November 2, 2021

#264 Andrew Ferguson – Transcript

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SUMMARY KEYWORDS
business, clients, people, revenue, advisor, buying, years, book, transaction, industry, model, bit, systems, license, licensee, months, build, generate, pay, purchasing

SPEAKERS
Fraser Jack, Andrew Ferguson

Fraser Jack
Welcome back to the xy advisor Podcast. I’m Fraser Jack and today I’m joined by Andrew Ferguson, they’re gonna meet again, very well, thank you. Now you’re from Webster’s wealth partners here in Brisbane. And we’re very, we’re very lucky to be able to record this live in live in your boardroom. But thank you for joining me.

Andrew Ferguson
Thank you. Thank you.

Fraser Jack
Now, do you want to give us a quick overview of your business at the moment?

Andrew Ferguson
Okay, well, look, we’re just a small boutique style sized business, sort of three, four type of advisors. We run a small office, and you’ve been running a lot of clients over the last 10 years, and we’re just working towards restructuring the business in the current sort of environment. Make sure it looks right. And yeah, manageable. Yeah, you and everybody else is running around like a mad chicken. Yeah, crazy

Fraser Jack
times. No. Well, let’s go back and explore your journey, because you’ve done a lot of things along the way and building this business to what it is today. How did you get into it?

Andrew Ferguson
Well, look, my wife was a mortgage broker. And I was in hospitality at time and we were looking, I was selling my business. I’ve been running a hospitality business three years, and it was during the floods and up and down of the oil. Look, it was a crazy time, six months of rain, and then extremely busy times after that, and then flatlined. So she’d been broking for, you know, five or six years doing that. And working in as a broker in a financial planning business. That was high volume, though, just making telephone calls and bringing in all sorts of clients, not very financially savvy clients. And she ended up doing more budgeting and, you know, restructuring for them as a as a broker than helping them get in a decent position. 12 months later, they’d be back in same sort of position. Anyway, see, we’re looking to buy a mortgage broking book. And then we just couldn’t find one, really, we had a few people try to grift us out of a few assets, that they weren’t actually for sale and trying to sell them anyway. We eventually started looking at plan books. And at that stage, we essentially weren’t even in the industry before we bought our first business.

Fraser Jack
Well, it’s incredible, isn’t it?

Andrew Ferguson
It’s very, very odd.

Fraser Jack
Yeah. So you so you know, that’s an interesting process that you went through when it comes to you know, you sort of mentioned the idea that it’s not as easy as it looks to purchase a business

Andrew Ferguson
now it’s not a well look at it is fraught with danger. It’s it’s a quite an easy thing to do. But it’s not easy to come out the other side without getting into a lot of trouble.

Fraser Jack
Yeah, funnily enough, not everything’s written on the label. Now it’s

Andrew Ferguson
add Look, just, there was so many different problems with the first transaction it was we took over from a lady who got banned by ASIC for general Scalawag behavior, essentially not not changing with the times. She just did whatever she used to do didn’t do the paperwork. Yep, everyone was set in the same risk profile and during the GFC everyone was in good double good products and then 2007 Most of them lost a fair bit of money. Yep. Claim after claim and so when did you purchase that was about 2012 Yeah, okay,

Fraser Jack
so they’ve been through a bit of a roller coaster. Yeah, they come out the other side. She just she’d said no, I’m gonna sell and you come along a little bit naive you probably say, obviously, yeah, yeah. And say oh, that sounds okay. And walked into walked into that.

Andrew Ferguson
Yeah, well, we can sort of came in as a cleanup crew. Yeah. That business was well sure which was they helped us a lot Yep. They wanted they wanted us to essentially Well, we did all the work and then they looked over everything just to make sure if there were licensee to make sure that they weren’t going to get into any more trouble because claim after claim after claim for that lady she has put her head in the sand and just ASIC ASIC struck her off she had this grifter boyfriend who was you know share trader influencing everyone Yeah. And that was that’s another story so yeah, so you

Fraser Jack
guys came in as the non Shining Armor just wrapping your arms around the clients and making sure that they’re okay and then making sure they’re structured properly and from here on in did was that a difficult I mean, I know it’s gonna be difficult thing. But was it? Was it a thing where a lot of content went? Well? Now we’ll go somewhere else.

Andrew Ferguson
Look, we Stephen did a magnificent job because she was the only one who was technically at a different dip F. P at the time he calls so I quickly got mine while we were trading. Yep. So I could get on the Get on the wagon because you’re seeing 20 Odd clients a week. Yep. Just trying to meet them all get around them all. Say hello. Yep. We had a team of people feeding them in when we had a box full of paper. You know, there was no no systems, no anything back then. And then just Stephanie had to learn on the fly and sink or swim once.

Fraser Jack
Yeah, this is an incredible journey. Obviously, as you mentioned, you’ve gone from boxes of paper that were mixed up to, you know, fantastic systems and processes in place, but will will follow that journey. So, so tell us what happened next, you sort of you rallied around those clients, you were there. Okay. You then would I guess you were chasing your tail, because you’re still on the same old systems?

