#261 Neil Younger – Transcript

Episode details

SUMMARY KEYWORDS

licensee, business, advisors, practices, people, licensing, advice, revenue, compliance, banks, client, moved, big, terms, service, changed, requisite, world, support, work

SPEAKERS

Neil Younger, Fraser Jack

 

Fraser Jack 

Welcome back to the x y advisor podcast I’m Fraser Jack and today I’m joined by Neil Younger

 

Neil Younger 

G’day Fraser, How are you?

 

Fraser Jack 

Fantastic Thank you for coming along now now you’re Of course, the record you then the managing the director, the director of Fortnum. Tell us about Fortnum.

 

Neil Younger 

Yeah, well for them say financial services licensee business. Today we look after around 230 advisors across 95 practices across the country. The business itself was founded in 2010 by a gentleman called Ray miles. And and I guess we fit into what is affectionately termed the mid tier of licensee businesses in in the market nowadays.

 

Fraser Jack 

Yeah, fantastic. And we’ll explore a little bit more about that and how that’s all working a little bit later. But before we go there, I just wanted to go back in time Tell us about your your your journey into financial services and how you sort of fell into this industry.

 

Neil Younger 

Yeah, I think we all fall in in one way shape or form, don’t we? I found myself falling into ANP is the first organization I work for, originally from Queensland and, and it was in Queensland when they used to have big state offices. The gold towers, it used to be affectionately called in Eagle straight in Brisbane was my first job. And literally, I was at a uni and didn’t really even know who ANP was, but they offered me a job and it seemed like a good place to work with a large insurance company and, and that was my first exposure to financial services. Then, of course, you know, the world changed a lot you know, we moved from, from life insurance companies, big state offices into you know, head offices in Sydney or Melbourne and, and I moved on from a MP probably some, I think 1213 years later, I moved to a company that was then called co Corp that became known as Asgard well solution which was the wealth arm of St. George bank. And I spent probably 10 best part of 10 years with with that group, including some of that time as part of the BT group because Westpac Of course sports and George bank and the wealth business got subsumed into into bt. So So yeah, a fair amount of time there. During that period, I moved from Queensland to Sydney and I moved really to get my first opportunity running a large licensee business and that one was security which was of course the the brand that sat with the NASCAR ball solution. When the BT merger occurred, I picked up all the BT advice businesses as well. And and then for me at a stepping stone into CBA somebody’s career counselor must have been said to me, You really need to have a big salary business under your under your belt. And that was a 700 planner salary channel so it took the big box and I did that for for 12 months, kind of they were right in the middle of a fairly large scale remediation program wasn’t necessarily what I was signing up for. And you know, I got approached to come around a lead vise insufficiently distribution businesses across the ANZ head so I spent the the following five years or so of my career doing that. So that that sort of took a long time with a lot of big institutional brands and so the move into Fortnam from there was was kind of a very different step from you know, large senior executive roles to running for them which at the time had only 100 100 financial advisors, but had all the I think essential ingredients for what I could see was emerging in terms of the next the next phase of advice and how would operate in this market so I was happy to step out of the bank and certainly I think my decision has been vindicated in terms of of being right around where the growth if you like and advice segments was going to go and actually happen.

 

Fraser Jack 

Yeah, fantastic. No, you’re right. It’s sort of a journey around the block if you like sort of three out of the big fall it’s over four out of the Big Five really To be fair, yeah, well, that’s

 

Neil Younger 

right. I did quite a bit of work over the years with Jeff Lloyd who was at NAB MLC Of course and is to joke with me I’ve got the only card that you don’t have in your wallet So yeah, I never have worked for National Australia Bank but I work for the others. Yeah,

 

Fraser Jack 

if you’re an offender and tell me that you know like working for a big business like say, you know, the CPAs of the world or when you’re when you’re looking at when you’re looking after huge sort of numbers of advisors, I guess it’s probably a little bit different now because you get to know every single advisor intimately and personally whereas in the past, it’s a little bit difficult to know who everybody is in the in the big organization.

 

Neil Younger 

Yeah, I think it’s one of the things that happens is that you know, you are quite far removed From the every day, there’s a number of, you know, operating business layers between you and the end advisor, you still get the opportunity to form relationships with advisors and I certainly worked actively to do so. But not to the same degree, you can’t possibly know that the numbers that you’re dealing with, I mean, my time at ANZ, there was 1500 advisors in that sort of cohort, that’s a big group to have that sort of close and personal relationship with. So yes, moving into the fortnum. world, and, and that’s far more possible. But he but even that said, you know, we we have staff that have day to day roles of engaging with advisors, and helping them with their practices and so forth. I’m not so involved in that hands on stuff, but certainly, I would have spoken everybody in the group.

