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.



    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.
    Click here to view the full article

    Building a Professional Advice Framework

    Newly appointed Managing Director & Group CEO of Fortnum Financial Group, Neil Younger has worked alongside Managing Director of Fortnum Private Wealth, Joel Taylor to realign the dealer group’s focus.

    This whitepaper addresses Fortnum’s Professional Advice Framework.

    “At Fortnum, we have established the reputation to call ourselves a Professional Advice Services Business; with a deep commitment to continually striving to find a better way”, and we look forward to continuing this journey in the future.

    Building-a-Professional-Advice-Framework-Whitepaper MARCH 2017

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    Fortnum continues to dominate the Licensee of the Year Award due to its focus on helping advice businesses succeed.

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