Andrew Ferguson
Yeah, well, that was, well, we had to build them from scratch. Yeah, and it was a bad transaction. Because we, we only this is, this is one of the things we learned. When we’re given the the paperwork for the, for the revenue, we thought you’re buying x $200,000, with revenue anyway, because of as God’s old software. And and I can’t quite remember what the the commission software, it’s gone out anyway, it would, if you had an existing client, and you do a new piece of work for them, the software couldn’t split up whether an upfront fee fee was upfront or ongoing back in those days. And so the revenue statements that we got, when we were doing our due diligence, they had this large, we thought we had a whole heap of large clients, but that that money was coming through in the ongoing column, but it was a new business stuff. It was a lot of luxuries or whatever it may have been. And so we we ended up with two thirds X. Yep. When we took over, and so there wasn’t even enough revenue to cover the costs of, you know, how we’d set the business up based on you know, it’s crazy how was represented, so it ended up in a blue in court. So yeah, that was an extremely expensive, horrible period of time. That plus doing all the work.

Fraser Jack
Yeah, yeah. That’s crazy. So that’s really just like diving into the deep end and or being thrown into the deep end with a lot of fire. Yeah. We’re not gonna fool we’re into fire. Okay. So that was it the first 12 months or 18 months is longer. That was couple of years that Yep, that mission? Yep. And so then your two year old business, sort of getting out of the fire coming out of the fire with it. We’re to whatever that up to there. Oh, look,

Andrew Ferguson
we just needed more revenue. Look, we had far too many clients are too many people to look after. And, you know, it was interesting. The X advisor had sort of categorized them ABCD, but more on relationship. And I understand why she did that now. And it to a degree it makes sense. But you know, anyway, we had to purchase another book off Gaby Wilshaw went under we could see that they were losing staff members. You know, one day there wasn’t even a receptionist when we rang up. You know, it was whittled down to about, like two or three people. Yep. Because the queen, I don’t know, he was a state manager. He ended up getting the whole group in trouble by doing advice on some sort of fun that was not on their IPL. And the CEO of show got banned for life. So

Fraser Jack
right. So this is this is, you know, no fault of your own. You’ve been, you’ve been pedaling like crazy to try and get yourself out of Avaya. And then all of a sudden now it’s something that out of your control.

Andrew Ferguson
Yeah. Well, that’s and that was it. And then we said, right, well, we’ll look, we’ve got to find another dealer group, because this is just the position is untenable. Yeah. And they get to see, you know, we’re gonna sink if we stay here. So we needed an I really a bit more revenue, Dave and meet some lending criteria. Yeah.

Fraser Jack
Yep. Because, because when you look when you borrow to buy a book, yeah, make sure that you’ve got revenue coming in and governance from the bank’s point of view? Well, that’s

Andrew Ferguson
it. And look, we’ve we gave them the statements and said, Here’s what the revenue is, and we only just fit into the policy then. And then when it turned up that we didn’t even have the revenue to begin with put us in a very difficult position. So we had, we were looking around for for a dealer group. And then we went, we got in touch with FSA which Heiner? The hyenas Oh, no else. Yep. And they back in those days without running a dealer group? Yes. And they were nice enough to sell us a small part of their Bridgeport business.

Fraser Jack
And so was that subject to you going across to their license,

Andrew Ferguson
essentially, you ever see was a deal that they helped us out? It wasn’t all revenue, you know, 50k was enough to get us up above that, that policy, or that

Fraser Jack
lending criteria? Yep. So technically, that’s the second book you

Andrew Ferguson
Yeah. And that was purely to get a loan? Yeah. pay out the last part of the last transaction. Yep.

Fraser Jack
Right. Okay. So borrowing more to pay out more. And as you go, tell us about that one. How did that go?

Andrew Ferguson
Well, that was actually a very good little book. There was about 100 people in there and they’re all back in those days. They didn’t need to be service to keep checking Writing revenue. So that’s where I might sink my teeth in it a lot of insurance work, a lot of taking clients out of old products that were expensive. Yep. Mickey Mouse sort of super an insurance business to get for those ahead around the industry

Fraser Jack
good opportunity for you to grow that book into a solid business. Did you do that was you do diligence on that business, but based on your first experience,

Andrew Ferguson
I was a lot better. Yeah, we knew what we’re talking about.

Fraser Jack
He knew what to look out for all of a sudden, yeah, now, we,

Andrew Ferguson
I’ve become? Well, in my opinion, you know, from where I was an expert on the contractor side of things. From where we started, you know, we’ve learned so much, and we’ve done four transactions now. So I’m very, you know, the amount of detail I go into with, when I’m looking at an acquisition, we’re not gonna be doing that again. But

Fraser Jack
I’m gonna ask you about that, too, when we get to it, but what because I want to know what that detail looks like. So because I think it’s really not so it’s critical. Yeah. So the second book was good.

Andrew Ferguson
Yeah, it was good to do look, it would have, you know, I turned it off revenue added in a year or two to pay for it. Yep. And increased it. So yeah, it was it worked out really

Fraser Jack
well. Yep. still paying down debt. Yeah. Forever with day, whether you get to from the

Andrew Ferguson
well, then we, we look, we still had we will we kept growing climb numbers, you know, referrals coming over. We still need more revenue, because the costs of running out we’re still Yeah, we’re only just making a wage. Yep. And that’s the trap that you get into.

Fraser Jack
Isn’t that interesting? You know, like, if you buy a business, but you’re just buying a job?

Andrew Ferguson
Yeah. Yeah. It’s something people needed. Were very aware of. Yep.

