June 8, 2022

The blueprint for the successful advice firm of the future #2 – Transcript

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The blueprint for the successful advice firm of the future

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Fraser Jack
Hello and welcome to the XY topics podcast. My name is Fraser Jack. And this is episode two in a series called the blueprint for the successful advice firm of the future. Episode One was actually released on the first of March 2022. So if you haven’t listened to that one yet, then it’s well worth going back and looking it up. In the series, we get the inside scoop from the Macquarie virtual advisor network, otherwise known as Macquarie, then a group of high performing businesses taking their success to the next level. In this episode, I’m very excited to be able to open up the vault and chat with Shan Chang, Client Development Manager from a quarry virtual advisor network. And joining him in this episode is Thomas Redacliff, Executive Chairman and director of encore advisory group. Our conversation takes us on a deep dive into the scalability of advice practices. We discuss topics like measuring your success, as in the stats that really matter. We discuss people productivity, process, culture, outsourcing, and of course technology. This episode is jam packed with helpful tips and ideas from two absolute superstars. So if you’re wondering how you’re going to scale your advice offering, then this episode is a must. Welcome back to this part two in a series that we’re calling the blueprint for the successful advice firm of the future. We’re talking about the scalability and capacity management for an advice practice, which is obviously very topical today. I think many firms have at the moment anyway, certainly growth opportunities is not necessarily something they’re looking at at the moment because people have sort of a lot of a lot on, but definitely the concept of how do they then take their capacity and do something with it. I’m very lucky today to be joined by two incredible guests, which which is amazing, which will probably mean you’ll hear less for me, which is a great thing. But we’ve got Tom from Encore and Shan from Macquarie van, both with us today. So we’re talking about decades of experience with working with advice firms so so much to gather from those two gentlemen, Shan, I’m going to drag you into the conversation. Welcome. Thank you so much for being here. Let’s start I guess but just a quick recap, I guess of where we we got to and a little bit about you. Yeah, sure.

Shan Chung
Thanks, Fraser. So Macquarie is a virtual advisor network. For those that haven’t heard the first podcast, just very briefly, we run a community of advisory firms who are really growth oriented. And they’re open to sharing with each other. So since 2011, we’ve been helping those businesses to run their business more effectively develop strategies and execute them, but also get together as a community and share insights which they tell us is actually the most valuable part. One of the things that we do though, is firms from time to time, need real depth of expertise. So we we go sort of across a broad spectrum of disciplines, and sometimes we need to bring in an expert that goes really deep into one discipline to execute something legal HR technology and so on. And so that’s actually how I met Tom Radcliffe at Encore because they help businesses with all sorts of things has been in particular this this topic of creating scale. And you know, driving those profitability numbers enabling growth, that sort of thing. So Tom, tell us about yourself.

Tom Reddacliff
Thanks, Shan. Yeah, look, encore itself is 20 years old. I’ve been involved for eight years and had a previous life before that in in licensees, and so forth and advice businesses. But basically, we’re on call we work in across accounting, mortgage broking and financial planning. Now, often a lot of the businesses we work with do all three, probably in terms of scale, two to 3 million up to 20 million. So it ranges in there. Really, we work a bit like an advisor. Initially, often when we go in, we’re trying to really uncover what someone’s desired reality, what they want to achieve and what the current reality is. And there’s often a gap. And just like an advisor, we end up coming up with an SOA, now it doesn’t need to be 80 pages. But we come up with something like that. And then often we work with firms on an ongoing basis. And a lot of the time we find that is too, there could be a formal board and governance structure or, or holding people, you know, really often people want to be held to account. I personally chair five boards and three advisory boards. So that’s sort of a core thing that I do, as well as obviously working within the consulting projects.

Fraser Jack
Tom, that’s incredible. I can’t help I love the concept of a reality gap. It’s certainly, it’s certainly a, you know, a great way to it’s a great interesting thing for advisors, because that’s what they’re doing with their clients. And obviously, it’s an interesting thing for you that you can look at the reality gap. And then, you know, essentially all your job is just to bring that bring that gap together. Shan might, I might see if we can just quickly go back a step. Now we talked about, you know, successful advice firms. And we we, we talked a little bit about the first episode, we didn’t totally get into it. But there was a few different pillars, and we kind of went through the pillar one and two, in in the first episode. Do you want to just do a quick recap on the successful advice firms framework?

Shan Chung
Sure, Fraser, thank you. Yeah, the framework is basically a result of us looking back over those years since 2011. and observing those businesses that really punched through those growth ceilings in that time, we’ve had businesses go, you know, two times three times five times over that period. So how did they do that? What were the success factors, and we structured them up into these four pillars. The first one is strategy or making better decisions and then executing well, second one is clients having a differentiated proposition are really, really understanding who your ideal client is and their needs. Third one is building a scalable model and having a plan for growth. And that’s where we’ll dive a little deeper today. And the fourth one is around people and culture having a strong culture of ownership. Within those four pillars, we’ve injected a lot of those insights, we’ve learned a lot of expertise. And that forms the structure of the program that we we have for virtual advisor network.

