CFS 10x webinars

Hi, everyone, and welcome to today's webinar on tech stack transformations. My name is David Pritchard. I'm the executive director of the wrap business at CFS, and I'm proud to say that it's my team that brought CFS to market. I'm hosting today because I've got a tech background. I'm passionate about the role that platforms can play, partnering with tech to help you to transform and grow your business. 

 

Just before we get started, I'd like to acknowledge and pay my respects to the Wurundjeri people of the Kulin nation on whose land we broadcast from today. And wherever you are in Australia. I'd like to acknowledge the traditional owners of the land and pay my respects to elders past, present and emerging. Okay, so this is the third webinar in the CFS 10x series. 

 

We recently launched 10x and it's all about joining education and capability with your objectives. You can expect best in class subject matter experts and thought leadership delivered in forums like this in roundtables, whitepapers, research, and industry events. Whatever your goals are, ten X is designed to empower you to execute your strategy. Last month, we focused on how to prepare your business for a successful purchase, sale or merger. 

 

If you missed that webinar, you can catch it on CFS.com.au/10x. But today we're talking about tech stack transformations. Why it's important to get your tech stack right. How you go about assessing, selecting and changing tech. And we'll explore a couple of case studies with very successful advice businesses who are at the different stages of the transformation journey. 

 

So to introduce my guests, on my right, we've got Pete Worn, Pete, you're the founder and joint managing director of Finura Group. so you advise Australian and UK businesses, on their technical knowledge, strategy and their execution, and you've got a mission to improve the quality and affordability of financial advice through improved technology delivery. Thanks for joining us today, Pete. 

 

and Danni Le Grande. Danni's a partner and head of consulting at Finura Group. And, Danni, you leveraged your passion for technology to enhance the operational efficiency of advice businesses over 25 years in the industry and the last 13 years specifically working with technology in the financial services sector. Welcome. and we've also got, Steve Sloan on the right there. 

 

I'll introduce the slide a bit later. Okay. But to get started, we'll compete in Danni. You've got lots of experience in the tech sector. So let's get started with you. What led you to co-found, and run for Nera? well, Danni told me, too. That's right. no. So, this is our second chapter as a team. 

 

So, a lot of the same. We work together in a previous company that focused on just explained development. But what we found, over time, is as the markets change and we've seen so many businesses go and become self license and become, graduate from being small practices to be quite complex firms in their own right, their technology needs and complexities and problems had grown beyond just purely advice tech. 

 

So we saw a real gap in the market to provide a service where we could help, you know, firms make better tech decisions, who perhaps don't have necessarily need has resourced to execute well but wanted someone to help them untangle that really complex world of advice tech, which is, quite frankly, exploded in the last ten years. 

 

Yeah. Yeah, sure. And look, there's lots of tech out there and adoption rates seem to have picked up as well across the industry, and seen quite fast compared to the more traditional product adoption rates. Why is that? I think I probably the, this recent example. So, it's not specific, just financial services, but the adoption of AI. 

 

some data from Gartner read the other know, I was saying that the AI adoption rate is being four times faster than any other technology we've ever seen in history. I think it's come from two factors. Number one, we've had AI. I guess shoved in at right by a lot of large tech companies who are really pushing AI. 

 

And anyone that's logged into any of those mainstream technologies in the last few months would know that. And I think I think the second component is that, we've seen a lot of bottom up demand for AI solutions, because it's really the first time that II has been, you know, driven top down by companies and also bottom up by users finding their own bits of tech. 

 

So it's been a really interesting example. However, I still think we're still grappling with just what do we use AI for sure. Look, that explosion of tech kind of makes me think of the importance of due diligence. Can you talk to us about that? Yeah. So without question, the number one problem we tend to find with firms that have come to us who have maybe made a few technology missteps, has been lack of due diligence. 

 

and it's been surprising because firms are so good at, running compliance committees and, you know, investment committees on selecting individuals and their clients, but don't apply the same rigor necessarily to technology decisions. we found a lot of technology decisions have been driven and quite emotional, actually, by things that they've found haven't worked and they've made maybe not database decisions. 

 

And so, are often tracks back to that. And as, as you would understand, as a business grows, the magnitude of this technology's reasons can become more so if you make a bad one. Yeah. Yeah, sure. Look, I mean, you've seen no doubt, you know, bad tech thrown at the wrong problem as well. Yeah. So can you just talk to us about, you know, what, what problems these tech trying to solve? 

 

Yeah. Well, I think, a lot of the problems that we find firms are dealing with are a result of legacy, actually. Think about it. So most advice businesses have been around for a long time in different forms. They've had succession, they've had em. And I, but you can track a history with most advice businesses. And what you tend to find is that the tech doesn't always keep up with the growth of the business. 