Fraser Jack
So what was the what was the step look, so

Andrew Ferguson
then we realized, like, we don’t have any more capacity for, you know, doing full service work. I said, Look, why don’t we buy a couple of these books? Because, you know, we can generate revenue out of them. They can sit there as income. And we just go through a metal. And when we’ve got time, and you know, I’ve hit those really quite hard. Yep. Because I, you know, what are we by? I can’t quite remember at this juncture was maybe $250,000 worth of risked income. And there’s a few old legacy products in there some very old expensive jobs. So an easy transition over to some cheap, affordable and much, much better position to

Fraser Jack
value for money. Yeah. And, and so that was, what he was at approx

Andrew Ferguson
thing. That was probably four years ago. Yep.

Fraser Jack
Yeah. So before all the changes in that environment.

Andrew Ferguson
Yeah. But well, as the, as the lift legislation started to come in, you know, that was probably a year before that. They started cascading the Commission’s down to where they are now, then. So those two books were there in quick succession. That same time, yeah. Okay. Yeah. Because we wanted to make sure we got up over our expenses. Yeah. Again, for kind

Fraser Jack
of feels like it was a little bit of chasing your tail with revenue, and then expenses and those sorts of things. Yeah. Which is a pretty big thing for I think most business owners.

Andrew Ferguson
Well, look, if you don’t set these businesses up, and structure isn’t right. From day one, it is really difficult. Yep. And it puts a lot of stress on everyone. But if you do it, right, it’s yes. It’s terrific.

Fraser Jack
Yeah. Did you feel like your structure was right at their point? Now? Looking back, I probably did at the time. But looking back, you think

Andrew Ferguson
now that way was better, though. Yeah, it’s better. Yeah. It’s only in the last few years that we’ve got everything. You know, it took us 567 years to start to play it out.

Fraser Jack
Before you can look back and go, actually, now, I really need to know what we’re doing. Or I need to know, all we need to do these things.

Andrew Ferguson
We just now we know. We’re in position where we don’t take any business that comes our way. Yep, we say this is what you know, from our affairs, we say this is what client needs look like for us to

Fraser Jack
get it. Okay. So quite clear around the the the demographics and the suitability criteria.

Andrew Ferguson
And that’s it. That’s it. Well, there’s only so many men in the middle of that, you know, I got croak for about five years so bright, that took a fair bit out of my the steam out of my ability to work, couple of children, very hard to find the time then

Fraser Jack
to run around.

Andrew Ferguson
And that’s what’s changed everything. You know, this from when we hit the second child. You know, there wasn’t your last half a person at least. Yeah. Yeah. So now that, you know, we’ve got to say like, you know, the client needs to look like, Well, essentially a perfect client for us to be able to put them on.

Fraser Jack
Yeah, so it’s been an interesting journey, isn’t it all the way through to now? And so what about those clients? They came on originally, have you been? Yeah,

Andrew Ferguson
they’re all still with us. Look, we really didn’t lose. We hardly lost anyone. Yeah, out of the trends that you can lose. You know, I’m really good with people. You You will, there’ll be a lot of drop off. And if you haven’t got the contracts rise, you’re going to end up paying for revenue and you never received and you’ll be in even more trouble. Yep. That’s what I’m doing the contracts are so important.

Fraser Jack
What What tips would you give when it comes to the importance of the contracts? Is it anything people should be looking out for? Now look at both as a buyer and a seller?

Andrew Ferguson
Well, look, firstly, gotta make sure that the revenue is there, that’s, that’s the most important thing. You know, they talk about a rise and fall provision, there’s no, there’s no rise provision, you always fall from you make it a full provision, you got to make a provision to make sure that if clients are non communicable, you can’t get in touch with them. After X amount of attempts you write them off? Whether you pick them back up again at a later stage or not. Yeah, they’re there. I’ve got about three or four sort of I can’t, I haven’t looked at a contract for about four years. So I can’t remember all of them. But you’ve got to make sure that you’ve set it up properly. And you need to write the contract yourself. Yeah. And, and even even a solicitor, I went see a specialist solicitor in financial services. And even she looks, she knew the law, but she didn’t know the industry as well as, as I did from an acquisition perspective.

Fraser Jack
Yeah, there’s law. And then there’s pitfalls, isn’t there? Those businesses you probably purchased them are based on multiple of revenue? How do you say that as a model? And that, obviously, I’d sort of one of those things, I’ve spoken to people, they don’t sort of think that’s going to be the way the future?

Andrew Ferguson
Well, I don’t know what to look for the low in small books. I don’t know what else you gonna do. They’re probably they got to be very low multiples from now on, I’d say. And then you’re just going to be talking about an EBIT valuation, which has skyrocketed, you know? Is it the 40s had solutions, you know, they’re selling businesses, or seven and a half times EBIT. Once you get over that threshold

Fraser Jack
meal, yep, they need to be profitable to do that, obviously,

Andrew Ferguson
I’m looking, you know, I always keep my eye and ear out, looking at things and they, some of them got very small client numbers. And in some of them are gone. They might have 15 planners running around. And, you know, they’ve got similar sort of profitability, inefficiencies referring to that, well, it just creates drama. So the more people the more room for error.

Fraser Jack
Yeah, it’s good for nearly Yep. So tell. Tell me about you. Last thing journey so that you are still with the the old debt wealth license?

Andrew Ferguson
Yeah, that’s right. What that look they, the high earners, super successful with their net wealth. They started off I think, back in those days, we will they were talking about their $3 billion dollars on their platform. Now it’s, it’s, you know, seven or eight times that, you know, there were the fortune, they just came, we went to the pizza day in Sydney one day, and they said, righto, 60 days, we’re shutting it down. And so we had to scramble around to go and find another licensee. And you know, every time you go to another licensee, they say, right, or you go to a full statement advice for every Yep, every client, and it’s just, it’s far too much. Yep. Very hard. Isn’t it to change? Well, if you’ve got lots of people, you’ve got it. You’ve got to start from scratch with every file, and you’ve given a 12 month period to do it. Yep. Otherwise, you you know you’ve not met your obligations under the exit date.

