June 1, 2022

The 12 Steps of a Managed Accounts Journey #2 – Transcript

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The 12 Steps of a Managed Accounts Journey

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Fraser Jack
Hello, and welcome to this topic series about the 12 steps to implementing managed accounts into an advice business. My name is Fraser Jack. And in this episode number two of four, we cover steps four, five and six in the change management process. In step four, we discussed having a strong value proposition and also investment philosophy. And step five, we think about what our clients really want. And in step six, we lean into the perceived objections from the point of view of all stakeholders, there is plenty to discuss in these three topics. So strap yourself in and take some notes, this episode. So we’re talking about step four, right now, when we’re talking about the value proposition and investment philosophy. And this is obviously a massive decision when it comes to a business plan and setting these things out and working out. You know, who do you want to be? And what do you want to stand for? Talk to us a little bit about your process that you went through when you set up the business or when you’re having ongoing conversations about what your value proposition is to your clients? And how do you then? Or how did you come up with your investment philosophy as well? Yeah, sure.

Simone McMullin
So we bring the best ideas to our clients. So we help to demystify complex issues. So we feel that we were acting as the head of a team of people that need to assist our clients to take action in all areas of their financial affairs. And they tend to neglect these areas because of lack of information or lack of time. So we put ourselves at the head of that team of people that bring the best solutions to the client. So our investment philosophy is really consistent with other service areas that we offer. For example, on the estate planning side, we create the estate plan, we document it, we highlight the issues and concerns, we flush out the family tree, but we don’t write the will. It’s very similar to what we do with our investment pieces where, you know, put ourselves at the head of the asset allocation discussion, the risk profile, the goals, what we’re what we’re planning for, but then we don’t choose the underlying investments. So that sort of quite that approach is quite consistent with all areas of advice that we look at for clients. Yeah, okay.

Fraser Jack
So that consistency, I think, is a really good thing as well, like clients see you that you’re the you’re there to help provide them with the information on their journey, and solve the problems. And as you said, demystify the complex issue, I love that term, bringing the best ideas, as you were saying that I was thinking of Captain or coach of the team as you should. And so they tell us, then, what, how do you explain your investment philosophy to them? Like, it’s like, you’re saying that, you know, you bring the good ideas, but what does the business philosophy mean? Or the business’s investment philosophy mean to the client? Or what? How do you explain that to them?

Simone McMullin
Sure. So the first part of that for us is, it’s really important that each client goes through an education process and gains an understanding of, you know, where they’re coming from, and also where we’re coming from some very important investment principles. And that’s regardless of whether you’re dealing with a very sophisticated financially literate client, or a client who’s, you know, in the very early phases of their, of their sort of wealth journey and tend to be a little bit younger. So we’ve got a quite a highly structured process that takes clients through that, that conversation, and that understanding. So we don’t, or we don’t start with a managed account solution in mind, we might end with that. And that’s really important for us in terms of delivering the right outcome to the client, and also making sure that the client file demonstrates a really sound complaint by its framework, and that the advice is driven by the client with input from the advisor. So that process is the same for every client, and then the end solution in terms of whether they’re best suited to a MDA and SMA, or an industry fund that that is the outcome. So each discussion is different. But we still have a set process for that.

Fraser Jack
Yeah, that’s really interesting. So the you the process, depending on the clock, I just want to go back to one step, that indication process you mentioned, how do you go through that? Is that something that you sit down with them? And you have just conversational? Or is that something that, you know, test them on a little bit? Or are you looking for certain things or topics that they might be, you know, missing information on.

Simone McMullin
So it’s quite structured. And I think COVID helped us in a lot of respects with this, because we developed a slide pack of about 45 different slides. And what the advisor then does is tailor that, you know, there’s some mandatory ones that we all need to go through, but then the rest of them can be tailored to where the clients at at that particular point in time. So it was important to us that we have a consistent message across all the annex Wealth Advisors. And so building that slide packet took us a lot of time, but we felt that it was important to make sure that the key messages are getting across. And then from there, we’ve developed a question set, and we’ve integrated it into our risk profile questionnaire. So our risk profile questionnaire is sort of six pages long, there’s a lot of space for free text for the adviser to write, and then for the client to engage with that and add their comments. Because we just feel that that’s the only by asking questions. It’s the only way we can extract information from our clients, rather than just us. Downloading all this information via the slide packet needs to be a two way communication.

Fraser Jack
Hmm, interesting. So so that your the question set then leads to what slides might not meet, it needs to be presented? And do you do that? Obviously, you probably wouldn’t say we’re going to do some education today, you would probably come in and say something like, you know, we just wanted to run through some of the things that we talked about a lot, make sure that you can understand them or what’s

Simone McMullin
definitely, yeah, that’s right, exactly. The clients are positioned at the start that it’s not a first meeting to SOA presentation process, we we certainly are looking to take clients on that journey. So we may have two or three meetings before we actually get to the point of positioning the advice and the engagement with the client. So they are aware of that upfront. And yeah, there’s there’s certainly room for reflection coming back. And and looking at that. And we felt that was really important. Looking at the fasciae standards is just one One example is how do we document that clients are understanding what it is that we’re doing, and and how we’re going about it. So a bit of it came came from that we’re already naturally doing some of that. But then when reflecting on the first few standards, we felt it was important to take it to the next level and be able to document the client’s understanding in terms of what we’re asking them, but importantly, what they’re saying to us.

Fraser Jack
Yeah, and I guess that loops right back into the conversation around demystifying complex issues when you mentioned your what you do as part of your value proposition to Yes, Dave, thanks for joining me, again, we are talking about value propositions and investment philosophies. Now, these often come out of history and experience and those sorts of things. And you’ve already mentioned that you went through a fairly traumatic experience at the beginning of your business career, starting at a peak and going straight into a GFC. Let’s let’s go into the investment philosophy and value proposition. How did you come up with that? And where have you landed on those those things?

David Moloney
Yeah. So we started probably five years ago, we had some deep thoughts around what we thought was appropriate. But partnering with our NDA licensee, and, you know, several consultants, and a few trusted individuals in the professional advice space, we came up with an investment philosophy that really resonated with our clients. And we thought that could stand the test of time. So we’ve always been massive advocates of strategic asset allocation. I think everyone within the financial planning space is one thing though, we did want to have was something where there was a tactical overlay, right, where clients could through the investment journey, have a process where they were risk on and risk off. So we built that into our mandates. And that’s been a process that’s been completely invaluable. And what we’ve found is clients are more willing, even when there is turmoil, especially, especially around now and a couple of years ago, they’re more likely to stick to the journey which is the main objective,

Fraser Jack
you’re exactly right, and certainly stems out of the history of the business. Talk to me talk to me in the last section, we talked around the idea of articulating being able to articulate your investments, or anything that you do, clearly. And so I think this is a big thing that advisors have worked on a lot lately is how do they articulate what their value proposition is? And how do they articulate what their investment philosophy is? What took us about that process for you and how you went through it and where you landed?