 

And as a business evolves, you have people coming in and out of it. You've got different, you've got acquisitions happening. And we often find that we just end up with a collection of tech necessarily, but without a concerted strategy. And those main problems that we tend to hear about, lack of integrations between key systems that a business is relying on for data quality is another one. 

 

And then the third one outside, which is not as well understood, is just lack of training and adoption that a lot of people in the business just don't know how to use the tools they've already got. So they tend to be the three things that Finura really focuses on before we sort of start thinking about adding any new tech to a business. 

 

Yeah. Okay. Cool. And we'll look we'll come back and unpack those three areas as well through the webinar. look, I know that lots of businesses could really benefit from a tech review, or an update. and you spoke about some of the triggers, for that. Can you just talk to those triggers for us? for people out there working in an advice business or business owners? 

 

You know, at what point in their journey should they consider undertaking a tech review? look, we actually think tech review should happen all the time. That's for the first thing outside should be part of the cadence of your business. But there are often triggers that would cause a business to reach out to a company like Finura. 

 

One trigger may be that they've realized that they've made a mistake with technology, and they want to work out what do we do? Do we have a sunk cost here or do we unwind that decision? And how would we do that? they probably the calls. We don't necessarily always like getting because you want to sort of be a bit more proactive and solve it before the decision. 

 

But that's number one. the other, we're finding the other big trigger for us is we're finding a lot of firms coming to us who are on that journey of becoming self licensed. So they leading a large institutional loss and say where the techs been curated and handed to them. and now there's sort of a bit of a they're in the supermarket of technology. 

 

If I could go, wow, we've got so much choice, what do we do? So that's a really important trigger. And the third one would be usually around the time of M&A. you're looking to it. It probably ties in nicely with some of the things you spoke about the last webinar where you know, you're buying another business. It's going to have really different technology, different people. 

 

What is the target operating state we need to get to from a tech perspective. And what's the fastest way to get there as well so that they'd be trading triggers? Yeah. Okay. and you mentioned cost. let's explore that a little bit further. You know, how much does cost really factor into the decision making process around triggering a review, but also just the tech choices that you make? 

 

Yeah, I think cost is frankly often too high on the criteria for decision making. So a lot of, core technology decisions we found have actually been result of cost driven priorities. So just trying to save money on tech. so that's probably one thing I just would, would add at the start. But from a we would always say, well, what's the value? 

 

We're getting dramatic. You know, what is the return on investment in most businesses? What you find, don't even categorize that tax expense at a detail level. They'll have one line item on zero for some software and subscriptions, and not a lot of detail underneath that tracking utilization. And that's a lot of the work that Danni and the team do. 

 

what I would say, though, the data, investment trends in some data, couple of years ago surveyed firms and most firms are willing to spend more on technology, but they're quite gun shy where to spend it? They're not sure where to put that money necessarily. And so there is a bit more of a mentality creeping in of, hey, we know we need to invest in tech, but we've had our fingers burn the past. 

 

We don't think we're getting value from their current solutions. Where do we spend that money in the future? So that's the question. Ultimately, we're trying to help firms answer. Yeah okay. Yeah. So you're still seeing a lot of ROI opportunity for that tech investment. Great. and tell us some of the benefits that you've seen out there in advice businesses undertaking these kind of reviews. 

 

Yeah. I think I mean, the thing for us is this is the first for many of us, there's real inflation, inflationary business environment. We've been in business owners. I'm a business owner. the state is too, and I'm sure I can talk this way. I would expect most of your staff are expecting pay increases in 1st July. 

 

It's not just a nice to have now. People are expecting high salaries. And so business pressure margins are under pressure. And so inevitably there comes a point where we say we can't just keep throwing people at our process problems. And in fact, if we want to scale and maintain high margins, we need more tech, we need better service, more clients for the people that we've got. 

 

So that is probably driving, that return on investment conversation we have with most firms. So when we do our tech roadmaps, we are really laser focused on how do we increase the capacity of this firm to serve more clients with existing resources, and what's the right way for tech to enable that? And I think if we can nail that key question, that's probably a really good Northstar for a business to be making. 

 

On making tech decisions moving forward. Yeah, absolutely. Great. And so you kind of justify undertaking this review from a cost ROI perspective. but there's lots of upside benefits as well, I think, around risk or value prop for the advice business and so on. Can you just talk to us about that? Yeah. I think, you know, when we start these tech reviews, it's never just about the tech. 

 

There's often we always factor in, the people, the processes in the business. But really important, the client value proposition. We have clients want to be served in the future. Now, a lot of businesses are trying to think about this so often. we'll ask a very simple question like, how do your clients want to engage with you digitally in the future? 