Fraser Jack
Yep. Yeah. Fair enough.

Andrew Ferguson
So not control those exit dates.

Fraser Jack
Makes a date. Yeah. Tell me about and for those people that everybody’s got an exit date. It’s good. It’s good that you read it know what’s in it. Tell me about the from there. So what happened after you were given 60 days?

Andrew Ferguson
Well, we, we met with a whole labor differently. They wanted to hand hand everyone over to Fortnum. They just said, Ronnie, you can have your essentially you have the people there. I don’t think there was any transaction. So we met Fortnum came along to the PDA. He did ad and then we didn’t think was quite right. And plus, it wasn’t the fpsa It was one of the cheapest depot dealer groups out there at the time. A wonderful group. Really helpful and we really liked that we wouldn’t be there if it wasn’t

Fraser Jack
for Atlanta, San Jose at the time wasn’t

Andrew Ferguson
feelings. Can’t quite rings a bell? Yeah, yeah. NVA

Fraser Jack
sorry. If I feel him Sunil kill me. So. Okay, so what did you do?

Andrew Ferguson
Well, we ended up within focus. Yep. They’re inside haunt. And he’s a very charismatic man and great group. And then we’ve been with them. Well, we were with them with phony a year or two before. We just found it restrictive. You know, being with dealer groups in general. And the costs and even the compliance, making sure they’re ticking all their boxes. Yep. We, for each deal agree with take a sort of 50% of our revenue. Yeah, and We just decided that, you know, maybe self licensing was the way to go. Because, you know, we just couldn’t have the rug pulled out from under us and our best clients would risk to us the rest of everything.

Fraser Jack
Yep. made a decision to go self license. Yeah. Tell me about your journey with technology up into that space, because I want to follow the evolution of your your systems, because obviously, you’ve got in focus got different systems to you know, yeah, well,

Andrew Ferguson
that that’s also very, it’s tough because we started off with coin, then we went to x plan x plan, super expensive. And then platform plus is the in house software with in focus in that one wasn’t quite the same. It was more it was built as a compliance tool for them. Yep. So it was more about the deal group than Well, that was their ability to keep track of all the people underneath them. So So yeah, I understand it. But yeah, we we were looking for something that was a bit more advanced.

Fraser Jack
Yeah, fair enough. At some or, or a bit more for your systems? Well, your internal clock.

Andrew Ferguson
We’ve ended up with the advisor logic, which is, you know, for me, I only up until 12 months ago hadn’t used any of these systems in their capacity, I couldn’t understand coin x plan, any of them other than finding telephone numbers, you know, and you’re paying $20,000 a year for its Rolodex and use

Fraser Jack
them and you’re and you’re not, that’s often the way businesses work. And you tend to just fall into this is all I need a bit. So I don’t push yourself to understand what the additional parts of the software can do, and how that might benefit

Andrew Ferguson
are the modules built with with x plan? You know, they’re, they’re bolt on. So you don’t only the power plan, and really has the full suite of, of software. So the good thing about advisor logic is, you know, it’s one size fits all, and everyone gets the same thing. And it’s just much more intuitive. You know, it’s built in, in the modern sort of way. So you can just, essentially, look at something and click on it, and it gives you what you want.

Fraser Jack
Yeah. Have you go for the transition from those someone’s like, well,

Andrew Ferguson
it’s a monster transition to get all the data in and out of these things. So it’s, you know, that topic going SOA is every time I have for sale? Yep. Going around everyone. The way you have to based on your contract contractual obligations. It’s yeah, now it’s, it’s, it’s really quick, sufficient detail, easy to use. It’s got this modeling tool that’s excellent. Nothing like anything else in the market and Morningstar of taking it, taking it over and pumping huge amounts of money into it. They’ve, they attach their reports, everything’s generates automatically. So it’s much more efficient. It’s got lots you know, the girls probably tell you a lot more about it than what I can. But even from my perspective, I can just go in there and I can even generate a piece of advice if I do.

Fraser Jack
It’s a good test. It’s a litmus test. If I can do it, it’s fine. Yeah. Tell me about your staff growth over that time, because obviously,

Andrew Ferguson
I will look them, they’ve probably reduced. We used to have, when we started probably six, seven people running around. And going back to the boxes, we had one person on, you know, a couple of two or three admin people just scratching around trying to collect data, we would have them put it into at least a format. So when Stephanie, my wife went into a meeting should at least have a concise executive summary of what was going on. Yep. Other than just a file to dig through and get like full Yep. So that’s where our executive summary came from. So you know, that’s one of the templates that we’ve built into the new software now that just what generates from model data feeds? Yep. Yeah, look, it’s been it’s come a long way. Yep. come a long way.

Fraser Jack
Fantastic. Now let’s get into this some this bit of a checklist or things that you’ve created when it comes to buying or selling or purchasing a business because I think this is equally as important to people selling their books as people purchasing or looking at purchasing businesses and obviously a lot of transactions been happening over the last little while and probably be a few more happening over the next few years. If you’re buying a book now talk me through the process. We would we be what what what tips or advice would you give me for looking at where would we start?