Fraser Jack
Fantastic. Now we’re diving into pillar three today, I guess, we might have to come back and do people and culture another time, because I think there’s so much in this, this area that we want to cover off on. And of course, we’ve got a couple of amazing experts to talk about. So let’s, let’s dive into that. Shawn, you wanna you want to introduce pillar three, and then sort of maybe the context around what we’re talking about?

Shan Chung
Yeah, pillar three. So mentioned, building a scalable model and having a plan for growth. And so that really involves everything to do with the operation of the business, and then also how you attract that organic and inorganic growth. Now, just due to where we are in the industry at the moment, today, we will probably focus more on the scalable side of things, because we’re finding that the clouds are coming thick and fast, they’re coming from cold sources, warm sources, you know, acquisitions are also a big opportunity. So it’s actually right now less about attracting the growth and more about, as Tom would say, receiving that growth and, and being able to, to serve those clients efficiently. So we’ll go deeper on that one today. So what does that entail? Well, you know, the question is, how does a business grow? Without simply adding more people, more complexity, more costs? And what are the components of that scalable operating model? So if your turnover is rising, how do we make sure that profit can rise? And we’re not just increasing complexity and making our lives harder? In terms of the answer to that question, you could roughly bunch it up into three components. One is the people because obviously, we’re a people business. Second one is process. So what kind of work are those people doing? And how efficient is it? The third one is technology as a key tool to enable those processes. So that provides a little framework for us to think about these things. You know, Tom, I know this is really where you spend a lot of your time helping businesses. So why don’t we step through that? Maybe I can ask you about what it is you do and share some some of the insights we’ve seen in practice with businesses. Yeah, shall

Tom Reddacliff
look, I often find when people give me a call, often there’s a problem, or there’s an aspiration, and unfulfilled aspiration, or a combination of the two, I like to start off with really understanding I mentioned before about current reality and desired reality. So a lot of my conversations, what is the desired reality around business client and personal? And then how does that match up to what that current reality is? That sounds simple. But those conversations can be incredibly meaningful, particularly as you get to a personal side. So for example, at a business level, there may be numeric targets, often people talk to me, they want to be a $5 million business from a 10 to a $10 million business, there could be a legacy or succession goal, I often find in terms of the client side of things, is it doing what you’re doing now? better or differently? Or is it adding another service line and doing something different for clients, and then at a personal level, it could be time release, it could be, I’ve decided to retire at 60 succession, or it could be a significant achievement that someone has in mind. So for me working through what it is that you’re seeking to achieve, where you are now what the gap is, that’ll then ultimately lead to the projects or the initiatives you need to do to get there.

Shan Chung
Excellent. Yeah, it makes a lot of sense. And so once a business has been clear about that time, and they’re fairly aligned on that, what do you then how do you then sort of diagnose where the business is today and start to measure the progress towards that? What does that look like?

Tom Reddacliff
Yeah, so by way of example, if I was to give you a business that’s currently at a $5 million turnover, and it is often I find a solid aspiration, people go, I’d like to be $10 million business in three to five years, that would not be uncommon. So that then makes me break that down. So the first thing I would say is, right, there are really three sources of growth, there is uplift from existing clients. Now, that might depend a bit on your fee model. So if you have a flat fee model that might be indexing your fees, for example, by inflation, if it’s a percentage model, maybe a slightly different thing. So that’s one source, then the next source would be organic growth. So that’s, for me, if businesses are getting referrals from existing clients, that is a great sign of health. That’s a crucial one. But then my next question would be if you get that referral, and it’s an ideal client, what’s the ideal revenue per client, and ideally, we’d like to be aspiring to lift that. So that’s another crucial I mean, it might be, you know, organic from centers of influence. So what are we getting from that. And then the third one would be m&a. And I can pretty well guarantee you, if you’re looking to go from five to 10, in three to five years, you will probably need to do a one or two mil worth of acquisitions will be bite sized chunks will be one. And it will bring into frame, some m&a capability, for example. So that’s the first part is I like to break five to 10. Fantastic, let’s break it down, let’s work out in each component part what we think we’re going to need to achieve, because that will drive strategies within those parts around the CLIENT OFFER around m&a, etc, etc.

Fraser Jack
So I’m gonna jump in there. When somebody is doing that, you know, obviously, you take five to 10, there’s a gap, there’s a $5 million gap, and you’re looking at, so you start with up, lift, work out what the maximum amount of uplift can be, then work out what organic growth and then go, Okay, well, then if those two don’t equal five, we need to do an m&a.