 

Fraser Jack  

Yep. Yeah, exactly. Now we’re talking, there’s lots of different things to talk to you about. One of the things is obviously changing, you’ve seen a fair amount of that, over your time. And if we go back, if we if we even go back to say, you know, when you’re in the a&p days, I think that’s probably when financial services reform came in, and all this thing that we know, as the end of the Corporations Act now, sort of came in to us about that, but I wanted

 

Neil Younger 

it was a different time, right? I remember being there when cars were introduced, and not the ones he had drive, but customer advice records. And, you know, that was the the early phases, if you like, of transitioning from what was the life insurance agent structure into financial advice, and almost it felt like the shingle wind up the different shingle went up over and overnight, a lot of work had to be done underneath the surface of that. But the model very much changed with with FSR. That agency relationship where primary responsibility was owed to the company, turn to being about know your client and doing the right thing by that client, and I think was the early stages of starting to separate product and advice. But it took a while, I think probably fair to say until we’ve gone through things like the Royal Commission, where we’ve really seen that the two can’t fit together in the way that the industry constructed them in the past.

 

Fraser Jack 

Yep, exactly. Right. Certainly there’s been it’s been a large or the ship that’s been turning over a long period of time. And obviously, there’s a lot of change. And again, without any old customer advice, recorded, customer information brokers, brochures, all these types of acronyms changed, of course, along the way. You did, as you mentioned before, you did some work in the banks. And obviously, there was some, you know, remediation stuff that you mentioned, you know, as it came through with the report and pointed the finger squarely at advice being, you know, not performing very well, that must have been a tough thing to have to try and work through for, you know, with all the planets.

 

Neil Younger 

Yeah, it was hard. The first major program of work was 515, which really set a new set of expectations around what the level of advice, accountability look like. And also compelled organisations, particularly the banks to look back at private practice and reconcile the differences. And that was both time consuming and difficult, but also expensive to rectify, sometimes things that were not right, sometimes for expediency, things that maybe were right, to get it to the requisite sort of standard. I think, probably fair to say it’s was that piece of work together with the Royal Commission, that was the death knell for the bank’s desire to be involved in a in the advice businesses in the way that they were, particularly in the area of housing self employed advisors, where the revenue generated for advisors in the practice, and the risk associated with getting it wrong was was at a very deep set of pockets at the center.

 

Fraser Jack 

Yeah, I sort of relate this back to the obviously you know, that we we’ve all seen how this played out, right? We know the banks left. I always wonder with the overseer and the difference between fussier saying the advice provider is the human whereas the cop sect obviously says the company is responsible for the advice provided. So therefore, the directors and those people working in the in the company are responsible. And I guess I guess that was just like you said that writing on the wall for the for the all the changes that took place in the ownership structure of licensing. Talk to us about how that sort of played out from a you know, all these businesses now moving around with licensing and is it settled near? Or is it Are we still looking at all the changes

 

Neil Younger 

I think we’re probably in in the allow period before we’ll see another reemergence of the next round of activity is my sense of where we’re at. So obviously In big flurry of activity is the banks made their decision. So CBA, of course, closed, the doors on fin whiz transferred, count out, security, again, doors, doors closed. So a lot of people dislocated have to find new homes, a lot of scrambling around, a lot of feeding frenzy from the remaining participants in the marketplace, offering all sorts of deals if you like to secure the transitioning advisors. So I think most of that has happened. And of course, you’ve had NAB MLC more recently in di double where from a feeding frenzy around those advisors. Maybe there’s another round of it with a MP going going on as well. And but I think that’s sort of coming to an end people are set for a little bit. And now I think they get to step back and say, well, is this business partner I’ve got around licensing, the things that I would like a license to help me do within my business, the right one? And am I getting the right level of value for the payment, particularly as any sort of that short term discounting that we saw quite a bit of across the marketplace starts to dissipate. So I think we’re in allow, but I do think we’ll see another round of activity as people kind of reset where they made the right choice first time. also seeing still a fair bit of activity in, in businesses kind of right sizing still just making sure that the advisors they’re working with the right advisors for to be working with if you’re the licensee and vice versa. So it’s been done both ways. And and that the there’s the requisite risk management and governance sort of sitting into those businesses, we’re still seeing a number of planners exit out of mainstream into their own afsl. And listen, to be frank, it’s not just self serving that I would say this, I am concerned about what that might look for, for for many to the future.