Andrew Ferguson
Well, look, it’s I think you’ve got to start think what is what do you want your business to look like before you even get into even thinking about stock trading in mind? Yeah, well, let’s get the numbers where the numbers set and what are your what is your capacity? Yep, you know, how

Fraser Jack
is this What are you buying? Are you buying a business or are buying a job?

Andrew Ferguson
Yeah, we got it, it really does trap you, if if you’re going and leveraging everything you’ve got just about to get into the industry and say, right, I’ll go in and be a financial planner or run my own show, you’ve got to understand how the numbers need to look for to even be worthwhile. Yep. And you know, what you’re getting, you’re in yourself, even for if you if you don’t structure it properly from day one, and needs to be sizable. And I, in my opinion, people just got to be careful, because if you don’t, if you’re not well funded, it’s right for danger.

Fraser Jack
Okay, tell me about the concept of, say, if I was looking at purchasing a business right now, making sure that I know my own, understand what my target market or my ideal client would look like, and then look for those clients versus worrying about, you know, looking for the book for sale,

Andrew Ferguson
you’re either looking at, you’re in a position where you’re going to be working out the back of your car, or, and getting referrals from a source that’s reliable, and they’re good quality clients. And that, that’s one way to go. It’s not easy, because for sort of, for, say, an account to trust you accounts are not good refers in general, I was selling a small book of clients to a fellow a couple of years ago, we’re just cleaning up our business. And he said he was working in an accountancy practice, you know, at one stage, and that the council director said, set up its own planning division, and the accountants still wouldn’t even refer their clients in house. So to find someone who’s going to refer you people that are ideal. It’s, it’s a bit of a unicorn, yep. You know, we’ve

Fraser Jack
takes a lot of work, you know, like, well, they’ve

Andrew Ferguson
got to trust you, because what are you going to, you know, effects their business, if you make a mistake, and that, you know, then that little climate, you know, what, why would they risk that? You’re essentially, yeah, I put that name against it. So they do see it as a risk? Of course, it is, of course, it is because, you know, they’ve sent you over there to do a job, you know, essentially based on based on their recommendation, their reputation, a reputation. And if it, you know, they could lose. And if it’s a client, that really worthwhile looking after they’re going to lose 10 or $15,000 worth of business themselves.

Fraser Jack
Yep, they lose, they lose the money, they lose, they lose face, I guess. Yeah. So

Andrew Ferguson
that that’s, that’s a hard one. Look, that’s the best way to get clients, though, referrals from a good source. And you got to keep those, those costs low. But at the same time, you know, you can’t meet somebody, you know, somebody got two or $3 million in a cafe and expect them to trust you with your money. So you’ve got to have a team, you got to at least look the part and it looked apart. You’re looking at a half million dollars worth of expenses. Yep. So, you know, once you if you, you know, ended up buying a business with a couple of million dollars worth of revenue, assets gone in expenses to begin with? Yep. And then what’s the debt on that look like? Yeah, you know,

Fraser Jack
it’s an interesting one, because obviously, you got a nice premises here, nice office, staff, you know, like room to move. People walk in, they say it’s an established business. It’s, it’s got some it’s got, you know, offers and furniture and nice furniture. How do you say the the sort of the you mentioned at the back of the car, but that’s sort of the work from home, you know, online, totally online, 100% online business?

Andrew Ferguson
Well, it’s probably a generational thing. Younger people wouldn’t say it is that much of a problem, but they really, I don’t think that they’re not gonna have enough money in superannuation to be an ideal client. And those sort of people in their 50s and 60s and 70s, they want to see someone face to face. They don’t want to, they will work on Zoom sometimes, but at some point they want to see right, well, they need to they need to see your face, they want to get they want to make sure you you could be anyone really, it makes it even more difficult over over the telephone or over. Yep, zoom. sort of thing.

Fraser Jack
Yep. Very good. So talk to me about your business now. What sort of what sort of clientele who’s your target client or your ideal client there?

Andrew Ferguson
Oh, look, we’ve because we bought a lot of businesses, there’s a bit age in it. So we do, we do need to start building up those 45 plus age group, have that longevity. So you’ve got to always think about, you know, when you’re buying a business, you know, if it’s like exiting advisor is 65 or 70. And all the clients have been there for 30 or 40 years, you know, they’re not going to be there forever. Yep. So there’s, there’s model where he’s going to look at you’re taking the whole business or somebody chopping off the tail of a larger one to get rid of the clients that they don’t want to deal with for one reason or another. Yep, you know, say a blank somebody Problem A buying the whole business? Are they exiting the business? You got to make sure you contract that they are exiting the business.

Fraser Jack
Yeah, as in the the professional together all together, you know, but just not just met business and then Sterling

Andrew Ferguson
leaving the country would be a good idea. So gotta have restraints in there and that they’re only worth so much contracts are only worth as much money as let you willing to spend on them in court. So you got to feel comfortable that you know the person you’re dealing with is, you know, telling you the truth. Yep. Yeah, because it looks like that can come back to buy.

Fraser Jack
So you’re so you’ve got some retired clients already, and you’re looking to build out the 45. To

Andrew Ferguson
Yeah, the 45 Plus, yeah, so really getting into the retirement planning is probably the most ideal space to start growing longer term clients, we’d sort of four or $500,000 Plus.

Fraser Jack
Yep. Okay, so that’s, that’s the target? Are they? Are they particularly proficient? Or if it really they’re in? Or look? Are they just local?