David Moloney
Yeah, so we created three components to our investment process, which was really robust strategic asset allocation. So getting the right modeling the right data, and trying to map that out over a 10 year timeframe. So put a lot of inputs into that whole process. And as we will understand that that’s a big component that drives long term returns, and also risk as well. The other component is obviously, the tactical overlay. So having a dynamic process that actually allows us to go outside the strategic asset allocation, not only to potentially cushion the downside, but also try to optimize the upside, if possible. The other component is obviously, manager selection, we use managed funds in our investment process. You can use direct holdings if that’s what you prefer, but to our demographic, it’s managed funds. And we obviously have a process around manager selection. And we’ve engaged and as a consultant that conducts all the manager visits, and does that grunt work for us, and gives us key recommendations as to who we should include into our investment program. So they’re the three key components that we landed on. But importantly, that’s clear. And that’s something that we can articulate to every single one of our clients. And everything that we do in the investment process, all our communication, all our timely insights, that are event driven, we can communicate to our clients to say this is what’s ultimately happened to you in this environment. This is where we see things going. It’s not a generic bit of communication. And it’s something that the clients really value and it filters out all the noise in the marketplace at the moment, a lot of people read stuff out there. But they can distinguish that what we’re talking about is actually tailored to what is important to them. So that’s a really important thing there. Each year, we obviously release our strategic asset allocation paper where we update our figures for the next, you know, 10 years. And that’s a big white paper that our clients really get a lot out of, and it’s something we can continually speak to. It also allows our clients to focus on their medium to long term goals, they are in a particular investment program for a key reason. We’ve got a 10 year lens, let’s keep our eye on that objective. So all these things all communicate to each other. Whereas in the past, you know, we were very reactionary, the inflation pace, we brought this up this time last year, the growth to value transition, you know, we implemented that, you know, roughly nine months ago to six months ago. So all these things that we kind of bring up, we then implement, and the clients say this is exactly what we spoke about. So this reactionary response just isn’t existent at the moment.

Fraser Jack
Yeah, well, that’s fantastic. So obviously, that requires developing a little bit of collateral, you know, around your around your Northstar around what it is you stand for. But then also, you just mentioned the the SAA paper, which looks at that 10 year into the future

David Moloney
spot on. So it’s something where we obviously try to see what the long term return and risk expectations are, across all our portfolios. So a lot of work with our team is put into that. The process is extremely scientific, it’s not something where people just plot or pluck numbers out of nowhere. There’s a whole range of simulations and inputs that go into that. There was also a bit of art to that process. It’s not just purely science. Importantly, though, it’s something where the work is done. And we’re really making informed investment decisions.

Fraser Jack
Yeah, well, it certainly shows you clients that you stand for something and and if you’ve got enough stuff in there that most of it comes true at some point, doesn’t it?

David Moloney
Well, that’s right. And this is the other thing, right? We obviously track our decisions. The transparency of all this can be brutal. But I guess that transparency and that honesty with our clients is really appreciated. But the track record at the moment seems to be we’re running at about 65% of decisions are good ones, so on We’ll take those odds.

Fraser Jack
It’s really interesting, isn’t it that, that you lean into the concept that not every decision is going to be right. And when it’s not right, you turn around and you say that we, you know, this was a, as you mentioned earlier, best idea, it was a good idea at the time, it’s probably not a good idea anymore. But it’s not something that you shy away from you sort of lean into that concept and go right, you know, we did get a whole lot, right. But of course, we’re never gonna get it. All right,

David Moloney
exactly spot on. And it’s a humbling environment that we’re in. So I think the best thing is to be upfront about it.

Fraser Jack
Mel, welcome back to the conversation, we are talking about the big chunky investment philosophy, we’re talking about value propositions and and once we work out what the business is going to look like, we sort of need to start chunking down into what are we going to stand for? What is the what is the value that we’re going to provide to our clients? And what is our investment philosophy going to be? I’m sure you’ve seen they’ve had these conversations a million times with advisors? Yeah,

Melanie Bennett
absolutely. This, this step actually can sometimes end up quite large, it can end up quite small, I think different people are on different journeys of how documented and define their investment philosophy is, you know, I’ve walked into advisor practices who give me the handout of the value proposition and investment philosophy. And so, you know, we just want to replicate that with professional support, versus people who are, you know, actually violently opposed to each other’s opinion within the one practice? So it’s really interesting.

Fraser Jack
Yes, that’s gonna be tough, right? If a practice has different, completely different opinions,

Melanie Bennett
they do. And the especially the, you know, the staff that work there, it’s, it’s more challenging for them. But again, you you’ve really got to tackle that head on and go, Well, are we going to have two different investment philosophies within the firm? Or are we actually going to align, and you really need to know what this investment philosophy is? What do you believe? What do you stand for? And what do you want to give to your clients? What service do you want to provide them?

Fraser Jack
And on that investment philosophy, if somebody sort of is a little bit each way? What do you what are your What are your suggestions around that? Because it kind of you kind of need to have a strong, strong belief, don’t you?

Melanie Bennett
Yeah, I think I think some people can be swayed, it’s an it’s not the norm that I’ve seen, I think where you get more more of the challenges in this space is people want sometimes want someone to tell them what an ideal portfolio is, whether it’s active, passive, whatever it is, whatever, whatever the philosophy is, however, they want to be able to add and change little bits here and there. Because they think something or want a bit of cuteness over here that they want to add in. It is rare that you have two completely opposing views within one firm, but we’ve had that. But you do need to firm up your philosophy. And you do need to work out what that client proposition looks like.

Fraser Jack
And, like, if you were sitting with somebody, if you sat down with a business, where do you start in that space?

Melanie Bennett
Yeah, it’s first question is, do you have a defined investment philosophy and watch that conversation go from five minutes to an hour, and then actually asking for information sometimes about what their portfolio looks like? Because I think sometimes people and again, a lot of this process, you’ve got to be really honest with yourself, I can have an investment philosophy and my, you know, ideal kind of portfolios, etc. But every client looks wildly different, because I’ve never kept to it because I keep changing my mind. And that’s okay. But we just have to be, you know, clear about that. So just sitting down and going, like, what do your portfolios look like? Now? Do you have a defined investment philosophy, basic questions, actually passive, your involvement levels, all those kinds of things? You know, show me your Soa, what’s in there, there’s got to be something in these 100 pages, we give out.

Fraser Jack
This belly a lot in there. Yeah, one of the one of the ideas around the investment philosophy that I like to lean into, is that fact that it’s a bias, right, it’s a bias that the adviser is based on their experience based on their beliefs based on the values based on, you know, fundamentals around, you know, looking at research and understanding how markets work and understanding what has typically done well in the past. You know, although past performance, yep. I think the idea that I that I find really embracing is that people will lean into that bias and say to the clients, this is a bias I have based on my experience, I believe these things, not necessarily they are 100% True, but I believe in them.