 

Fraser Jack 

Yeah, exactly what we can get into the future stuff in a second, I just want to go back a step as well with you know, with fortnum and Ed’s journey through obviously, you have a following there, you’ve got to keep an eye on all the all the other licensees as they’re coming through. And obviously you you know, and would have relationships with all of the most of the people running those licensees tell us about the journey that that for them took on since since 2010. So

 

Neil Younger 

So I mean, it was it was formed out of a group of advisors that had operated together under a license for some time. So in some cases, many back to AP days that an old business there, right ran. So that was the foundation group that got together. And they were like minded, they were looking for a community of like minded advisors, they were clear about what they wanted support with and the infrastructure was built to deliver that to them. What I really came in to do was to take the business through the next phase of its growth, which was taken from that business through a corporate ideation journey to, you know, a business that was the right size with the requisite scale and capability, which needed to be deeper. And it wasn’t deeper because of any lack of desire. Just it has to be resourced appropriately to do that, and you need to be bigger, then, then then you know what it was at the time. So with my corporate background, you know, had a fair bit of experience around what were the ingredients that needed to position us for the future. And I think the first phase of that was really putting in place, the right governance frameworks, the right oversight infrastructure with their advisors, and the right capacity to better support them, and then resource that appropriately, I think that’s what then happened was that position is extremely well when the banks chose to exit because for a lot of advisors, they could see there was a stark difference between those that had the capability and those that didn’t, and often that reflected in the price. So for many of them, they were well supported in the institutional groups, they were a part of the four even though there might have been frustrated with those institutional groups, they still got a lot of service related support. The worst scenario I think, for many of them was to move out of that world be unsupported and and not know where to go from there. So we we took a lot of boxes for a number of planner practices that were looking for, you know, an intensive support process, full service shop, so to speak. And, and we’ve benefited from that. So we saw a lot of growth and we saw growth in our and our target market segment, which was for larger corporatized firms. And that’s, that’s really been the juncture of our growth over the last last period of time. And of course, as you keep getting bigger, you add more to your kitbag and your capability and you deepen and deepen those services further. And that’s that’s the nice position that we we find ourselves in today. But we’re by no means done right? We’re not, not finished yet.

 

Fraser Jack 

Yeah, well, and certainly there’s always a journey ahead, told us about the the changing revenue models in licensing because obviously there was, you know, comes from, we come from a world where there was some subsidization, depending on products, and there was some support involved, whether it’s educational support, or all these types of things, and how that’s now changed. And what that’s done for licensing. Yeah,

 

Neil Younger 

well, there’s no doubt the model, certainly the models in the banks that I was a part of, were heavily subsidized their p&l, so the businesses ran to a loss, and they were topped up with capital and meet the requirements on an annual basis. The only way that could be done, or the only reason that organization would have commercial interest is because they’re making revenue somewhere else. And as we know, that was in the product line. I think the reality is that as the disconnect between the product and the advice became more real, or the risk associated with the advice relative to the revenue attached to the product became differentiated, I think the writing, as we’ve said is on was on the wall. Now, you have the wind at all of what were those subsidies to get to, you know, a commercially sustainable business. So in the old days, of course, way back, use the share the revenue on platforms at licensees level that’s been gone for some time. So you’ve moved to we’ve seen a move very strongly to a fee for service arrangement with the planners that are part of your network, the same as they’ve moved to fee for service arrangement with their clients. And that’s, that’s no different for fortnum. This journey, I probably the journey wasn’t so big for us, because we had less of that revenue. Because we were not a product manufacturer built into our original business. We had some volume related overrides, but they were minimal by comparison to the fees that we were generating directly out of our advisors. In fact, if I reflect on the history is probably the reason why fortnum found growing to the degree that it can today harder, because we were just so much more expensive than everyone because we weren’t being subsidized. So the playing fields are what more even nowadays, as essentially, in my view, a number of others have been forced to catch up to that.

 

Fraser Jack 

Yeah, exactly. And obviously you need that you need you need dubbers to make it viable. And then it becomes a tipping point, I guess,

 

Neil Younger 

one of fixed costs, he wants businesses, you know, in terms of the governance frameworks, the infrastructure and so forth. The they’re not they’re not inexpensive to run. And almost I think licensees get criticized for spending a lot of money that they shouldn’t need to spend on compliance, for example, having been through the process of engaging with the regulator, in circumstances where you’re deemed to have got it wrong, trust me, it’s a worthwhile investment.