 

And then that will cause a whole bunch of other questions to fall out of it. and maybe some of them out of our wheelhouse. But I think there's a great question for them to grapple with. so the benefit of these prices, it'll often, raise issues which are not tech related, but I think are critical for the business to answer before we even think about putting a new tech solution in place. 

 

That's the first thing. The other thing we tend to find is often it'll make a business think differently about how they organize and manage staff, so how they organize teams and what kind of roles do that in the future, what kind of people that they need in the business? running the systems and technology. So, like any externally run process with an independent set of eyes, it'll just often ask those questions that maybe haven't been asked in a long time. 

 

and that's fascinating for us to sit there and to wonder. Yeah. Yeah, great. Really valuable. I know you love this question, Pete. The million dollar question. So what's the answer? What's the silver bullet here? Is there is there a kind of single software solution that we all need to be kind of moving towards, to solve all of these issues and deliver all these fantastic benefits? 

 

Oh, it's I, I dive absolutely. No. So, Yeah, there is a I mean, we do we do look for the holy grail, the unicorn of tech. and Danni, quite rightly in all her reports, always had that the first thing to say to a client is, hi, the unicorn doesn't exist. That's the first thing. as an industry, we have literally found millions of ways of doing the exact same processes. 

 

That makes building tech really, really hard for software companies. so what we're really big on is firstly, simplifying tech. So we actually a menu that reviews will strip out more things than we had from a technology perspective. So that simplicity is really, really important. we maximize the value of the tech you're already using because quite often we find businesses don't even understand the full capability of what they've already got. 

 

Sure. But what we'll do is we'll make sure that we're really deliberate and clear on what piece of tech does what job in the business. And it's got a it's got a dedicated purpose for being there in the first place. So out of that simplicity, you get a lot of really clear answers on that. we obviously, you know, put some pretty strict protocols in clients around due diligence and how they select technology and not throwing tech at a problem necessarily. 

 

when if there's a probably a different solution. But the, the holy grail ultimately is the right combination of processes people and capability and the technology that supports it. And no two businesses are going to be the same. Yeah. Go ahead and deploy. Yeah, right. So no one size fits all. Unfortunately people all right. So and talk to me a little bit about the role that you think platforms can play in helping with this. 

 

I mean, I think over the last few years we've seen some of the smaller tech players in the country fail. and that has a real flow on impact to the businesses that use that tech. and I think that platforms have got a really positive role to play here, but I'm interested in your views on that. that's critical. 

 

so the market for advice software in Australia is about $200 million, which is not a lot relative to other industries. And in fact, that's why you see platforms being much bigger businesses than advice tech companies, generally speaking. So, we make no secret about it. We think platforms with the balance sheet and capability that, they bring to the market, they're just such a critical part of infrastructure for what we do, and usually have the capability and balance sheet to invest in tech themselves. 

 

14:46:09 - 15:14:06 

The key question, I think, for platform providers to understand is that, advisors use multiple platforms so that you have to realize that, you know, you've got to play nicely with all the tech the devices use. and it's also unrealistic to expect that an advisor would choose, just one platform and one bit of advice tech. So on the platforms is always be, recognize the value, provide the ecosystem, and provide a frictionless, environment so advisors can pick and choose the tech that works for them. 

 

15:14:06 - 15:34:01 

And we can do our job as consultants, and don't stand in the way, really of advice firms innovating. So, and I place a sign off. I'm seeing a lot more of that from platforms now, which is great. Yeah, sure. Fantastic. Okay, Danni, welcome. Thank you. Now, you've had a distinguished career. You've also run advice businesses. You've worked abroad. 

 

15:34:15 - 16:01:03 

What attracted you to Finura? Well, I think navigating the technology landscape is, is really tricky. And to all the pain points, there's a lot of technology out there. It's, really complex to get your head around how it's going to best fit into your business. So, Viner has got a really good opportunity to, I feel, make a difference in that area and to really help advise businesses sort of understand how to use technology properly and also to help manage that change. 

 

16:01:03 - 16:16:16 

Because as we know, that's probably one of the most trickiest parts of, of technology. And getting new technology into business is managing that change as well. Working in the trenches as well, I can sort of relate to the client service teams in the power planning teams and the advice teams as well. So I've felt the pain in the past. 

 

16:16:24 - 16:36:14 

so you can really empathize with, with what happens there in the back offices too. Yeah. Fantastic. and look, we will hear from a couple of really successful advice businesses today that have been through a tech review and are at different stages of that transformation journey. but I think everyone out there really wants to understand what does this review process actually look like? 

 

16:36:17 - 16:57:16 

Can you just talk us through that process step by step? Yeah, sure. So what we really need to do is to get a really good understanding of how advice is being used across what we call them jobs to be done. But really the advice journey in an advice business, it's really important for us to talk to the business owners, the client service teams, the back office, the middle office just so that we can get a really great understanding of what's happening. 

