acquisition of Just Advice was part of the firm’s “aggressive plans to grow.”

Fortuity also announced the appointment of Samuel Fenning to the role of financial adviser. Mr Fenning was formerly an adviser with Just Advice, according to his LinkedIn profile.

Managing director of Fortnum Private Wealth Joel Taylor said the dealer group is pleased to attract well-educated, young professional advisers like Mr Fenning who are passionate about helping people achieve financial freedom.

“Today’s advice businesses will be unrecognisable in the next five-10 years with new education standards, a smaller professional advice community (with adviser retirements) and increasing customer demand and complexity,” he said.

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Fortnum hires former BT manager as advice head

Fortnum Private Wealth has appointed a former BT Financial Group manager to the newly created position of head of advice.

Kerry Thomas is the former national manager, practice advice at BT Financial Group, and will be tasked with enhancing the delivery of Fortnum’s professional advice program to the group’s national network of advisers, according to a statement.

Ms Thomas has over 15 years of financial services experience and will report to Fortnum Private Wealth managing director Joel Taylor, the statement said.

Mr Taylor said Ms Thomas has the right blend of skills, expertise and values, and is the right cultural fit.

“It’s important that our staff – and advisers – have a high degree of personal integrity, and embrace our high performance, collaborative culture,” he said.

“Kerry is an experienced professional who has a genuine rapport with advisers and she is a great addition to the team.”

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Planner’s advice to industry: get comfortable with change

Like many financial planners, Robert Reid finds the shifting goal posts of regulatory changes tiresome.

But he argues they’re fundamental to lifting the reputation of the industry and atoning for the scandals of the past. Those scandals that may have been caused by a few unscrupulous and unethical advisers but, as he notes, the stain has a way of spreading to affect the reputation of the entire fraternity of planners.

“It’s easy to bitch and moan about regulation, and it remains an ever-present concern, but we have to remember as an industry that we have brought this on ourselves,” he says. “It’s because of our own behaviour and if we want to move towards self-regulation of the kind they have in other industries, such as accounting, then we have to earn the public’s trust.”

While this means a degree of flux and uncertainty as regulatory frameworks change and laws introduced, it also means the industry is flushed of any lingering snake oil salesmen.

“It’s a shifting landscape, but the upside is as the regulations get tighter the people who are in it just to make a quick buck will get out and will leave it to the rest of us, who want to turn the industry into a profession,” Reid says.

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Advice group principles provide security

Advice groups should be proactive in devising professional and ethical commitments for their advisers that go beyond the Corporations Act as the industry was ultimately heading toward further regulation to shore up consumer protection, according to Fortnum Private Wealth.

In a new white paper, “Building a Professional Advice Framework”, Fortnum group chief executive Neil Younger and managing director Joel Taylor said that despite a raft of new regulations being introduced to financial planning in recent years, there were still problem areas that were likely to lead to further legislative action.

These included a lack of restrictions around dealer group ownership, subsidisation of adviser licence fees by institutions and the narrow range of products permitted to be on aligned advisers’ approved product lists.

“They all point to an under-regulated industry with major shortcomings when it comes to consumer protection,” the report said.

“Therefore, it’s dangerous for advisers to rely on the Corps Act for guidance on how to meet their best interest duty obligations – they need to have a set of professional principles to guide them.”

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Eschew products, support client-led advice: whitepaper

A whitepaper has stated that the future of advice firms is an existence as genuine professional services firms, but added that licensees also need to adapt in order to support them.

The paper was jointly authored by Neil Younger, managing director and group chief executive of Fortnum Financial Group, and Joel Taylor, managing director of Fortnum Private Wealth. It states that advice needs to be rebuilt on three pillars: a set of strong professional principles, sound professional judgement, and robust professional practices.

Taylor says Fortnum’s professional principles underpin what it calls its professional advice framework, which is designed to help advisers view their services “through a ‘professional’ lens as opposed to a legislative lens”. The principles cover fair engagement, competence, professional diagnosis, and best interest advice.

Younger says advice models are “transitioning from essentially licensee businesses that ran distribution business models, to advice services businesses that have a very different framework of solutions for advisers”.

“There is a vacancy in the middle-market segment for an established, professional advice services business with sufficient scale to be able to develop technology solutions that deliver efficiency into the delivery of advice,” he says.
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