 

Fraser Jack 

Yes, exactly. Right. Looking back, so is the, you know, once the events are taking place, it’s very easy to point fingers and say, well, that, you know, could have been fixed up, but at the time, you got to be thinking forward, right? He told us about the optimum size. Both I’m going to get to the advice business in a second but the optimum size of a licensee because you mentioned sort of you know growing to that that right size at writes business, right size, what do you think it is for a licensee? Yeah,

 

Neil Younger 

so it’s funny when I first went for them, I thought, optimal size for 40 was so circa 400 advisors around 200 practices was kind of the hot outside back of the envelope. But you’ve got to have a view in your mind about what’s what makes economic sense as you project forward. And that was a number I had in my head. I don’t think I’ve moved away from that number. But where I’ve probably varied, my view is the number of practices versus the number of advisors. So important today, we have about 2.5 advisors for every practice, which by industry standards, a licensee sort of above 200. That’s a pretty, pretty good ratio, but I think that will continue to get larger. And we’re seeing that with consolidation of practices, the removal of a lot of smaller advisory practices where there may have only been one advisor to the far more practice level corporatize structure and that’s certainly how we’ve positioned so I’ve become less fixed on numbers and more fixed on on the you know, the the revenue profile of the business. And the in the service proposition we can deliver to larger businesses is really I think the pathway for our continued growth. But if you asked me for a number I still say, you know, look, it’s probably still that 400 advisors, but maybe it’s now 150 practices.

 

Fraser Jack 

Yep. And it’s, of course, built on a whole lot of experience of Running different size licensees talk to me about this some this corporate structure of the practice, because I think it’s a really interesting point for a lot of the listeners of this show. You know, if they’re a one person business, then is that less attractive from a licensee, you know to from from working with them partnering with a licensee, versus if they were to join two or three smaller practices, individual practices together to create that corporate?

 

Neil Younger 

Yeah, I think the analogy I use when I get asked questions like this is I say, Well, you know, if you’re a one person band, and you set up a business, if you did an org chart, and he said, here’s all the roles and responsibilities that fit on their org chart, I’ve got one name to stick in every box, right? Well, the reality is, it’s pretty hard for you to be effective in every single one of those boxes. Yeah, our head of marketing and head of plan and paraplanning, I’m head of everything yet CFO, it’s really difficult. So the reality is, is that as you get bigger, you can find yourself being able to put multiple names in those boxes in the org chart. And, and I think that affords you the opportunity to get better at executing each of those individual tasks and better as an organization as a result. So I do think there is value to scale that comes out of out of business getting larger, and having within it more functional capabilities. And that’s that’s so when I talk about corporatization, the last thing I want people to think about is it being a bureaucracy, or there’s a reason I work for a bank today? Well, I know what bureaucracy is, right? It’s not about that. But it’s about structure and the discipline that comes with running a business. And I do think there is a difference between being a self employed financial advisor, than being a person that’s part of a financial planning business, and that corporatization is a pathway to extracting that value. And I think, if I look at it, then through a risk lens, I say, Well, you know, to do everything that a planner is required to do today, tick every box that’s not is gonna keep them safe. It’s a big job, right? Do that all themselves is risky, to have an infrastructure with the appropriate level of capability and expertise, I think is, is just becoming more of a unnecessary ticket to the game. And that’s why I think a lot of licensees have started to move away from you know, the one person band if you like that kind of stereotypical shingle, but because maybe they they just don’t have the capacity to do everything that they need to do.

 

Fraser Jack 

Yeah, I couldn’t agree more in that with regards to the size or the level of that practice. You know, if we were to start any practice today from scratch with no, you know, nothing in place, what would what would the target be? What would the target of amount is it afford for for advisors? As What are your thoughts? Yeah.

 

Neil Younger 

If I look at it down through a revenue lens, I’d say you got to be aiming at a $3 million revenue line. And I think, then you start to say, well, all in terms of capacity to service that revenue at a plant level, how many planets do I need? Ron? I think the reality there we’re saying is, is that the average client, that advisors are, are dealing with a higher in value, because the costs are so high for the delivery of the advice. So the numbers of clients per planner are coming down, and the revenue profile, therefore per planner, is able to increase, but for a $3 million business you are talking about for probably five advisors attached to a business of that size. Now, I will, you know, like I don’t offend people when I say these three, because often you do, that doesn’t mean that you can’t run a successful business with a million dollars with a revenue, it doesn’t come out saying that. I’m just saying you’re responding to, you know, what I sense is, is kind of the optimized or the business model that is becoming more prevalent in the marketplace as businesses go through consolidation phases. And I think that numbers are a realistic one to least draw a line in the sand boardroom table.