Tom Reddacliff
Absolutely. So I start with, I leave m&a to the end. And often what you’ve got to do when you’re doing organic growth, so take, for example, referral for existing clients. Well, not all the advisors in the business are at the same rate per client, for revenue per client. So I actually like to go right down to the pod level. So So what’s our targets for all the various pods because a pod could be a capacity or another one might have some room to move, but they might have the same revenue per client metric. So I find that getting that scientific, then I get to m&a. And I can say right, I reckon we need to do this and acquisitions to make these numbers reality, and we’ve worked it all out and broken it down.

Shan Chung
That’s yeah, that’s great, Tom. Some observations I’ve seen recently that that relate to that. We had a conference and one of the speakers had recently moved their average client fee from 7000. A year to 15,000. And that’s that’s the average client fee. Now, that was done over a period of years. And it was a deliberate strategy. But it was a combination of factors around them under charging, potentially over servicing, not really pricing to the value they’re delivering. And I think that’s quite a common common challenge. So having a structured plan in place for that more revenue from existing clients is really key. And m&a is it can be a tool for for businesses of many sizes, we had a another business saying that they did their first acquisition, he was a young advisor when he had 300k of revenue. And he brought on 400k revenue. You know, he was a tough period, but it’s certainly a vital tool for him to accelerate quite quickly. Great. So that’s the top line top. So what are the what do you measure on the way to achieving those top line figures?

Tom Reddacliff
Yeah, so that’s the first part, right, you’re breaking down growth. So that aspiration, it’s a bit more granular in how you’re working it out. I’m a big user of business health ratios, I think they do some excellent work in there. And that’s, that’s the next thing I get into. Because if you’re looking to scale your business, in its simplest form, if you’re growing your top line there from five to 10, now let’s pretend you had a 25% profit margin at the moment, where you really want to be aspiring to get to say 35, maybe even 40. So what that means is, you’ve turned the growth into profitable growth. And I think that’s a really great sign that you’ve scaled your business, you’ve got to be doing some things to achieve scale to do that. So for me, when you’re using these sorts of ratios, know the assumptions and the numbers, so for example, business health, assume 100k, salary per advisor, put in you know that because you’ve got to compare apples with apples. But I like using ratios such as profit or revenue per employee per advisor. And typically, I’ll take the business health number, and then use context and formulate something with the business that’s relevant to them. A really key ratio of two ones I’d call out is when it comes to salaries as a percentage of revenue. So the business health number is 38%. Now, let’s call it 40, for example, it’s quite often I will see a business that will be 45 to 50. And really, what we’ve worked through is, we want to make the growth happen. But try and keep that cost base flat, or not rising at the same amount. And therefore we’re getting our salaries to revenue ratio to from 45 to 50, down around that 40 mark, as we scale the business and achieve the growth. And I think that is a really crucial measure that you’re getting greater productivity from your staff. The other one is what I was talking about before is pod science. So I like to break down the pods, ideally speaking, you’d want to be seeing your advisor pods 800 to a mil, in today’s world, and it’s it’s really breaking that down how many clients are in there? Is it fall hazard or capacity really getting stuck into that side of it? Because ultimately scale is going to come down to how you execute into that model as well. So yes, that next level is really starting to get into the sort of ratio analysis and working out what you’re trying to achieve in those ratios. As we sort of glide through the next three to five years. Tom, can

Fraser Jack
I jump in there as as you bring salary percentage down, or there’s the salaries of all staff? I’m assuming we’re talking about all staff salaries versus revenue, as you bring that down? I’m imagining a lot of these firms, then the staff have got more on their plate, they might be more efficient, but they’re they feel like they’re doing bit more. And then to me scale is almost another layer on top that could add even more complexity into pushing that revenue percentage back up again. Is that do you see that as a problem? Or is it that there’s obviously a lot of efficiencies you have to find?

Tom Reddacliff
absolutely spot on. So often, what I’ll find is that business at 45 is telling me and the staff are telling me, it’s oh, we’re at capacity. It’s it’s very chaotic. So what often that will make miss or we’ve got to just go back a couple of steps and work out why that’s happening. And usually what I do what I do, I start with the client and the client experience and work our way through. Because ultimately, we want to we want to get to a point, Shawn talked about the ability to receive growth, and a critical part of that is your really is your people and your processes and your systems to be able to receive the growth.

Shan Chung
Yeah. Excellent. Thanks, Tom. So you’ve set that high level target. You’ve set some metrics reduce business health as a reference for those that’s just publicly

Tom Reddacliff
available data is it? It’s not public, they’ve got a calculator on their website. It’s very, if you go in there you can Subscribe to that. It’s not hugely expensive, obviously, they, you can go through the more more expensive models, but know that what I’m suggesting is there’s some accessible numbers there. It’s not massively expensive to do that. Excellent.

Shan Chung
Sounds like a worthwhile investment if someone were to look at that, but yes, as a rule of thumb, we often see 35% EBIT, or 30 to 40 being quite healthy, you know, notwithstanding significant investments in growth and that sort of thing over short term.