Melanie Bennett
Yeah, I would agree. I would agree. But I would also say that, you know, within the process of managed accounts and professional investment management, those beliefs can change. You don’t have to be wed to a belief that you had you know, I think we often get wed to this belief we haven’t we’re too scared to change it but you can broaden what that view is change it, add it and mix it so you know, with professional input, your investment philosophy and your beliefs, my might change a little bit, your views of the world right now might change a little bit, you know, you, you might not have previously thought the markets were volatile enough to generate huge alpha in spaces. Now you might think they do. And that’s okay.

Fraser Jack
Yeah, exactly right now. So the vestment philosophy is one thing that that we just sort of skipped over. And I’ll come come back to it the value proposition side of this, and the value proposition around where do I add the most value to my client? It sort of is that concept of maybe, maybe my role is not as the investment advisor?

Melanie Bennett
Yeah, but then what is your role? And what and what do the clients value? And then looking at, okay, because often, it’s really interesting, because sometimes you’ll go into a practice and you know, they’re great, because everyone’s really open. It’s really collaborative, but like, you know, what is your value proposition? But then how much you actually getting to do that. So a value proposition versus what they’re actually doing can be really different as well. So the value proposition A lot of the time doesn’t change too much, because they’re not doing it right now.

Fraser Jack
So why would that be? Is it because they just have too much else going on? Or are they actually just maybe they don’t believe don’t believe in their value proposition with the template, there’s enough value in it,

Melanie Bennett
I think capacity systems processes, tech compulsion to change to get to there. And just knowing as well that it can be done, or changed better than they’re doing it right now. But just not having the ability or the capacity and time to get to it.

Fraser Jack
What are you seeing with when you know, some great practices that you work with, with their value proposition that they can clearly articulate what sort of value they bring to their clients?

Melanie Bennett
Do I mean, it’s segmentation is one thing. So when I see a well defined value proposition, they’re clearly defining not what you give to the client, but what the client receives from you. So it’s done in the client lens. So you will get x y Zed from me, or you will feel x y Zed. For me, this is how I’m going to deliver it to you. These are your different options. So it’s the clients view, instead of the advisors view. And then behind a good value of value proposition is very clearly defined, in my experience is very clearly defined segmentation, there’s not much scope creep between the segmentation because that’s how you can be a lot of clients won’t mind too much. If you say I’m going to give you X Y, Zed, this is how much it is, you know, you said you wanted blah, blah, blah, this is how I’m going to give it to you. That’s fine. But as soon as you stop doing that, that’s when you get the friction. But if you start creeping up in scope, as well, you’re taking from someone else. So you’ve got to have those really clear defined segmentations and what the value is of each of those services. And then the only other tip, I would say value proposition be, you got to be really unbiased in what you think the clients actually want? And yeah, that’s challenging. Like, how do you mean by that? So I mean, I think you could ask, probably, well, you would know best. I mean, everyone, I’m sure would say to you what the value proposition is around, you know, clients want communication, they want easy to understand documents, what do they want? That everyone’s probably got a very similar list of that. And that’s not necessarily your value proposition.

Fraser Jack
No, I 100% agree. And I really loved that the way that you mentioned the client, putting it in the client words, making the client, the hero of that journey. It’s not about what you’re giving, it’s about what they’re receiving, and the perception of what they’re receiving and what they value. So, yeah, I would say to people, you know, ask the client, what was the benefit of that? What was the emotional benefit from, from uncertainty to certainty from, you know, like, what, what are the intangibles inside of that value proposition that you can? You can, you can, you know, take them from, you know, we’re doing this, we’re taking a complex structure, and we’re turning it into into simple terms, or that’s, that’s what people value about us, you know, it’s not about what we’re offering. It’s about what they their interpretation of what they receive.

Melanie Bennett
And are we making them feel more certain or less certain, in the way we’re interacting with them? Right. I mean, I feel more uncertain about a situation when someone I deem as an expert, is talking to me in a way I don’t understand.

Fraser Jack
And you mentioned clearly defined, see, like, clearly defined role, clearly defined segmentation, which I think is great, too, because it’s, you know, anything that, as we said before, anything that’s sort of confusing, it’s just really hard to make decisions. Yeah,

Melanie Bennett
it’s hard internally. And it’s hard because it does you give more to one client. And there’s often a lot of practices who say the top end props up the lower end. And I just think that’s thinking we really need to challenge,

Fraser Jack
Tom, welcome to this step four of our process or change management process. Talk to us a little bit about step four. We’re talking about investment philosophies and value propositions. I bet you’ve had many, many conversations with many people about what their investment philosophy could be. Tell us a little bit of those conversations.

Tom Schubert
It’s interesting. I think there’s probably a lack of understanding about what a true investment philosophy is potentially in the market. And I think, again, early stages of the managed account journey for a lot of people, there’s a lot of consultants out there that deliver the value through trying to help an advice practice articulate what an investment philosophy is. But a philosophy is one thing and a holistic investment services and other some observations around the Australian market, I think there’s been certainly a somewhat of a code of value for a period of time due to some large sort of movie star fund managers that have potentially indoctrinated advisors, I’m not sure that the rest of it is necessarily grounded in their their strong belief. But really, what we’re trying to achieve here is get clients and advisors to essentially refocus themselves back on, you know, asset allocation. That’s what we do. As a business. We’re asset allocation experts, and specialists. And really, what we’re trying to do is have, you know, the client ultimately is trying to achieve long term objectives. And it does so through a diversified portfolio that their advisor aligns with them. And if we get back to the basics, that asset allocation, but is the primary driver of returns over the long term, then really, it becomes less about, you know, the nuance in the philosophy and whether that means you low cost, you know, passive versus active or value versus growth, or it really comes back to what is the best, you know, Portal growth portfolio, a balanced portfolio I can build for my clients, but, but more broadly, a managed account as a service should enhance engagement, it’s a transparent structure, I should be looking for, you know, strong reporting, strong client engagement, and everything that comes with that service, not just, you know, the investment outcome necessarily. And so really, what we find is, unfortunately, a lot of advisors or advice, practices have gone back to the beginning, and are really trying to recreate a service from the ground up. And unfortunately, it takes a lot of time and a lot of resources to build a true investment philosophy and process and the systems that go with that. And then all of the regular reporting and insights around that. And so, unfortunately, you know, there are different ways to do this, right? You can you can go to market and adopt somebody else’s. And I think, absolutely, that’s fine. And certainly the clients that work with us come along and say, Well, you really thought about this, you thought about a way in which we can deliver the holistic service and actually want to adopt our philosophy so they can get back to again, focusing on what they’re good at, and what really what their clients want in delivering the technical and ongoing service and advice.

Fraser Jack
I find this is one that advisors struggle with a little bit because often can get down deep into the weeds when it comes to investment philosophy and get a bit too a bit too tactical in that scenario, versus the higher level strategic idea of what that might be. And, and to have that I guess we’ll just start with that larger umbrella of what that, you know, the philosophy could be in in a in a in a chunked up bigger picture view. Without getting too stuck into the weeds there. Do you find that sort of there’s a whole level hierarchy there are different where people just die from one to the other?