Andrew Ferguson
Well, now we look when we’re not so worried about the types of clients they are well, person with different personalities, you’ll learn in this business, that they’re more difficult professions to deal with. And others. Yes, I

Fraser Jack
think we know though.

Andrew Ferguson
If you have a whole heap of those, yep. They can be hugely analytical and time consuming. Look at it, it’s much easier to work with one person with, you know, $2,000,000.10 with 200,000. Yep. Right.

Fraser Jack
Yep. Let’s say it’s always,

Andrew Ferguson
yeah, is it? Look, it’s just gotta get the numbers, the amount of work involved in doing a file, nowadays, you just, you’re not doing it compliantly unless you’re giving it the real relevant amount of hours that it needs. It doesn’t matter how efficient you are, how, how good you are, as a planner, the paperwork takes so much time. And it needs to be done. Absolutely. Spot on. Otherwise, you’re in trouble. So yep, you need to go through it slowly. You need to go through methodically, you got to have it checked. You’ve got to do audit of your own work, ideally, on a monthly basis to make sure that you don’t lose things. Loose Ends are the death of you in this industry. So yeah,

Fraser Jack
that’s a very good tip. Yeah. Talk to me about getting your own license. How long did that process taken in? Wow. And how did you go about it? And what was the experience? Like?

Andrew Ferguson
Yeah, well, good. Wasn’t wasn’t too bad. We did our own license application. Yep.

Fraser Jack
So you didn’t get the lawyers to do it. Now, obviously,

Andrew Ferguson
it’s well, there’s there are apps out there that will do it for you. But then you’re still going to come up with all the documentation to justify everything so that you’re only paying him to do 50% of it. So we did it in house. It only took about, well look at after about six months during a month. And we said how’s it going there? And the bloke? I think you forgot about our, you know, went on holidays, or we forgot about applications. 24 hours later, you know, after three months more down the track. They said rings back in three months. Some some nice girl named Cassandra just kicked it off. So

Fraser Jack
right. Okay, so you sort of got a little bit lost in the system? At some point? Yeah, it

Andrew Ferguson
worked out to our favor. So that was just before they started to make it a lot more difficult to get your own. Yep. Awesome. So how long have you been licensed for three years now? Yeah.

Fraser Jack
And you both are responsible managers on there? Yeah. Yep.

Andrew Ferguson
So you know, look, it does take, there is a lot of work in the auditing, and you got to pay someone to help you. Yep. But we’ve got, you know, terrific support from our compliance. contractor. And, look, it’s not for everyone. It is certainly not for everyone, because it is. It’s it’s a serious undertaking. Yep. I couldn’t help myself. Yeah, it’s definitely does, essentially everything on that side.

Fraser Jack
And so how has that changed your mindset from being, you know, a business owner to then being a licensee? And is it sort of added additional rigor to that? Or is it?

Andrew Ferguson
Well, look, it’s just changed down? perspective, really, when we were trying to grow not as a solo practice, because we’ve hit our ceiling already, you know, people, absolute maximum American should be looking after 100 clients. Yep. When we’re doing a great program with Qt. So we’re going to be taking a group of kids through a training plan every sort of three to six months. Yep, a handful of them.

Fraser Jack
So that grad plan is leading them into working as I say, an associate I could serve a servicing provider in the office or is it like it’s not going to be the pressure or yours?

Andrew Ferguson
No, no, no, they look they’re gonna start at the bottom. We have mapped out everything every job in this Business and look, if, unless you’re in a bank, where you only sort of get a red, green, red and green button or round peg in a square peg, and if it doesn’t fit in that hole, you can’t do anything. You know, it’s really about teaching these, these needs new generation from episode from start to finish, because look, I even I’m of the I came into it as the generation who I can’t really work without a paraplanner. So we’ve we’ve been working on our system, we were able to generate our own documents in house with a digital template, and which dramatically reduces the amount of time to deal with these documents. But if you’re an advisor, and you’ve got, you know, say these kids actually get to be your advisor and say, five years time they’ve got they’ve got a few impediments standing in their way purely because of their age. Yeah. But they need to know, even good, they’ve got to learn admin first, you got to learn when a problem comes up, add it, fix it. Otherwise, yeah, you can’t just hire an admin. Yep, who knows what they’re doing, it just doesn’t really exist. Or

Fraser Jack
you could retrain them anyway into into your business and your process and your beliefs and your values in your business to talk to me about that great program. So how did you start that up? And has it worked?

Andrew Ferguson
Well, look, we’ve just been, we’ve hired many good kids over the last 10 years, but none of them really wanted to be in the industry long term. So we’ve spent money and time on them, getting them up to speed, and then some incredible, then they leave. Yep. And we’re like, Well, I don’t want any more kids who don’t want to be in the industry. Because, you know, it’s a significant amount of your time to get them up to a level where they’re helpful. And you can trust them and that they can, like, just task by task. So, you know, to be to have strength in the practice got to have extremely strong admin side. Yeah. So we want you know, we want to teach them from making telephone calls and doing research and submitting documents through to turn teach them how to be a power planner, how to structure the dire notes, and, you know, eventually get to a position where you can put them in there for professional year, isn’t it? No one’s gonna, it’s a funny system they’ve come up with who’s going to pay, you know, 5060 7080 grand to train somebody? And then are they any good at the end of that as well? Can you put Can you trust and put them in front of clients that are worse, lots, lots of money to the business, and rely on them to, you know, not not only be a practitioner, but efficient, and a salesperson, and, you know, have that experience that if only comes with time?