Tom Reddacliff
Okay, so average, in this survey over sorry, about over a million dollars is 38%. That’s with 100k salary. So that’s what I’ve just got to be careful when you do compare apples with apples, they’re all practices. So the ones the whole shootin match is more like about 28%. But that’s with 100k. salary. So gets back to what I was talking about before and apples with apples.

Shan Chung
Yep, for sure. Okay, so the business planning summit in place and diagnosis done. Getting into some of the solutions and levers that advice principles can pull. If we were to start with the people side of things, what would be some of your top guiding principles when it comes to the people component.

Tom Reddacliff
So with the people component, firstly, let’s talk about this business, some five to 10 mil. Now, if someone running the business is also running a pod of 800, to a mil client responsibilities, that that business, you probably got 3020 or 30, people growing to 3540 people. So that’s pretty significant. And I think that you’d want to start to look at more dedicated management in the business, my experience, if you get a GM in there, you’ll get a better quality one, if they feel like I’m making a difference. Often I find with business owners, it’s your baby, right. And I know there’s an emotion to that. But if you can find a way to sort of somehow compartmentalize that a bit, and give them the ability to grow and achieve, you’ll get a better quality person. Because what I find in the businesses I go into is the people side of it’s the toughest part, the capacity, some of the stresses in the business, this is the part that gives often some of the basics on role descriptions, individual development plans, performance reviews, I find hit and miss. So that’s your basics, let alone the critical part of communication. And that can be routine, but released writing communication, but also proactive communication. And in that, are you are you providing a mixture of accountability and support in your leadership, there are some times with some people in some contexts where you need to dial it up and help people do account. And other people put a lot of pressure on themselves, you got to detect that and give them support. And I think part of good leadership is getting the basics right. But also be able to balance accountability and support within the context that you’re dealing with, with those

Fraser Jack
people, Tom kind of jump in there. As you’re speaking, I’m thinking about the fact that we’ve just been through the process of the numbers. And now we have a real understanding and the belief that the numbers that are the targets, or the focus for the future for these, for the staff now are something that it’s a just cause for them to be able to go right now actually know what numbers I’m going to chase. And I’ve got this thing rather than just having, say, an arbitrary target, that was just an agenda at one point, they can actually focus on, you know, the the percentages and the numbers that you just talked about.

Shan Chung
Let them in the TED, make them part of the formation of the purpose of the business, make them feel part of the goals to credibly engagement difference that comes from that. And when you give a little bit of trust to your people, it’s amazing what you get back. And I know it’s a risk. But I think it’s a risk worth taking. Because the difference I see in businesses that have just taken that little bit of risk is enormous. Tom, we have a great example of that in van, one of the larger firms that they’re approaching 50 million in revenue. And they’ve tripled that in the last three or four years is that they actually invite every single staff member to tell their leaders what they think the top three priorities should be for the business. And so we’re talking about 200 plus people. And they’ll extract themes from that they’ll validate it against what the leaders were thinking. They’ll explain why the things they’re not doing being done. And and so they’re bringing more than 200 people inside the tent on on shaping that direction. So you know, and they’ve been shooting the lights out. So absolutely agree with that one. Yeah, so excellent. So some good guiding principles there that accountability and support balance. And we’ve also seen firms just accelerate rapidly once they dedicate that that right leadership investment, which can be a challenging one, but really unlocks growth. And so other people side as well. Once you get into the operations of the business time and you’ve got the advisors and the teams working with clients well What kinds of productivity metrics do you focus on here? And what levers are there to influence those?

Tom Reddacliff
Yeah, what generally happens now is you really climbing into the pods and the teams. So this is where productivity of advisors and productivity of pods and stuff, it really comes into play. Generally speaking, I find there are three models out there, you’ve got a model, which is very heavily pod orientated. So you’ll often have an advisor, power plan or support staff member. And a lot goes on in the pod that’s a dominant part of the model. Other models I’ve seen that are very process driven, have extensive amount of centralized services in parallel planning and support might be all the way on the other side, probably fair to say, I probably see a lot of models somewhere in the middle of that. So I like to know all of that, because that’s going to be crucial to productivity. Ultimately, in its simplest form, you want to get your your pods to be as productive as possible. And as I mentioned before, I think you should ideally be trying to get 800 to a mil, per pod, if you can. Now, often, what I will find is, if things are straining below that we’ve got to get into, we’ve got to get in and diagnose why. And I’ll come back to what I talked about before, I will often find that is something going on in identifying back to the client, the client experience. But most importantly, it’s when I see variation. I mean, I was at an off site a couple of weeks ago. And I actually decided to interview each advisor separately, because I was told that everybody had the same process, doing the same thing. So well, they weren’t. So then I put them all in the room and took them through each other’s model. Now, that’s understandable at the moment, because it’s chaotic. At the moment, everyone’s scrambling to get consent forms in at the moment between the end of June, everyone’s really busy. And often you don’t sit down and actually just do this sort of exercise. But ultimately, if you can’t get consistency in the pods, it’s very hard to scale with your support staff, and then support staff get confused if there’s any centralization in your model that what they’re supposed to do, because it varies between the advisors. So this is the stuff that’s crucial to productivity.