Tom Schubert
Absolutely, absolutely. I think partly, it comes back from the, it’s a bit of confusion, like what is the investment philosophy, I think, because of the traditional advice process has been driven around, ultimately a sales process in a way, like, if you have an idea, whether that’s to change a fund or an asset class, it’s usually driven, you have to sell that idea to your clients to get them to adopt. And I think over time in Australia, you know, a lot of the solutions have been provided by you know, traditional research houses, which are sort of bottom up fund research houses. There’s a cold of this movie star fund manager. And we’ve seen the downfall of one of the biggest ones have recently and so advisors have sort of, in a way, their investment philosophy has been around picking the best manager, and you know, really backing them and standing behind it. And I think unfortunately, it’s sort of the portfolio construction, and then the asset allocation piece has sort of been not forgotten, but it’s been pushed to one side over time. And, again, back to Manage Accounts, if we do believe as the research suggests that asset allocation is the primary driver of returns and actually getting away the beauty of a managed account is it’s a holistic portfolio, and we can get away from that sales process around we’ve got to buy the next movie star fund manager and get back to what are your long term goals and objectives? And what is the best portfolio to give you the best chance of achieving that and I think that really changed the game for a lot of our clients and means that they’re away from that sales process less focused on the line item and getting their clients to essentially focus back on you know, the objectives and the outcomes of the portfolio and that’s really what’s most important.

Fraser Jack
Yep, yeah, I couldn’t agree more that the the and sometimes that philosophy does include some emotional aspects or some beliefs or some, some past experience, as we all have been through certain parts of the market ups and downs so I think it’s difficult to sometimes sit back and let your emotions as to once I’d for a little bit and just look at the the numbers and then work out what a good philosophy would be from a practical, logical point of view. Tom, thanks so much for coming on this particular point, we look forward to catching you when we dive into step five. So thanks for joining us again, in step five, where we’re talking about the client, and specifically what you know, clients want out of an advice relationship. Tell us what are your clients want,

Simone McMullin
okay? We feel that clients want outcomes, so that they’re obviously looking at the bottom line and what outcome that they’re getting. But they also want the truth and transparency. So we believe that that we provide that to them, but they want us they want their advisor, we believe to be focused on strategy, and also focused on the relationship. So when it comes to what we can do for them, we believe that they’re expecting us to do the research in terms of what is the best, as I mentioned before, the best ideas that are available, there have an expectation that we do the research around that and then bring to them, what are the best outcomes available in the marketplace. So our clients are time poor, and don’t have the ability or the knowledge to do that for themselves. So they’re expecting us to do that across all facets of, of the advice process?

Fraser Jack
That’s really interesting. The I really like the idea of best ideas to you mentioned that when we talked about value proposition, but best ideas doesn’t mean best investment or best risk policy or best, its best ideas. It’s certainly, it sort of takes the pressure off a little bit, doesn’t it? It does, but that also

Simone McMullin
changes over time. So I think, speaking to other advisors around transitioning to managed accounts as an example, we can sometimes get bogged down in, but I can’t go out with that story now. Because five years ago, I told my client that, you know, the multi manager approach, or this was the passive investing, that was the way to go. But I think clients are expecting us to evolve as things evolve. So as technology evolves, as products are innovated, they’re expecting us to be really on top of that, as well as on top of the strategies and the changes in government legislation. So I think that that should just become a part of a normal conversation with the client that here we are, again, there’s a new there’s a change, there’s something that’s that’s happened that’s evolved, and let’s talk about that, and whether that might be suitable for you.

Fraser Jack
Yeah, so best ideas based on current conditions? Not, not some promise you made six years ago?

Simone McMullin
Yes, exactly. Right. And staying staying true to that and holding on to that is, is doing the wrong thing by the client. Because, you know, if we do that, it becomes almost an ego. For me, it becomes an ego thing that I need to attach myself to this, because that’s what I, you know, I associated myself to that. So I think just just removing that and understanding that, that things change and things happen. I think that’s giving the client what they would expect.

Fraser Jack
Yeah, certainly, certainly leaning into that concept of we cannot predict the future, and sometimes the best ideas will be wrong. Yes, yeah. Really good. Really good. And energy mentioned before relationship, you know, is is a huge part of this, you know, truth, transparency and trust. So it’s really is that long term, as you mentioned earlier, that really that long term relationship that you’re looking for? And I guess that’s what you and if that’s what you’re looking for, you’re finding clients that want that to? Definitely. That’s right, Dave, thanks for joining us, again, we’re in the process of having a chat about what clients want or, or get out of a process. We’ve been through your process, you’ve got some pretty great collateral that you can talk to your clients about. But apart from the collateral, tell us what else your clients get or want out of their relationship with their advisor.

David Moloney
Yeah, so obviously, the investment piece is being taken care of. And we can communicate that extremely well. If for whatever reason, our client is off track, we’ve got actually the time to do the strategic things. And that’s where we see advice really playing an important role. And obviously, a lot of people say that as well. We spend more time on the strategic piece, doing things that we can make a real tangible benefit to our clients, whilst the investment piece is running in the background. Of course, the client really wants us to understand that and have a good grasp of that, and they want to feel connected to that. But the efficiencies, engaging the right professionals really does free up our time, we’re spending less time doing things where we’ll struggle to add value, and focus on the areas where we can add value. So that’s been really important for our clients and we feel it is hard to quantify it in a lot of we operate in the dark arts a little bit. So it is trying to create tangible value to our clients can be difficult to articulate sometimes, but having greater conversations about what’s important to them has really been a big part of I guess, continued success.

Fraser Jack
Yeah, exactly right. I love I love the idea of creation, creating intangible value, more so than just hands. for pelvic and I really liked also what you said around our clients want to connection to something, you know, I think that’s that connection is certainly done on a human to human intangible level. Yep, spot on. Tell us a little bit about, you know, you mentioned transparency, do you begin conversations with clients around that just want low fees, or all those sorts of things?

David Moloney
We do? I think everyone does. So it’s not for everyone, let’s, let’s be clear. So we do have solutions for someone that is extremely low or cost conscious, we do have solutions for that as well. And you can run managed accounts in a very low cost environment, if that’s what you want to do. So that is something we are thinking about potentially having a solution for that space. But in the meantime, you know, we do advise on there’s plenty of quality solutions out there for cost effective portfolios. And if clients don’t want to engage us in a more larger investment piece, then you know, that that’s fine. So be it in saying that though, the beauty of the managed account space is that transparency, and when our as a consultant is able to negotiate a fee rebate that does go back into their account. And they see that hit their account, so that they love that. And they know that when we are engaging a fund manager, we are trying to get the best possible outcome net of costs for them. So in our typical investment program that might have, you know, 15 or so, to 20, managed funds, roughly 12, at the moment would have some kind of rebate negotiated with them. Part of our investment process is to include some index options as well. So we’re not 100% purely active, we do adopt a bit of a core satellite approach as well.

Fraser Jack
Mel, thanks for joining me, again, we are talking about the client experience and what clients really want. We sort of touched on this in the previous chat where we talked about the value proposition. But tell me what you’re seeing in regards to when you speak to advisors about what their clients want from the relationship.