 

Fraser Jack 

You know, I think it’s a really interesting conversation, because it actually does form sort of forms that someone’s future view of how they might want to mold their business over time. And obviously, business valuations are a big part of that conversation. And so if that’s if that $3 million revenue with, you know, is an attractive business for both licensing, it’s probably also attractive for their business valuation.

 

Neil Younger 

I see this a lot in valuation conversations. If I think back 10 years ago, the only metrics you wanted to understand was what was recurring revenue, and how many how many clients do you have right, though, are pretty much the two metrics now. Now the D day is far more detailed, right? What’s the service proposition? What’s the The value you’re capturing per client, what’s the service to varying levels of revenue attached to the client? So the the the detailed understanding what’s the risk governance frameworks? What’s the checks and balances that are put in place. So very much, you’ve got a corporatized view of valuation being applied to the acquisitions, because it’s just not an aggregation model anymore. So if your business can’t answer those questions, then by default, you have less sitting on the other side of that transaction.

 

Fraser Jack 

Yet, it’s certainly the old days of selling your business based on multiple of revenue, that surely that’s gone by now.

 

Neil Younger 

Yeah, I mean, still people back solve against that. But yeah, I’ve seen a massive change in mindset over the last couple of years where people really are looking for the value attributes, and more traditional valuation methodology where they’re applying synergistic values to to the underlying calculations, as opposed to just looking at revenue. One lever,

 

Fraser Jack 

yep, yeah. what’s what’s How do you see data or structured data playing a part in the valuation

 

Neil Younger 

critical? How will you know your businesses is critical? how that data is secured, their more intelligence, you can extract off that data, I think, is, is probably the next phase that we are not sure we’ve really monetized yet, but we will monetize it. But if you can’t produce detailed records on your business and understanding of the economics that drive client interactions and profitability, and then you’re already back on the backfoot,

 

Fraser Jack 

Yep. Yep. Talk to us about an off probably off the back at that data conversation. How has compliance changed over that time? And where’s it going in the future?

 

Neil Younger 

Yeah. So what compliance traditionally has been reactive, of course, the main weapon in the compliance Arsenal was audit. I think the reality is, if you’re relying exclusively on audit as a function to meet your supervision and management obligations, then you’re probably going to fall short. So data is a critical component to real time, or at least pre emptive type that supervision and monitoring and, and businesses like ourselves, do all of that. We have centralized databases, we have kr eyes attached to that database information, and we use it to inform. Now we don’t use it, because we want to find that somebody has done something wrong. We use it to make sure organizationally, we identify issues before they become, you know, raging bushfires that you can’t put out.

 

Fraser Jack 

Yeah, exactly. And the key risk indicators can certainly do that. So. So that’s, I guess, the the idea of, you know, again, looking back and looking now how can technology or compliance evolve to the space where it’s actually helping advisors provide advice before the advice is provided?

 

Neil Younger 

I think there’s quite a bit of progress in that area, I’ll just take breach reporting, for example, most recently just changed come in her new regs have come in in October. So, you know, there’s so many mapped outcomes that trigger a breach notification under the new rules is that as it maps back against corpse act obligations, they themselves are too onerous for any single advisor to kind of check balance that. So how do you use technology and embed if you like that workflow, where identifies productively where the if I do this, I probably would get to the end of the journey and realize I’ve got something that I’m going to have to breach on right? prevention rather than then cure becomes the mindset. So So businesses like us are investing and continue to invest in that type of capability to help ensure that that essentially to digital checklist rather than a paper based checklist, but it’s into it’s integrated into the process. One of the real challenges we have, which is being frank about this is that everyone wants to do everything their own way. So it’s, yeah, in some regard, there’s not a lot of value in terms of unique differentiators for compliance. So I’m not sure if it’s necessary to really be thinking that way. But, you know, the more you can homogenize some of these processes, the more you can be pretty clear that they’re safe.

 

Fraser Jack 

Yep. And would you consider compliance, disapproved the last one compliance activity? One of the the main services of our licensing? Absolutely,

 

Neil Younger 

I think, you know, if I think about the work effort in our business, to synthesize, consent, do breach reporting and so forth. You know, if that was done across the 95 i’d practices in our business with the requisite legal advice to make sure they’ve got everything right. It’s just where spend a fortune right? It’s overwhelming as it is, when it’s distilled down into what do you actually have to do? So absolutely, I think it’s a critical component, but it’s the foundation component for what you build a business on. You know, when I talk to good businesses, they don’t worry about compliance, they just that’s what we have to do as part of our job. And that’s the mindset we enjoy working with. It’s not something we’re imposing upon you, it’s something we have to do, it’s a ticket to the game to do the job the way it needs to be done. And then it’s now about making that as as efficient as possible as it integrates into, into the process, not the enemy. It’s just part of the requirements.