Fraser Jack
Tom, I got a quick question, just as you’re talking about pods, what’s the average size of the pod as in the amount of advisors and support staff and paraplanning

Tom Reddacliff
on average, as on the business health numbers, about two and a half, recently validated advisor rate and earnings numbers and things like that. So typically speaking, you’ll see advisor paraplanning, and a CSO. And it’ll be somewhere in that range of two and a half, maybe three people. But I think if you’ve got, say three and a pod, you really should be shooting for a mil for pot. If you’ve got three, I would say

Shan Chung
good stuff. What else? Could it say there is some level of standardization, but the ratios aren’t quite where they should be. What else might a business do to to lift advice, team productivity?

Tom Reddacliff
Yeah, well, it’s what I like to do is, first of all, get absolute clarity on the client we’re serving. Number one, then what I’ve found usually is it’s been a fair while since everybody got in a room and went left to right on the client experience with initial advice, and ongoing advice, just the crucial milestones. And what will come from that is you’ll find there are things that you’ll decide to eliminate. There are some good ideas that are going on, that might be uniformly applied, you’ll pick up and effectively your recapture process, people will have felt bought into it, it’ll be more aligned to the client and the client experience. So that’s a simple exercise good old left to right, get a whiteboard out, get some butchers, whatever it is, do not underestimate that. I think that’s, that’s, that’s something I love doing. And it really works

Shan Chung
spot on. I agree. So this is really starting to move into the process side of things, isn’t it time and, and having that that time to try and improve current processes cut out things that aren’t valuable to clients? So yeah, you mentioned a kind of a client journey mapping exercise. We’ve done those before, they’ve been very effective. I’ve been surprised to see that it’s, it’s not rocket science. If you’re a business leader, and you just give your team space to talk about the client experience, they will identify areas for improvement. You don’t need to be the grand architect, if they’re doing it every day. They know that they know where things don’t make sense. How about if we stay on process for a bit? How about the cultural side of that, you know, if a business is trying to constantly improve processes, which we find the really high performing businesses do, what would be your advice to a business leader to impact that kind of culture and, and might help make it happen?

Tom Reddacliff
Well, the first thing is a leader has to be a sponsor of it as number one. Now, that exercise I’ve found very useful before the one I just mentioned, is will often give interviews staff members separately. Now the reason for that is it prevents groupthink. So what you do is you give everybody a common little preparation template, and I use a very simple thing. Put up four elements around financial aspects around processes around people, marketing and client, right? So for four areas, what do we need to fix? What are some great ideas we could pick up on? And what are some risks to avoid, and you give everybody that and you interview them separately, and then you end up with a composite of that. And I think that’s a really great exercise to go through. And a really good backdrop to then do the left to right exercise that I talked about. It will also, it’ll be a great way of giving what I often find it gives you like a voice of the business. So you can talk to the owners, and take them through that. And then from there, it’s a great backdrop to work on your strategic plan, and identify key priorities and initiatives as well. So it’s a double whammy, you can help you with your strategic planning. But also, it’s a great exercise to do before you do that left to right exercise with process that I’ve talked about before.

Shan Chung
That’s a great one. Yeah, love the idea of interviewing employees separately, and then bring it back together

Tom Reddacliff
takes a lot of trust from the owner, once again, by giving a bit of that trust away and allowing people like me to talk to them individually. You can be feeling inside yourself, Oh, what are they saying about me? Or what have they said, You know what, let it go. It’s a valuable thing,

Fraser Jack
Hey, can I jump in there to time I love the framework, by the way, fix, you know, what needs to be fixed, what you know what ideas can be improved, and what we need to avoid? I think you could use it so many ways, and so many different parts of the business. But you mentioned the word trust from the owner. And I think this is a really important point when it comes to culture. And I love Simon Sinek saying that, you know, a team is not a group of people who work together, they’re a group of people who trust each other. But that trust that the adviser also that the owner is showing in the staff, that that’s felt, isn’t it by the person you’re interviewing, they feel the fact that they’re there within a safe space and that their opinion is trusted,

Tom Reddacliff
you can feel it in the walls almost it’s funny when you you walk in, there’s just some sort of an energy or a sense, in a business that’s got that going. Whereas I’ll get another one where it isn’t, frankly, isn’t going. And I feel it feels sometimes disjointed, stilted. There’s something someone’s not saying it’s got a very different vibe about it. And you know what everything’s changeable. So if you’ve got that vibe isn’t quite right, well do something about it. And I think the way to do something about it is you’ve got to give a bit of trust away, to shift the dial and get you further over to