Melanie Bennett
I think, just in the last few years, I think advisors have ended up challenging themselves in a COVID time about what clients want, as I think this is really a very interesting space to be in in the last six to 12 months, because I think this is changing i My experience has been advisors are breaking their own perceptions about what clients want. I think the ones that I’m seeing doing this really well, instead of focusing on the medium, or the delivery, the delivery method and what they’re delivering, is kind of what we spoke about in the last episode is how does that make the client feel? So does the client want on demand updates on the market? Because they’re feeling uncertain with the swings? Do does the client want to keep a level of control with constant, you know, portfolio updates, or the perception of constant updates? Like what what are we trying to achieve with that our client communication? And do they want you as an investment manager? Or do they want you managing and being the governance across all of their effects?

Fraser Jack
Yeah, it’s really interesting there because, you know, when clients want communication, is there is there obviously asking him as the number one and working out for them, what’s what’s good for them? But is there a, you know, can you over communicate the clients? Can you give them too much?

Melanie Bennett
Yeah, I’ve seen I’ve seen firms. There’s actually an amazing firm I worked with then, with the most incredible marketing and communication kind of framework set up but almost just went a little bit too far that it almost became spam. Right. And amazing segmentation exercise for them was bringing it back. And they actually ended up with personalized phone calls. As part of the segmentation, the internal segmentation offering and it wasn’t, the client gets to call you twice a year. They had tasks to call the client. Just check in Hi, how’s everything going? This is what’s been happening just Hi. I wouldn’t nice touch that. I definitely think you can go too far. They brought the pendulum back really quickly and then added in some very personalized touches in there wheeled back the the high marketing and that got amazing results as well.

Fraser Jack
It’s interesting, isn’t it the there’s there’s communication and regular and constant that you’re going to turn up when you say you’re going to turn up. But you’re personalizing it. It’s always been I guess personalizing things at scale has always been really tough.

Melanie Bennett
Yeah, I agree. And I think that’s one of the and we’ll talk about it later. One of the benefits and managed accounts right and it’s a collection of best ideas in a portfolio and the best ideas portfolio for one person could be the same best ideas for another person. So personalization touch. It’s not as high sorry, it’s not as high touch as it used to be to provide professionalized service when you have that uniformity in other parts of your business.

Fraser Jack
Yep. And how important is we mentioned technology before? How important is technology in that space of being able to look after clients?

Melanie Bennett
I don’t think you can do it without technology, like you just I am yet to see it done without a high adoption of technology and consistent adoption of technology. So, you know, every you, if you’re going to adopt one process or system and one software, you got to fully adopts, there’s no point being on to for the same thing, it’s worse.

Fraser Jack
Yep. And have you? Is there anything that you’ve seen that advisors doing really well, in that space of getting in clients to really engage with their portfolios, and really engage with their advice?

Melanie Bennett
Yeah, there’s so much work coming out recently, for client engagement, front end, digital fact finding, and all of the client goals, settings, client portals, beautiful things for the clients to interact with. And for advisors to get that information in a very quick and, and in a way that feeds straight into their data systems. So for me, there’s just no kind of excuse anymore, for not having a process like that. The text there, it works, it’s great, can be scary to try and get into it. But that’s our own biases. Again, it’s very easy with amazing companies out there who will literally handhold you through the way,

Fraser Jack
Tom, we’re chatting about step five, in the change management management process, we’re really focusing on clients and what clients want. Tell us about your experience in this and what you think you are, you’re spoken to advisors about what clients really want out of their relationship with the adviser.

Tom Schubert
In the end, I don’t think they’re looking to pick the next, you know, Facebook, or Amazon or the next big winner, I want to trust you, they trust you, they want to get the information from you. They want the communication, they want the engagement, they want you to be there and help them sleep at night and not worry about their money. It’s really that simple. And that the advisor client relationship is embedded in that that trust. And so I think that in itself is really important to these considerations.

Fraser Jack
Yeah. Now, you mentioned, obviously, trust is a huge factor. And it takes some it can take time to build trust. But obviously, once it’s built, it can be a very, very strong emotion that people have with the relationship that they have with their advisor, you talk to the stats show that, you know, most clients are all clients trust their advisors. And obviously, because the relationship has been built, talk to me about that, from you mentioned to the communication being a big part of that, what sort of things that we talked about when it comes to communication with clients, and ongoing communication or regular communication, not just having the sort of once a year meeting,

Tom Schubert
I think, you know, when we when we talk to our clients about adopting our service, at least in terms of investments, the worried essentially, that the clients going to, you know, think less, essentially of them for outsourcing some of the investment, you know, communication, if you will, and again, one of the powers of managed accounts is actually to enhance that communication. So the clients generally now have a nice app on their phone, and they can see all the decisions and you know, the activity in real time. And so, you know, we worked, we produce a large amount of regular communication, and our clients in turn sort of through our white label solution will provide that to their clients. And what we’re finding is they’re having deeper, more richer conversations with their clients on an ongoing basis. Again, because it’s coming back to that sort of holistic goal, the portfolio, the asset allocation, and how that’s aligning with their long term objectives. And so helping the advisors to set the narrative and helping them to have more regular and consistent communications is actually enhancing the relationship. Nowadays, we live in the information age, and everyone expects to hear from, you know, their service providers on a more regular basis, like having a quarterly review, and they’re not hearing anything in between that quarterly review is no longer good enough. And particularly as we get towards engaging the next generation who are used to, they want to receive weekly communications, not monthly communications. And so one of the real powers is the managed account service in that your clients have got consistent portfolio outcomes means that you can actually provide more regular and consistent communication, alleviating the burden to need to go and do that yourself. But also feeling the need that you know, and the expectation, I guess, that everyone’s got,

Fraser Jack
yeah, I certainly think from an from an advisor sitting there thinking about how can they communicate regularly with their clients on this aspect? I’m certainly thinking there’s plenty of opportunities for them to record something and send it out to all all, especially if I’ve got a lot of clients aligned in this space, but also, also I think a lot of that trust factor that you mentioned comes through in the belief that the advisor on He knows or understands everything as well on the belief that the advisor is completely 100% on board with everything that’s going on. And I guess that comes back from some of the previous conversations we had around around value proposition, what are your thoughts around the advisors and, and their belief and trust in the in the process as well,

Tom Schubert
again, come this, this whole concept of building your own or partnering with somebody else, I think is really important consideration on communication. If you want to start from scratch, you know, develop your own investment philosophy, develop your own investment service, then ultimately, you’re going to be responsible for producing all the communication, if the objective of building your own or having a managed account solution within your business, is to gain the efficiency and have more time to spend with your clients or finding clients, then you’re not really alleviating any burden for yourself. So when you are sitting back and assessing what is it that I’m trying to achieve from this, and look, look towards the partner that you’re going towards, or in our case, outsourcing and saying, Actually, you’ve got a holistic end to end service that’s got really deep rich communication, that’s actually going to give me the efficiency but also the increased engagement that I want. And so I think when you’re thinking starting out on this journey, and look towards where you’re trying to get to, if the communication services really important, I think it should be for all advisors to consider then do you want to be responsible for producing all of that content yourself? Or do you want to leverage the content that your investment partner can provide?