Fraser Jack
Exactly what it said it’s difficult for a lot of small businesses to look at funding that model. And yeah, so we’ll end up with I guess, the larger businesses bringing them through and like you said before, you know, where they go after that finish the year you you want to stay as well, near?

Andrew Ferguson
Well, absolutely, absolutely. So that’s why we’re trying to build a model where we can we have a model where we’re toward turning into a hybrid sort of franchise, yep. Tell me about the model, we’ll look at it, we just want to have some AI’s who we can drive business to. Because we’ve, I’ve spent the last couple of years learning how to generate leads myself and running our own in house marketing. So we can generate the business, we just need hands on deck, proficient, reliable, and, you know, want to be in the industry, and it’s the way we’ve structured, it’s more profitable than buying, getting yourself into debt, buying a business, and then going through all the pitfalls that we we went through, yep. So the win win for both? Well, that’s it if you can, if you can earn from the dot, and then after sort of four or five years, you’ve got a solid home, you know, book of 100 clients with support without the costs. It’s just, it’s more efficient, you know, we’re looking for we look at efficiencies everyday in our business. So, you know, we’ve been able to create it our model where people can, well, the new generation getting getting have a not a free license, but somebody will support them without taking all them, you know, a lot of yard slice of their, or their income.

Fraser Jack
So does that is it more like a professional practice? I say a law firm or

Andrew Ferguson
it’s more like that. Yeah. So they work, they will work under our brand, they leverage off all of our infrastructure, we do all the compliance, check everything, make sure everything gets done from a legal perspective. Feed business through to them.

Fraser Jack
So fantastic. Okay, so then that that’s um, you’re almost doing all of the all of the bits around the outside and you’re getting them to focus on just the

Andrew Ferguson
the work relationship. So it’s, we don’t want to grow a large deal group with Yeah, all sorts of hoes that you don’t know anything about like it. You know, I just can’t imagine having 250 practices under your license that you really don’t have any idea what is going on, you know, worry enough about 100 clients. Yeah. And with everything gets done properly for those clients, let alone 1000s of I don’t know how they survive without getting.

Fraser Jack
Exactly. So all the systems and processes the back end, you’re gonna take care of how many how are you looking to grow this? How many are you looking to grow to?

Andrew Ferguson
Oh, look at it. Look, it is based on our insurance as well. We’re only allowed to take on two this year. Yep. Negotiate. Adding another handful more next year.

Fraser Jack
Okay, so then your POS had some important housekeeping, your steady growth?

Andrew Ferguson
Yeah, that’s it, they just don’t want us to go and just collect people over to the state control, control. Control the whole thing. So yeah. It’s never going to be a monstrous group. It doesn’t need to be if, if we’re focusing on higher net worth clients. We don’t need Yeah, volume of people. We need volume funds under management.

Fraser Jack
Yep. Okay, so that’s about just sort of steady growth to a larger professional practice.

Andrew Ferguson
Yeah. And make sure it’s, it’s profitable in all areas. It’s manageable from a lifestyle perspective, as well as workload because, you know, I’ve been reading some of these, these reports coming out of I can’t remember where it was an API site, you know, there’s what two thirds of advisors are seeking cycle cycle cycle for, you know, because of the stress and yep. And we’re doing some, some work with a performance coach, you know, there’s a chart that explains, you know, from under stimulated up to the top of the curve, where your maximum sort of efficiency and then all the way down to the depression year, you know, and if there’s too much fun, you know, we understand that people need some balance. We haven’t had it. So we want to create a viable model, that’s, you know, people aren’t overloaded. Yep. From a workload perspective, viable for everybody that it needs to be verbal cross, what is it gonna be a long term thing? Is it gonna be a 1020? Plan? Everyone’s got to be happy in their weather, weather, seeding, you’re entertaining and just not under as much pressure because rules keep changing.

Fraser Jack
Let’s get through college,

Andrew Ferguson
it’s gonna it’s gonna keep happening. It really, it really should get easier once everyone’s done their graduate. The graduate degree, they should be able to reduce some of the work red tape, but they probably won’t. We’ve got to be a year or two ahead of what we think is going to happen

Fraser Jack
in there. Talk to me about about your performance. Coach, you mentioned your performance coach, Ellen would be important. Oh,

Andrew Ferguson
look, and wife just did a AIA session. It was you know, solid CDAP points. Yep. Along with it. I think ladies fitness a bed and I haven’t even started my I know, I think you’ve spoken hope. Yes. Yes. Yeah. So anyway, I’m just going to do the staff and I’m going to do a session with her. Because Stephanie got a lot out of it. And you know, it’s all about doesn’t matter how many hours you do. It’s what you do in

Fraser Jack
our energy credits and understanding when you when you get the most out of things. Yeah, well, in balancing the young family as well as business things. Yes. Look,

Andrew Ferguson
if you overdo it, you get burned out, and then you can’t leave. It’s not like you just can’t shut the doors switch light off, especially if you’ve got debt attached to it. You’re in, you’re in there, and you’re in in the trenches, and to make sure, you know, you don’t feel like a lot of the financial advisors in the industry do.

Fraser Jack
Yep. Yeah, understanding where that burnout point and that slope when you start going down the slope, and you recognize that early.

Andrew Ferguson
Yeah, that’s right. So it’s got to be, we need people to be able to go through their daily routine, smooth and consistent pace without getting overcooked.

Fraser Jack
Yep, yep. Fair enough. Now, you mentioned about bringing on a couple of new authorized reps this year. Apart from that, what else do you want to take the business to sort of in the in the short term future?