Shan Chung
this pot. Good call. Good call. There was an example we saw in improving processes, where this was a great tool that the leaders used actually to demonstrate trust, they formed what they called an edge team as in innovating at the edge across for people across roles in the business from junior to senior. And they gave them a few boundaries. For example, here’s your budget, you can actually you can experiment and you can actually lose clients, but only up to a revenue level of x, and no reputational damage or compliance breaches, you know, within those boundaries, you can do anything you like. And that was quite liberating. So they went away and tried all these different client experience, you know, things and ways to engage with the market and each other. And it was incredibly successful, so that they gave really clear boundaries, and then complete freedom within those. And then you were talking about process improvement. And during the journey, we’ve found that the Lean discipline is helpful with that, you know, if any listeners are wondering, when what tools might exist for that, you know, it’s it’s Toyotas, mastery of improving processes, and it’s a very simple way of thinking about reviewing processes to increase value to clients and cut out waste. So, so we’ve seen firms use that to great effect as well. What about whether a business has less control? Tom? So because not all of us practices, so advice practices don’t have control over everything, you know, so they’re often dealing with providers and partners, and experiencing frustrations with those, what ideas do you have around managing that kind of scalable challenge?

Tom Reddacliff
Look when you’re dealing with? I think a good example, at the moment is the annual consent process on platforms. I mean, if there’s one issue at the moment, I am hearing screaming in my ears is the scramble to June 30. And the reality is some platforms are taking the licensees consent form some ARB and really I’m finding that’s a major source of inefficiency at the moment so you know, I want to take a look at issues like that. evaluate whether your provider is working with you to provide the best experience for the client that you can, and is helping your staff feel like they’re enabled in a good environment to do that, that isn’t working on both those metrics of the client and your people? Well, I would, I would reconsider who you’re working with, quite frankly, because that’s, that may not be a sustainable relationship, and will harm your productivity and your ability to scale. So you want partners that get it. And that will go with you.

Shan Chung
Good call. Good call. other facets of process that you help firms with quite closely is outsourcing. And we’re seeing that over the last five to 10 years go from kind of a dip the toe in type thing to almost a requirement. Now two firms at scale up? How are you seeing that play out? You know, what advice do you have for firms looking at that, because it does come with risk. And in quite a significant investment of of time and resources,

Tom Reddacliff
the logic of outsourcing on the surface, it’s quite compelling. You sit there and probably the most, when you think of outsourcing, I know you immediately think of a Philippines or an Indian solution, there’s probably there’s different sources of outsourcing. That’s, that’s just one of them. But often, there is quite significant cost benefits that can come from that. What I have found is the people that have been successful at a solution like that, there’s a few key principles. So number one is with the resources, for example they might be using offshore, is they actually make them part of the team. So they’re not just sort of someone separate. They blend them into team meetings, pod meetings, pitches on walls of them. These days in the pandemic zoom meetings, you name it, there’s a genuine engagement. The other one would be if you haven’t done my the left to right process I talked about before and really, really got yourself nailed down on your client experience and your processes and so forth. If you haven’t done that, and then you go to outsource it will be exposed, because what will happen is it will increase confusion. That’s where I’ve found sort of probably major trouble in moving to that sort of an outsourced model. So I would do that exercise before I get into the you know that sort of outsourcing or offshoring. Now that’s not the only source of outsourcing, but I’m using that as an illustration, the benefits are there. But I do think you’ve got to do the groundwork to make this an effective strategy.

Shan Chung
Yeah, absolutely. That That makes a lot of sense from what I’ve seen. And then that way, if you’ve got a clear process, you can hand over a very clear and discreet part of that, and then expand, expand their remit from there, as opposed to giving them a complete and ambiguous kind of process. Right? Okay. And then and say a business has done some of their groundwork, they’re ready to go, they start talking to some providers, they even sign up to what what should a business pay attention to, to make sure that that’s successful as time goes on.

Tom Reddacliff
So and we’ll probably get into a little bit of this when we talk about technology later on similar principle. That is, I think you’ve got to have your own selection criteria formulated before you even consider any options. So so something like that will come from the client, you serve your offer, your staff, a whole lot of elements will come into that. And that will help you formulate a criteria of selection. So whether it be platform, asset, consulting, technology, anything, formulate your own selection criteria, and then when you get the options, you will be evaluating or scoring them against that versus being kind of tactical. And sometimes someone can be a really good presenter, or so forth. But is it the best fit for your takedown criteria?

Shan Chung
Great. Cool. Yep. So so that allows you to go in with specific questions to test what they can do against your needs. Take it from there. Yep. Good call. Good call. Okay, so why don’t we go further into the tech side of thing, and I know this is a real area of specialty for for encore, tell us generally about technology and say at the top level. Again, some guiding principles. If a business is reviewing their, their tech stack or their tech environment. How should they be thinking about it? At the highest level first?