Fraser Jack
Yeah, I guess one of the things we would talk about clients and trust, one of the big things that could could could come that has anything to do with shock, when it comes to expectations, or fees, or anything or anything around that anything around the, you know, we were doing something and now it’s something completely different, or it’s more than they expected to tell us a little bit about that, what your thoughts are around sort of that, that shock around fees or shock around expectations, or and

Tom Schubert
certainly, I think the way the service is positioned is just an extension of what most are already been doing, but comes with additional features and benefits for the client. And so it’s really around evolution, not revolution. That’s the first thing we sort of say to advisors if you need to take your clients on a journey. But ultimately, you still got the same process and you’re really aligned to the same outcomes, you’re just delivering it in a different structure. But phase as we know, we live in Australia and the industry super funds do a great job of keeping clients focused on phase and certainly versus other markets in the world, there’s a much stronger focus on phase and the value chain has evolved. And really, what we’re seeing is the need to provide V certainty advisors we know he and I to produce a fee disclosure statement for their clients articulating all the fees and costs in involved in delivering the advice to them. And so one of the things that should be considered and that we try and deliver on is, you know, that fee certainty, so having some sort of fee budget or fee cut, as part of the process means that next year when the FDS is produced, there’s not nasty surprises, as you say, advisor and that they have that certainty. The other real ability is leveraging kind of institutional scale, an advisor at a single practice level, is unable to go out in a lot of instances and negotiate on mass to to achieve, you know, institutional pricing. So again, you know, partnering with groups such as us where we can leverage our collective scale, we’re able to go to market and get, you know, competitive fee deals, which you know, benefits the client directly. And so providing that V certainty and transparency plus the scale advantages is one of the real benefits of a managed account.

Fraser Jack
That’s one of the things I wanted to ask you about is obviously because you’ve been an advisor, and you spend a lot of time having conversations, joint conversations, I guess, with advisors directly to clients, do you think that’s something that your history of being advisor helps you be able to relate to that? What the clients are trying to get out of a conversation with an advisor?

Tom Schubert
Absolutely. I mean, I’ve sat in the chair and had had the conversation directly with clients for many years, and also been involved on selecting funds and researching funds. As part of that journey. And again, you know, observations of the industry was the sort of communication that fund managers provides to advisors often is, it’s late, it’s in the rearview mirror. It’s not very detailed, and it’s not very transparent. And so we’re, you know, we say, our clients as partners and an extension of their business. And so, you know, what we’re trying to provide is that transparency that support and insights which are digestible, not only to the adviser, but to the end client, we think that’s really important.

Fraser Jack
So thanks for joining us to chat about Step Six in our change management process. We’re really leaning into the concept here of there’s always a word of you know, but how about this or an objection or what I tend to call a limiting belief in our mind And somewhere, whenever we make a decision, there’s always a some learned behavior that we’ve learned from somewhere. We picked up something and we’re and we and we go a year. But what about that, in adopting this process or any process for that matter whether it be, you know, the going to a new license or managed accounts, talk to us about some of the things that have come up with you with the advisors, you work with? Any any ideas around? Not just image object objections, but things that popped up in conversation?

Simone McMullin
Yeah, sure. I think for us control was an element of concern. When adopting the managed account, when we moved from our previously ran managed account, it was really important to us that we had control to hire and fire the portfolio manager. So we’re not interested in the short term relationship with the portfolio manager in the portfolio manager that we’ve appointed his Drummond capital. And we’re looking forward to a really long and prosperous partnership with them. But it was really important for us to have that sense of control in that we can make that change if we want to. So when we started our own FSL, we had the choice of being appointed as the operator of the of an elven NDA. And then you need to have an extra condition to put into your license. So we had that choice to make. And then obviously, we had a choice to make around appointing the portfolio manager. So we decided to not be the NDA operator. So we solve this by appointing an NDA operator, which is full of capital. So they provide the NDA licensing. So our initial concern over control complexity was solved by appointing an NDA operator who provides us with the licensing. So they also monitor the portfolio manager, collect fees, pay the portfolio manager, etc. And give us a lot of ongoing advice and support.

Fraser Jack
Yeah, interesting. So, you know, in just just on top of that, we’ll probably get to a bit more of that later on in the conversation, but NDA operator, you also. SMA is also something that you’re offered to some clients. So you depending on the client, you will choose which one?

Simone McMullin
Yes, definitely. And that certainly flows out of the question set that we have developed. So where that client might be best suited is fleshed out through that process. So we certainly certainly not jumping to NMDA, but but we have a full range of managed account offerings.

Fraser Jack
Yep. So control was a big one for you. Were there anything? Were there any others that you sort of thought might be the case? So obviously, you’re you run your own license now was in a lot of that was taken into consideration when you you know, as a responsible manager?

Simone McMullin
Yes, definitely, definitely. So the risk management was certainly a big part of it. We don’t want advisors building their own portfolios, because of the inherent risk associated with that. So that was a big part. From the advisors perspective, there’s always seems to be concern for advisors, when they’re putting in front of clients or more expensive solution, there’s been a bit of a feeling that if I’m offering a more expensive solution, that somehow I can’t do that, that that’s somehow written into legislation that clients are not permitted to go into more expensive products or, or investment services. And that’s certainly not the case. So we had to do a bit of work at looking at that ourselves internally, and just uncover what was behind that, where, where that concern was coming from. And a fair bit of it obviously, was from the environments that we’d all been in before with the, with the compliance regimes that we’ve been part of, and just, you know, we solve that by making sure that we have a customized, tailored experience for every client, and by making sure that that is clearly documented and articulated. So we push through that,

Fraser Jack
yeah, so they focus on cost is obviously part of big, it’d been a big part of a lot of marketing campaigns over a long period of time, and still gets, you know, consumers to think that cost is the be all and end all of investing. Does that mean that if somebody is of their clients or of that belief, then obviously you have solutions for that, as you mentioned earlier?

Simone McMullin
Do certainly certainly we do if that’s if that is the overriding factor, we do have solutions that suit that but it for us, it comes back to the transparency point in that once you I suppose, open up the box and clearly lay everything out item by item by item, it is that ability for the client to see that transparency. And when you do take that and compare it to their current solution or other solutions that are available, it actually becomes a lot clearer but but being able to break that down and understand it is a bit of a skill that advisors had to had to get comfortable with.

Fraser Jack
And sometimes when making decisions like this or any decision in the business there’s often a lot of choices around and and you know the fear of making the wrong choice can often hold people back. Yep, certainly. So you got control you and you mentioned before that you getting rid of any, any any contractual obligation to stay with that person and to have the the idea of hire and fire. How important is that flexibility?

Simone McMullin
It’s of utmost simple Once as I was saying, I’ve we feel it’s important from the clients perspective, but, but also just just really important for us to be in control of our own business. We’re not looking for sort of short term outcomes, we want to partner with a portfolio manager for the long term, similar to the message that we give our clients, but, but just to have that control was was vital.