Andrew Ferguson
Now look, we’re just we’re just reducing our client numbers at the moment. That’s where we were at the moment.

Fraser Jack
How do you say that to a client that you’ve got to abox? And what sort of conversations are you having? Or are you selling bits off?

Andrew Ferguson
Well, look, we’ve got well, we’ve always had less active clients and others, you know, it’s getting to the stage where it’s not just about client, the clients portfolio but also their attitude. Yep, we’re really Gaynor we need to make sure that people

Fraser Jack
are they actively engaged with you or not? Yeah, well

Andrew Ferguson
that’s it, you know whether they get stuff back to you properly, you know, you’re not chasing them around for things, you know, that just creates more admin more wasted time you’re not charging for it. So it’s just another part of trying to find efficiencies in every little jachym out every little hole that you can.

Fraser Jack
Yep. And you mentioned charging, how have you gone with your pricing structure? Have you? Is it something that’s in a moving piece of piece of the jigsaw puzzle? Or is it Oh, look

Andrew Ferguson
at our pricing has been pretty steady across the board. Because look, surfaces by chance with when we took on the first practice, the lady Church used to charge pretty heavily Yep. You know, and KPMG put a study out the other day, they reckon it’s, you know, somewhere in the 4000s to reduce that statement of advice. So yeah, unless the client is bringing in five or six or $7,000. Plus, it just doesn’t work. Yep. So going and buying all season days, as they call them in the transaction world, you know, that have two or $3,000 or less is a bad idea.

Fraser Jack
Yeah, it’s lucky lucky said it’s one of those things of the season. These are the usually the ones that I’m engaged now, and don’t have that engagement

Andrew Ferguson
with the annual opt in it. What are you going to do? Like, I don’t even understand how transactions going to happen. That someone is naive enough with this annual opt in without a transition plan. Yeah, that that’s a that even another level of complexity to a transaction. And that’s coming since I’ve, you know, we’ve put a line underneath. Yeah, interesting doing transaction,

Fraser Jack
because you’re probably right, those clients will be in a few years time. If they’re not time to not respond to them. They’re not going to be clients anymore, and

Andrew Ferguson
the whole thing’s gone. You’re left with the debt. You’re going under the last two hours. Yeah. So how would you how to get in there and even get these clients to sign a new form? Yep. To keep that revenue going, it’s it’s, it’s even more difficult than it used to be.

Fraser Jack
So at the moment, you’re really going through and looking at the engagement of your existing clients decide which ones are not going to likely be engaged in the future, and we need to work out what we’re gonna do with them now. Yeah, that’s it. Yeah. Fantastic. And look long, long term plans. How do you see it all shaping out? Obviously, there’s going to be lists, maybe less advisors, and more people? Oh, yeah. Well,

Andrew Ferguson
look, we’re probably going to be reducing, you know, our client numbers down to really quite manageable. Yep. You know, the ones that we work with personally, yep, there’s million dollar plus codes. And just write a much more efficient operation and grow the the external world, they’re essentially self employed external hours, because we’re doing we don’t want we’ve we’ve hired model ARS over the years, and it’s never worked out. So we, we feel that people who are self employed are going to be have the right attitude for growth. So we don’t, we don’t want to be involved in their day to day. We just want to, we want them to run their own operation. But just to have, you know, lead being able to leverage off the infrastructure that we have.

Fraser Jack
Yep. Okay. Nice. Fantastic. Thank you for coming on the podcast today and sharing your journey. It’s been an incredible. If somebody wanted to continue the conversation with you, what’s the best way for them to reach out?

Andrew Ferguson
Now look, you know, there’s always a phone number on the website, which is wells

Fraser Jack
in the URL. It lives as well. Webster’s wilderness Webster’s with an S. Yep. And what about LinkedIn?

Andrew Ferguson
Yeah, we’re both on 70. are both on LinkedIn? Yep. So we’re available there. But look, the websites got office number, and we are looking for people who are interested to, to look at a pseudo self employed model. Because you lucky, you’ve got two parts to any business doesn’t matter what it is, generally, generally, it’s its operations and then business development. And you can’t do both properly in this industry. Yep. So unless somebody is driving one half of it, you can’t, you know, practitioners just don’t have the ability to, to grow unless they have somebody helping them on the other side, to divide their time up between the two. Yeah. So you know, I’ll end up moving into a just pretty much the marketing role. Yep. In the future. Fantastic. Business Growth. Yeah. So we build the build the profile, build the traffic, generate more, because look, there’s so much there’s so much movement and with all these advisors leaving, there’s going to be no one left in, you know, three years time. Hardly anyone left in some of them are gonna have their nappies on. There’s only going to be a handful sort of in my age bracket, you know, two about to turn 40 or 40 to 50 left. So there’s going to be a huge amount of movement in clients it from all whether the practice have been sudden they don’t want to stay. They’re looking for a new advisor. Yep. You know, it’s a great opportunity for people to pluck business out of, you know, the pool. Yeah. And look, you don’t need a lot. You don’t need a lot. You just need the right ones. You need to make sure your business is structured properly. The compliance is just going to keep coming. So unless you have some support there, it may not work out for you if you go into a straight transaction. Yeah, just be careful with the transactions.

Fraser Jack
Learn learn from the learn from the mistakes of the past. Thank you so much for coming on the podcast. Yeah, we look forward to following the journey.

Andrew Ferguson
Thank you very much.

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