 

Fraser Jack 

Yep. I don’t have any years into this, but I sort of feel like the, the licensing as being the the middle is being taken out, we’re getting that with self licensed, you know, small practices, or we’re going to end up with these, you know, the larger groups like yourself, you know, let’s say three 400 advisors or a couple 100 practices. I

 

Neil Younger 

think there’s a danger to that, right. And, you know, I see this in terms of some of the rhetoric in more recent times licensees are the ones that are creating the imposter, around compliance and governance. Like I think, certainly all in the institutional world, your risk, tolerance level, particularly as you go through all commissioner and 515 is quite low. So they did set the bar relatively low. And they said, everyone’s got to jump over that, that. I think that led to a lot of perception that they created the problem, their response probably did in some regard. But I’m not sure that that’s necessarily the case for what remains in the sector today. In fact, to the very point I made before, making people do the same task we’ve just done at a licensee level 90 Times has to be more inefficient than having it done once. Right. And therefore cost should reflect that into how businesses operate. What I worry about with the way you describe the polarization occurring is that one, you could end up with a very homogenized model with the big end. And that’s not where we certainly will go. And you could end up with a lot of people just missing the mark at the other end. And not because they’re deliberate about it, but just because they just won’t have the requisite expertise or, or scale to get these things done efficiently. And, and some of them will adopt an out of sight, out of mind approach and just not do them. And I do worry, based upon as an industry, how much work we’ve had to do to prove for many people, they didn’t need to prove professionalism, and that they deep care about their clients. Firstly, I don’t want to find ourselves going through the second phase of that, because people have let themselves down with regard to their obligations. And that’s what I think they’re concerned about for for the future. And again, it’s not necessarily out of intent, it’s just that they’ll, they’ll not have the expertise,

 

Fraser Jack 

there just the sheer amount of things that need to be or tick boxes that need to be ticked and things that need to be done.

 

Neil Younger 

Yeah, I just know how much I invest in those things. And I just worry about how they can can get to them without being significantly distracted away from the other areas of that old design that I talked about before. They could be focusing their time and energies on for a better return.

 

Fraser Jack 

Yep, yep. Now that probably leads us into their professional indemnity compensation. You’ve obviously seen some changes over the years with the PPO insurance. Talk to us about where it’s come from, where it’s going and what the prospects are looking forward with P Oh,

 

Neil Younger 

yeah, it’s been hard like the the insurers got very nervous with uh, with claims or potential claims through that 515 phase and what’s a lot of that remediation is right in the fee for no service that didn’t itself create a PMI claimable event refunding unpaid you know, and service fees. The cost associated the mediation program certainly are claimable. So I think the Australian market insurance got very nervous about that. Parallel that to where a lot of capacity was provided to Australia was set of organisations like Lloyd’s of London and they were going through their own changes structurally within that market. They were limiting capacity around insurance and you end up with this you know, the worst of all worlds as a lack of supply nervousness about those that are supplying and in the consequence was exclusions reduction in the quality of the cover and significant increases in the in the price point. So you know, standing start, you know, the the conversation for most groups. 30% up on premiums even environments where you’ve had no client.

 

Fraser Jack 

So that’s that tends to be 30% every year

 

Neil Younger 

it is and and I think that’s probably going to continue for a little while longer. But we’re starting to see when I talk with our our brokers and we have no competition and Australian is National broke insurers on our on our panel and we’re starting to see some interest emerging now back in the UK around insurers so so I think we’re starting to see the early stages of maybe that pendulum might swing back a little bit. But it’s been a painful experience. And and I think, you know, there’s there’s certain pockets that have felt that more than others, you know, said for an organization like ourselves, you know, where claims experience exceptionally good, our risk and governance we can demonstrate in a lot of detail gives insurers a lot of comfort, the less you can do of those things, the more difficult it is and you know, it’s I was in the UK on pi and 80 years ago, it’s probably just before we couldn’t travel anymore. And and you know, plenty of war stories from from the Londoners’ about people jumping on planes to come in begging for insurance, otherwise their license was gone.