Fraser Jack
And back to the conversation, Dave, thank you. Now we’re talking about objections. And the concept of there’s always a year but moment whenever we, whenever we hear of a new thing. There’s always are is, is it new? Is it Why Why should I go there? There’s always this little thing in the back of our brains that sort of triggers up something when, when you were going through this process of, you know, transitioning your business across what what were your objections?

David Moloney
Yeah, why are we introducing this? Right. And I think that’s where the collateral is really important. And that’s why we developed our document called the portfolio project. Again, it really gave the context in the background as to why we’re implementing this change. At the time, we didn’t have any track record. Right. So that was quite difficult at the time, but now we do and it’s clear as day as to why we’re on this journey and why we’re implementing what we’re implementing. But at the time, yeah, we just had to give the context as to why we’re going down this path. We didn’t know a pandemic was coming. And we’re just fortunate that we got in there before it all did. Yeah, that’s

Fraser Jack
a really interesting one, isn’t it? Not that no track record, I guess it’s, it’s always the sort of thing in the back of somebody’s mind whenever they’re when we’re about to start something because they have to turn up to their clients and say, This is our beliefs, this is what we believe in. And we’re going to hang out, hang out, you know, our logo on it, or our brand on it. And yet the if people say, show me the returns, we haven’t got anything. So how did you get around that?

David Moloney
It was interesting, we had, we actually had to provide some kind of pseudo style portfolios, just to kind of give a bit of an idea and the flavor of what we’re trying to do. And a lot of the underlying investments that we were recommending had existing track records. So we’re able to articulate that relatively clearly, clearly. And we did explain upfront, we are building the track record. But part of our story was we wanted to introduce more transparency, and more, I guess, a way of being able to understand whether our investment process was actually adding value to our clients. So we said that would be a journey, and we would build that. But that was something that our clients would go on with us.

Fraser Jack
Now at the time he was self license. Did you have any concerns around licensing and whether that was an issue for you guys at the time?

David Moloney
Yeah, so our license, we didn’t have an NDA capability within our licensing. So what we did was engage a third party NDA licensee. It’s not just a licensee, though. Or mentioned the name finally, capital, they are genuine specialists in what they do. In terms of, they track all the mandates, they give us updated reports, if anything was operating outside of it, they are on to it, or the transactions are implemented extremely efficiently. And with a real process. So it wasn’t just someone watching and ensuring that you got best interest duty at heart, but also someone that was a real expert in implementing these portfolios. So that was something I didn’t quite understand as to what the role was at the start. But going through that now, and seeing several stressed markets in that process. They are genuine experts in what they do.

Fraser Jack
And you mentioned the concept. Before around around, you know, like, if you stop this, you want to start a new process, if you know that you might be locked in for a long period of time. How did you? What were your thoughts around that? And how did you feel around the concept of say, being locked in to manage accounts?

David Moloney
Yeah, so it was like we did create it in a way where we do have flexibility. It’s more the unwinding of a relationship that’s hard. So not to compare it to break it up with a partner or something, but it’s more that was part of the reason we loved the structure so much is that if for whatever reason you your as a consultant isn’t delivering on what you expect, you can substitute them in with another consultants. So for businesses, that’s the flexibility that I think a lot would appreciate, and it’s something that we thought we really liked about the structure. So, yes, there is an element of, you know, you’re trying to find a partner, you’re in it for the long term, but at the same time, you do have the flexibility to get out.

Fraser Jack
Now, thanks for joining me again, in this series. Now we’re talking about step six in the change management process for advisors when they’re running through, and any any sort of major implementation, including managed accounts into their business. Now, one of the steps here, step six, we talk about leaning into the concept of there’s always going to be some sort of what ifs objections. Yeah, but what about this, I’ve got this thing in my back of my brain where it says, I, you know, I have to do this, or I have to do that. Often, sometimes those things are limiting beliefs. And they’re not actually that true. But what have you seen around the space that you know, where you get these sort of things holding people back?

Melanie Bennett
Yeah, this is a great step. And when I first started working in the industry, when we first started projects around managed accounts, we actually didn’t address this. It was only in the last few years that we really lent in heavy into this space, because it was actually a real hurdle in the adoption. And people often didn’t want to talk about their objections. So changing that narrative and being really on the front foot with them saying, you know, these are some of the objections that we get, you know, let’s normalize that there are objections here and address them. And we used to do workshops with clients, you know, around working through them. So it’s not just there’s, there’ll be objections from all levels within the business. Plus, what about the clients, when it’s the clients object, this is still a new value proposition that you’ve got to put in front of your clients. So I think, you know, it’s reasonable that you should play out what could their objections be, make sure you’ve got answers for it. And that process is actually really good as well. Because by doing this with someone, you end up building really strong beliefs yourself around these ideas?

Fraser Jack
Yeah, I think I think as you’re talking, I’m thinking that you definitely need to create that safe space. Right, that right now we’re just talking about this particular step with just talking about, like, what are all the issues that people have with this? What’s the pain? What are the perceived pains? Because often we if you say to somebody, what’s the perceived pain that somebody else might feel? And then you get the pain that they’re feeling? Right? It’s easier to say, or somebody else might think that there is an issue with what what if they, what if it costs more for the, you know, to provide the service or whatever, you know, and but that’s the actual thing that they’re thinking about, but they just want to say it as in a way, but I guess that’s safe spaces is an important, I think

Melanie Bennett
it’s really important. And, you know, to your point, perceived beliefs as well. So Will my client. Now think? Well, you used to do all that? What are you doing now? Or, you know, my client actually wants to make all the investment decisions. So, for the client, but then also the advisors, you know, I picked these portfolios for the last 10 years, I’ve made these portfolios, you know, now introducing someone else, isn’t that my job? And what does that mean for my personal value proposition? So I think it’s definitely something that you need to create a safe space about. But it is a vital step for this adoption in managed accounts. And the other thing I would say is that the players in this space in our industry, are so good at helping and facilitating this step. And they’ve been doing it they’ve been working with, you know, national practices. And I’d really be keen to see advisors leaning in more to people in our industry giving anyone a call, we link people up on LinkedIn, what do you think, how did you do this? Share the knowledge,

Fraser Jack
you’re getting getting over that getting over that belief, or that objection, or that idea? And that that was a really interesting one that you mentioned here. Like if I was doing that in the past, and and now I’m outsourcing that, that does that devalue me. And that’s a really interesting thing for people to get their wrap their heads around.

Melanie Bennett
Absolutely. But that’s your that’s how you’re going to have to present this to the client. And you’ve got to do that. You’ve got to believe you, you know, advisors get to the point that there are firms that implementing a managed account, because they fundamentally believe that this is the right thing for your client base. And why do you think that, you know, changes in technology and access to these managers is now available? If that was available 10 years ago, maybe we would have been doing it then. But it’s only just available now. But these kind of conversations are really good for the practices and firms to be having before sitting in front of your clients because you are only doing this because you believe it’s the best thing for your client, but you’re on the backfoot a little bit. It’s new, it’s a bit scary. So it’s fine pitch practice together.