Tom Reddacliff
Yeah. So I think when it comes to technology, probably I call it the technology Lolly shop vector. There’s a lot of stuff out there. And there’s some pretty good people selling technology as well by the way, so you will get noise thrown at you in technology and often there’s issues with the technology you’re using. So why Once again, as I mentioned before, I think it’s good to sit back from that, and work out, right? Start like this, number one, go back to the client, who is the client we serve? Who is the client that we want to serve in the future? What are we good at? What’s our capability, because that will then guide, and your people will help you do this, guide your process the left to right, then get into the technology in that order. Rather than being tactical, with technology, be purposeful, and it should, it should come through that process. Because then what you’ll start to do is you’ll start to formulate a technology selection criteria. And I think that’s really important. Now, you’ll be looking at your tech stack in two dimensions. First of all, you’ll be looking at it at an enterprise level. Now a lot of people use Microsoft, for example, well, how will he using their basic tools, office, Power BI, etc, etc. So there’ll be how you’re working SharePoint, they’ll be there’ll be how you’re working in an enterprise level. But then also, you might delve into the advice side, for example, and then you’ll start to get into more specialized things with planning software, workflow, CRM, etc. So I think you’ve got to have some guiding principles, probably right over the top of those guiding principles. Do you want to be completely cloud based? Right, you will get into issues such as security, I mean, the number one thing on all my risk registers with the firm’s I chair these days is data privacy, and cyber. So that’s yeah, that’s going to be a core requirement over the top capability, quality, ease of use, these will all come in to your selection criteria, I’d say they’re probably more broad or brushed criteria, then as you get into your more specific applications, say, CRM, for example, that will really depend on your business, it will depend on the client you serve, what you feel you need to capture, you will develop a criteria for that. And there’s heaps of CRM options. I mean, do you need the Rolls Royce Ferrari CRM? Or do you need something a bit simpler. And that will be a function of your business. So bottom line is be very purposeful with your technology decisions, start with the client, then process, then technology, develop a top down criteria, consider enterprise level and consider the parts and then same, as I mentioned before, then go through your selection criteria. That’s sort of the order of events that I would recommend.

Shan Chung
Excellent. Yep, great structure there. We’ve seen examples as well, where a business leader has exercised good change management by bringing a tech savvy member of their team into that process of testing their selection criteria. And they were looking at a particular piece of software. And because they were quite granular about what they needed, from a flow of, of process point of view, they actually found a deal breaker piece of that software that didn’t allow them to move forward. And that allowed them to, to call that one off. And you know, that they said if they had implemented that it would have been an enormous waste of time and money. So having that criteria really clear. And in some cases, granular, you really want to test as well, don’t you?

Fraser Jack
Hey, Tom, can I throw something in there too? I love the fact that you’ve got that those guiding principles. And I think safety, as you mentioned, that security is an absolute, I used to come from the school of thought where I love the shiny stuff as well. And And these days, I’m very much on the other side of that coin, where like, yes, yes, granular needs to work, but it also needs to make sure you keeps your clients data safe.

Tom Reddacliff
Absolutely. I think it’s a back to basics approach, probably two other things that I’d add on to what you both said is, if you are considering using a provider, and it’s going to be a major part of your business, there’ll be colleagues you’ve got or the probably use that or have checked it out, get the Intel this is where it’s, I think very early part of a community, what self I’m self employed, right? Self Employment is, can be a lonely world. So I think if you can be in variable communities, this can help with stuff like this, because other people will probably use it. The one thing I left out before, I just want to add in as well, data, we talked about some valuable assets and people I think are the most valuable asset in your business. But I’ll tell you one, that’s not maybe second or third data. And if you haven’t got your data cleaned, it’s very difficult to implement an effective and efficient technology solution. So what I see with clients that have got issues with their data, there are specialist providers that clean data, but you know what the best one is, they send the data out to the pods and go, guys, next time you speak to clients, update this, cleanse this. And actually, they do. I know it takes a bit of extra time, but they do a good job. So the quality of data data is an asset, I cannot emphasize enough, there is no technology solution you will implement with poor quality data that will work, you have to clean your data up.

Fraser Jack
So Tom on there, that’s probably sounds to me like that’s a BAU, then that’s inside a pod that to every time every time not just not just a one off, but it’s a Bau ongoing every time check the data, check the data.

Tom Reddacliff
Absolutely. So and and if you’re out there, and you’re a general manager, or CEO of a business, shine a light, and you’re concerned about the quality of data, well make it part of the KPIs of the pods to do something about that, because it’s a really important asset for your business. So that’s something that a leader could drive, and, you know, put some put some reward, but put some accountability behind that as well.