 

Fraser Jack 

It’s interesting, isn’t it? So you know, the the the fact that you need it, and then we only ended up with what a couple left as it as it were, we pretty much

 

Neil Younger 

have had no insurer in the Australian market taking on new business, which means it’s game of musical chairs, and they stopped and you’re sitting in the same seat, right? So you you’re getting what you’re getting, as far as an increase is concerned, there are pockets that are getting insured. And I think there’s a bit of false security around this because some of the smaller afsl are picking up insurance, the insurance is being framed on a on a low perception of risk because their businesses are small, right? Where I think the danger here is is that one claim, and they won’t get renewal terms, because the claim relative to the premium will not come out. And that’s where I think there’s some short term sort of disturbances and then in the model that will probably wash their way through in the next little

 

Fraser Jack 

while. Yeah, fantastic. Be good to see it coming back towards the center. I

 

Neil Younger 

think there was a cover, I think phrase is critical, right? Because not all covers are equal. And you only know that sometimes when you get a claim. And we’ve got compensation scheme of last resort coming into into bear and that just creates a burden on the system for everyone else to cover.

 

Fraser Jack 

Yeah, yeah, exactly. Right now in you’re absolutely right about the reading the policy documents, because they are sometimes the policy wording makes a big difference. And we all know that. But we don’t read them. How does the independent conversation come into with licensing? Obviously, there’s you know, it’s been predominantly most people just stay away from the term because because it’s it’s easier than trying to work it out. Has it ever been something that you guys looked at or considered?

 

Neil Younger 

Yeah, it’s hard. Because say, for example, Life Insurance Commission, which is still a legitimate way to be charging for services in the insurance space, the moment you have that you can’t pass that independence test, right. So So on the basis of that alone, we’ve never sought to push that path. Usually in mind the update to the legislative requirement where you can disclose Well, I’m not independent, but define Why? Because I’m not sure you’re necessarily unable to evidence you can still operate in the clients best interest because you happen to be remunerated by an insurance methodology. In the insurance base, for example, example does make sense to me.

 

Fraser Jack 

Yeah, I think I think you’re probably when a few friends with that one, because I think most people are in the same boat, not really doesn’t really compute too well. But it is what

 

Neil Younger 

it is a very prescriptive process, of course as they are they disclose all that to their clients. But you know, if it opens up the conversation, I think most fair minded people realize that that doesn’t equal conflict.

 

Fraser Jack 

Yep. Now you’ve done a lot of work with the financial services council over the years. Tell us about Tell us about that. Yeah, certainly

 

Neil Younger 

my time at the bank. So I was heavily involved in the advice board at the FSC. So not so since I left ANZ Of course, we moved in into Fordham, but I still remain pretty close to a number of participants on that, that board today and the work that they’re doing. And of course, there’s quite a collaborative interaction amongst a number of licensees that were were many of us these days now are ex institutional groups and, and we know each other Of course, and there are quite a bit of collaboration that we do in areas that make sense for the collective good of the industry. You know, we were active in input to Treasury or tasik or to government directly to To the minister, arguing for things that are just pragmatic, certainly off the thematic of accessibility of advice,

 

Fraser Jack 

if it is, now, with with the licensing these days, I think, you know, a lot of the I want to go I want to talk about the professional, you know, sort of thinking about from a practice point of view, you know, obviously, that $3 million revenue practice with a three or four advisors, great for that professional year candidate to come in, you know, provides enough structure, what are you doing from a licensee point of view to sort of develop the professional

 

Neil Younger 

year, so we actually had the first advisor complete their professional year, in Fordham was one of our financial planning practices came in with planner just started and we helped facilitate that piece. So, you know, we bought, we built the capability to supervise, so there’s two layers, supervision, obviously, the framework, the practice users to guide that new person through the process. And then of course, all the checks and balances that get done by the licensee to assess. So it’s all we developed all of that. I think one of the challenges for us, though, is capacity. So it’s quite an intensive program of work that person must undertake. So that’s, that necessitates a lot of support at the practice level, and then again, an equal measure level of support at the licensee level. The question is, how many of those Can you put through the pipe every year? I think for the moment, that’s, that’s quite limited. And we will so for example, we go out to a network and say, who wants to bring somebody through their professional year? Give us the heads up now. So we can kind of map or plan the work effort associated with those those candidates over the year. So I think this is a gap the industry’s got collectively is how do we find more efficient ways? Because a lot of that heavy lifting was done by the institutional groups being people through their salary networks and so forth. And it’s not there any longer. So I think collectively, we have some some ways to go to solve that as an industry.