Fraser Jack
Yeah, exactly. Right. The whole practice together. Yeah. Everyone loves a good roleplay but which we’ll get to in a minute. But I do I do think this is a really an essential step, right. It’s a really important part of getting all those things out, understanding what the objections are understanding what if they perceived or real, understanding what the true Truth is around those like maybe that was, there’s actually a lot of evidence to be of the contrary or whatever it might be and understanding other people’s stories, and being able to have that, that comfort and security and confidence to be able to move past this going. Yep, doesn’t matter what people throw at me now, I’ve got a good answer for

Melanie Bennett
yes. And it’s, again, your beliefs. So as you just have to, as long as you’re believing and and saying that’s fine. But yeah, it’s forming your beliefs and working through the detail. It’s a new, it’s a new offer. So spend the time working through the detail.

Fraser Jack
Yeah, brilliant. That’s it. Step six, overcoming objections. Don’t skip that step. No, Tom. And Step Six of the change management process, we are thinking about some of the objections that were often come up in adopting Manage Accounts, what have you seen in the space,

Tom Schubert
many, many objections, it’s a pretty daunting process when you’re starting from the beginning. So there’s many objections that advisors have, I think the first one and often the largest one is control. And advisors not wanting to give up control of the investment decision making process. In the end, we say advisors are not giving up the ultimate control their job to sit there is to govern the process to design the mandate and to ensure its ongoing suitability for their client base. So ultimately, that they are in control. It’s just that, you know, in it, in cases, particularly such as working with us, you are delegating day to day decision making within those mandates, and, and once they understand that, they can still deliver the perception of control to their clients. And then ultimately, that’s all they’re really looking for. And it’s liberating to actually to let go.

Fraser Jack
Fantastic. Now, apart from control, because I want to get to control sort of in the next step, what about what about the idea around fees, and you know, thinking that there, there are more layers of fees now to be included,

Tom Schubert
a thing of value chain is, has evolved, that’s probably one thing. So we know, platform fees have come down a long way, there’s obviously been pressure on advice fees, but there’s also pressure on investment management fees, we’re saying the fees, but the underlying funds into portfolios come down and actually, through managed accounts, were able to deliver scale advantages. So the aggregate fund that we manage as a business enables us to negotiate cheaper fees or institutional pricing for our clients, which are, you know, paid through to the end client in the form of a rebate. And we’re actually seeing, you know, that percentage of the portfolio largely offset, you know, the investment management costs that we layer in there. And so what in most instances with our clients, the total cost of the managed account portfolio is often less than the portfolio, the fully advise sort of portfolio that they’re coming from. So their perception that it’s more expensive is generally not true, it’s often cheaper, which is, again, an additional benefit for the client.

Fraser Jack
Again, I love it when we come to objections, because there’s a we sort of have these these limiting beliefs in the brain that go, that must be that must be the thing that I’ve held on to for all this time, and then, and then when somebody does the numbers in you, and you come up, and you go, Well, okay, but I need to rethink the way I’m thinking, like I would also lean into the concept of the regulators and the concept around with can be seen as a product or can be seen as a service. And there’s obviously lots of different things around with the regulators and where it sits in the space. Have you seen that as an objection?

Tom Schubert
It’s certainly an objection. But I actually turn that on its head, I think that really practice issue considering, you know, what the regulator would ask about the way in which they’re currently delivering investment solutions to their clients? Like, is it really in the client’s best interest to have a quiet static, you know, portfolio that’s only rebalanced at the time at which the advisor, you know, meets with the clients? Is that really been the best interest? And then secondly, around equitable execution. So how is it you know, there’s, it’s under the Code of Ethics, now, the equitable execution, but how do you make a change within your client base to start with your highest fee paying client or your lowest fee paying client and so creating efficient structures to deliver the same price, at the same time to all of your clients is really the only way in which I think you could be doing the meeting your you know, your ethical obligations? And so, I’m sure there’s some there’s certainly objections and ethical question the amount of work that you are putting into the investment process, but I don’t think that’s true at all. I think, in fact, you’re doing more there’s more reporting, there’s more insights, the governance role that you have as an advisor and in designing and overseeing the title process still absolutely exists. And you’re just delivering it in a much more equitable and efficient way for all of your clients. So I would ask people to turn it on its head and think about what they’re doing right now and whether the regulator with He knows that’s a good thing.

Fraser Jack
Yes, exactly right that everything that somebody is doing right now could be picked on in some particular way. That’s the that’s the the environment we’re living in. Talk to us a little bit about what you think some people might be worried about whether they are locked into a structure or can change once they start this process

Tom Schubert
I’ll look at and one of the one of the many benefits of a managed account is the fact that the underlying assets are held in the clients name. And so it I would say, no, no one’s locked in a structured client and individual client can walk off with the portfolio as of yesterday and sort of unlocked themselves from the from the model portfolio that attracts at any time. And so you know, they’re liquid, they’re transparent, and they’re in the end investors name. So there’s not No, it’s not a closed end fund by any means. I think that’s, that’s really important. Certainly, as a business, there’s a commitment around what you’re doing. And but you can absolutely change all of your partners, I think the way back to that sort of value chain consideration, adopting specialists within the value chain to help deliver the service for you means that that is interchangeable, you know, don’t if you’ve got an independent responsible entity or managed account operator, sitting across an investment manager and a different platform. There’s there’s various specialized parties in the process, if you’re buying your investment management, your you know, your regulation, etc, or platform, all from the same place, I would ask questions, because that looks a little bit too locked up for me. But if you’re buying specialized services from across the market, as part of that it’s easy to interchange them over time.

Fraser Jack
Yeah, thank you. And I guess the only the last objection that people have come up with is just around the concept of, there’s just so many decisions to make so many choices, where to start, you know, who to who to look to the there’s just so it’s quite an overwhelming thing to start the process, which was, I guess, which is what we’ve created this change management process piece to start with, but what are your thoughts around it being very overwhelming,

Tom Schubert
certainly, there’s a lot to consider. And so I think, understanding that there’s multiple parties that are involved in this process, and it has been done before. If you’re starting out on the journey today, looking at providers that have actually demonstrated the ability to deliver all of that for you over in the end and get to that sort of north of 80% conversion within clients, I think is really important. And looking for the resources that are available within your service providers, whether that’s an investment manager, asset consultant, whether that’s within the platform, but you need support teams as an advice business that you can leverage. And having someone there with a dedicated sort of operational or practice management support that, you know, that’s going to assist you to to go on the journey because there’s lots of different ways to tackle the project. And often again, the advice practice needs to make sure that they’re able to implement this without disrupting their ongoing advice activities.

Fraser Jack
Yes, and I think the thing about being overwhelmed is it stops you from making decisions and this one certainly requires a lot of decisions to be made. So, Tom, thanks so much for catching up in this step. We look forward to chatting to you and we start talking about the next step which is letting go of control

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