Shan Chung
Yeah, that’s, that’s a great tip. We’ve also found that where you keep the data is obviously pretty important. And so one of the guiding principles fan firms have used in the past is we own our data, we have control over it. So we’re looking at a new system, to what extent does that system allow us to move the data around, in and out. And also, if we were then to turn off that system, to extract our data. And, and many firms even just have a data storage hub, from which all other systems move in and out, as opposed to putting it all into a particular CRM, for example. And that makes the life a lot easier as time goes on?

Fraser Jack
Can I throw one more thing into the mix there, when it comes to data, obviously, that we know the privacy principles state that you know, they want data to be kept on in Australian service. And just on technology, there’s a lot of pieces of technology out there that might transcribe something for you, or might make a quick and easy video, but it uploads it on to servers that are in the cloud. So you know, my tip there is just make sure that if you’re uploading something to or using a service that the that it’s you know, where the where the data is being stored.

Shan Chung
Good call. Good call. So, Tom, we’ve recovered off those three, three buckets. But I know you got a lot of experience what what happened, we talked about that you think we should throw in the mix, when it comes to building a scalable operating model?

Tom Reddacliff
Well, probably one thing, that is what I would call the wobbles what you what you will find, yeah, we talked before about, so it could be a business going from one to a $1 million business trying to be a two or $3 million business. That’s an inflection point. It involves more people a bit of forward investment. It could be, as I said, five to 1010, to whatever your goal or aspiration is, if it involves quite solid amount of growth or significant growth, you will get to a point where you go, gee, I’ve got a Ford invest, do something here, that’s a wobble. Because you’ve got to take a leap of faith, employ someone put a bit extra face cost. Now what I would say is, the reality is you can’t grow unless you do that, you will hit those inflection points. But the best thing is have you visioned out what the next wobble looks like. And what that will guide is, I think you will Ford invest better, and you will prepare yourself and your people better for that next stage, it will be more that the vision will be clearer. It’ll be more structured, more planned. But don’t underestimate the wobble. And I know what it’s like, as well. We are investors and oncall. We put our money into things. So I know, I’m not just a consultant. And I know what it’s like to get your wallet out. But I don’t think you can achieve the sort of growth milestones I’ve talked about unless you do

Shan Chung
couldn’t agree more, especially the time like this when growth is everywhere. Those those investments will pay off. Yeah.

Tom Reddacliff
The other thing I see a lot of I mentioned before is I do see more and more businesses now that are embracing the integrated financial services model. So they might be currently in financial planning, but they’re looking to add mortgage broking on the might be in accounting and financial planning looking at mortgage broking or vice versa. I’m increasingly seeing more of that. So I think that’s a really good aspiration. But it’s a very different business model, and it will test. So in terms of growth ceilings, part of your growth, aspiration might be to build a model like that. What will be tested is your connective tissue between them. It will test culture. I think it’s I’m a huge believer in that model, but it will present a test of connectivity and culture. And that will be another growth ceiling that you should consider very carefully as well.

Fraser Jack
Yeah, well, thank you. So, so many things, so many great things to touch on there when it comes to scaling businesses, which is again we’re scaling keeping the the high touch the high level of service hub. It’s incredible. Gentlemen, thank you both for coming on. Just a quick few of my highlights really, you know, starting with the measurements, Tom, I think is an incredible thing. You know, like, quite often we skip that part and, and go straight into trying to solve the problem. But until we really understand what we’re trying to solve, I think it’s really important. Obviously with, you know, productivity, you know, with the people, the culture conversations, we had, I think, a vitally important and we could probably have that conversation ongoing. Outsourcing is obviously a big part of what we covered in technology. I feel like we get to do just about do a podcast on each one of those subjects. But I think it’s what we covered today was was really great. And I’m, I know that people will have questions and want to have, you know, further conversations on this and just if they do, Tommy might start with you. If somebody wants to reach out to you and continue this conversation, what’s the best way for them to find you

Tom Reddacliff
give you my email address? That’s T Radcliffe, T R Edd, AC li double f at Encore ag.com that are you

Fraser Jack
hip? So encore ag.com. They use the website if they want to check you out. Yep, that’s the website as well. Encore. Thank you. I’m sure people will be reaching out and and Shan, what’s the best way for people do reach out to you in the van program? If, if they want to continue that conversation?

Shan Chung
Yeah, they can head to maquarie.com.au forward slash van VPN. And that’s a program runs for 18 months. We go deeper on topics beyond scale and growth and allows you to share with your peers you know, Tom mentioned that great point that you’ve probably got peers who are using software that you’re looking at. That’s one great example of what happens in Van they often go into state and do road shows and go into each other’s offices and actually look at this in person so you can create some really genuine connection. So website but also if you just contact your Macquarie BDM they can certainly help you out with that.

Fraser Jack
Thank you gentlemen, I really appreciate your bringing the value to this, this blueprint for the successful advice firm series.

Tom Reddacliff
Thanks Fraser.

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