 

Fraser Jack 

Yeah, exactly. Right. Because you know, literally 1000s of people a year could have been coming through the, through those banks, or that system that now doesn’t exist. And as you mentioned, the pipe is not that wide for the for the professional year candidates. And, you know, we could end up with a shortage of, of advisors for many years to come with it. Yeah,

 

Neil Younger 

well, we’ve got both sides of that equation, right. So a lot of exiting planners, we’ve seen those numbers falling off, and there’s more to come, of course, and and you’re right, a bottleneck, getting people in at the pace. So those larger practices have the capacity to absorb that cost, because they’ll have the capacity to benefit from the investment, smaller practice, they struggle with that, right? It’s so long, it’s a long time before they get back to right sizing the cost associated with that investment.

 

Fraser Jack 

Yep. that tell us about for them, what was how do you, you know, how are they How are you different? And what do you sort of bring to the to the market,

 

Neil Younger 

I think that’s where we different tiers, we’re not distracted about anything, or we are an advice license that provides services to independent financial advisors. So if we think about every day, what is it that advisors need to have at their disposal to be able to leverage a good outcome for their end clients. And in that sense, that’s where we remain focused. And and I think that’s, that’s what makes the difference. The second thing that’s that’s really unique about us is, is getting the right people together in the room. So a lot of people talk about community, if you want to be a successful business, then hang out with successful businesses. Now I want to say we put a lot of effort into making sure we’re working with successful businesses, but it almost becomes a self fulfilling prophecy once you get a few of them, more of them come. So so I think that’s what’s unique about us as well is we’ve got we’ve got people in a cultural sense that really actively want to engage with each other. And, and that creates that right type of communities. They’re the two I think key differentiators always argue we do all that stuff. Well, but they’re, I think, ultimately, you know, being well supported by your peer network, as well as the organization’s critical and an organization’s not distracted is, is critical. I think I call it alignment.

 

Fraser Jack 

Yeah. Wonderful. So talk to me about the future of licensing, you know, I’ve always had this view, you know, that it could well be, it could be all, suddenly that can become extinct over time. You know, obviously, I think when I think of FSR coming in, I kind of think there was probably an assumption that most advisors would be self license on ethics or or the government’s schedule, and so that has never happened that way, but Is this something that is licensing or something that could become extinct? I think it could be

 

Neil Younger 

in its current form. Because common sense says, the advisors providing advice and I’m taking responsibility for words not particularly a sound logical model, right? The question is, how does the advisor take responsibility for it? So what’s the gap around governance? If you decentralize to that degree? I think that’s the thing that’s on the mind of treasuries they look about a look at the future of advice reform, the next phase is is that today, there is whether it’s considered a desirable, there is a function provided by licensees that interposes between their responsibility advisor, that has to be replaced, and it just doesn’t go away. You know, we don’t have no requirement for compliance because the licensee isn’t there. So who takes on that burden responsibility, and and ensures it gets discharged properly. So I think we’re away as away from the inevitable, but I do think the never ball curve, where the licensee structure that we see today will disappear. We don’t fear that, you know, our, our model is about enabling advice. It’s not about adding cost to the process. those costs exist anyway, I think it just morphs into into a different style structure. And then you start to look at what are the other value points that you add as part of the community. In our world, for example, we aggregate considerable value in terms of even product pricing, which is all wholesale, but we negotiate and negotiate on scale, well, we can do that, that’s 100% pass through consumer benefit. So there’s a lot of other things that licensees or that collective, whatever it ultimately ends up being called, I think adds considerable value to

 

Fraser Jack 

it, because we’re seeing a bit of a trend towards a collective as well for selfless and even if you’re self licensed your soul join a bit of a collective and be part of a group in some way where this sort of thing can take place.

 

Neil Younger 

I just do what I say is that, you know, what’s the right scale, the way you start to optimize and, you know, even even my experience in this business where you’re running a business with, you know, 100 advisors, it’s very different your options around what you can do are very different to say what they are to die. So, so same parallel into a planning practice, you know, there’s, there’s more you can do when you are bigger, as long as you stay focused on the right things.

 

Fraser Jack 

Yep. Fantastic. Thanks so much for coming on and chatting us to today, Neil, tell us about how advisors can reach out or chat to you if they want to continue the conversation.

 

Neil Younger 

Sure. Obviously, you can come to our website, www fortnum comm.au. or reach out to any member of our team, obviously myself, you’ll find me on LinkedIn or attached to their website. Or even talking to people within a business like Rob Skinner, who I think has spoken on your program most recently heads our practice management function, but now we’re only too happy to help and so we’re we’re not about recruiting advisors for the sake of recruiting we’re actually about finding the right relationships and fits so that ends up being the case then it is fantastic.

 

Fraser Jack 

Thank you Neil. Thank you.