 

16:57:22 - 17:15:00 

Because quite often when you talk to the business owners and the advisors, you'll get quite a different experience for technology to the teams in the back office. Once we've got that information, we run analysis over that. and what we really want to do is make sure that we're choosing technology that's going to align, with the resources in the business. 

 

17:15:09 - 17:36:07 

and sometimes that does often mean taking the positive resistance, potentially looking at what we've got already in an advice business. We might not have been using it very well, not been trained very well in it. So we dissect all of that information. And then what we come up with is a, is a package of recommendations for that advice business that is going to help them make their business objectives into the future. 

 

17:36:09 - 17:54:04 

All right. Fantastic. And Pete alluded to this. And it's just one area I want to drill into a little bit. It's the people aspect of these transformations. so can you just talk to us a little bit about, you know, how you understand the people in the business and how they're using tech, and then how do you go about changing that? 

 

17:54:06 - 18:14:02 

Yeah, it's really it's really tricky. And I think, the best approach that we can have is, is a baby steps approach and a phased in approach. So we want to meet the overall business objectives. But it's really important that we really drip feed the change into a business. We don't want to just roll technology out, in one fell swoop and give everybody that logins and off they go. 

 

18:14:03 - 18:37:16 

We really want to methodically think about how, technology is going to be used across those jobs to be done and with those teams in those in those businesses. Okay. And inevitably in these businesses, you'll find, tech that they love. That's probably not the tech you'd recommend. and the reverse of that as well. Right. New tech that you might want to bring in when they're kind of wedded to something else. 

 

18:37:18 - 18:56:07 

How do you work through that kind of an issue? Well, we probably, speak to that a little bit with, in real life situations. but I think it's just sort of explaining and helping, advice businesses understand what the technology can actually do for them and, you know, getting to page points. technology is sort of designed to do what it's supposed to do. 

 

18:56:07 - 19:13:18 

And sometimes we have to think about, not trying to fit a square peg into a round hole. And is there anything that we can do to sort of come to the party when it comes to, technology? But certainly we need to take into account those biases, potentially, they might be bad experiences with, technology in the past, and that's going to cause the resistance to change. 

 

19:13:18 - 19:32:17 

So we want to make sure we really kind of unpack that with the advice business as well, because we want them to be, you know, ready and willing to make that change. Yep. Got it. Okay. And last question around cyber or just risk in general. But cyber is obviously a hot topic at the moment. How do you factor that into this review process. 

 

19:32:19 - 19:48:19 

Yeah. Look, it's a it's a it's a big deal. And it's obviously becoming more of a concern as we move forward, with advisors and these, these tech roadmaps. So, what we really look at is how the, advice businesses are engaging with their clients. And quite often we do we do research the market on this. 

 

19:49:03 - 20:09:04 

at the moment we've got 80%. We know that 80% of advisers are still emailing, advice documents to their clients. So, we really make sure that we address things like using client portals, using password protection, that sort of thing. It just to get to that, I think, two thirds of all cyber issues are actually caused by human error and behavioural things within a business. 

 

20:09:06 - 20:40:10 

So we will always recommend, a cyber security training solution that businesses need to use. And a lot of times where you do that and AI training as part of the AI for sale. but it's actually training. You'll just have to not open phishing emails. you know, run those sort of takes all the time. So, but obviously that and from our perspective, you know, we, we feel that financial advisors of the custodians of some of those sensitive data a person can have, particularly for doing insurance and those sort of things. 

 

20:40:22 - 20:57:22 

so really we look at trying to run scenarios of fans of, well, if we have to get off email with our clients, how do we do that? You know, and, and just run those sort of scenarios of the business to really sort of test that. because, I would say most businesses have had an incident where they've sent a document to the wrong client because of an order. 

 

20:57:22 - 21:14:23 

I feel in an email like it is that literally that simple as that. Those things happen. So, we can talk a lot of big cyber AI runs worried about hacking and all these things that happen. But actually so much of it's behavioural and training and so what Denning the team really trying to do is put systems and processes in the place that mitigate that risk in the first place. 

 

21:15:03 - 21:32:16 

Yeah, okay. Okay. Before we get into a couple of case studies, I just want to kind of get real for a minute. So can you just talk to me about these reviews? You know how hard I like to do. How long do they take? How much do they cost? Because I think that's probably top of mind for business owners out there. 

 

21:32:19 - 21:51:12 

Yeah, yeah. So, the first thing is we think it's got to be, one of the top 2 or 3 priorities for a business at that time when they do it. So we'll always side it with business. Look, if you've got a lot of other things going on and you can't commit to this, it's probably not starting, you know, because there's nothing worse for us from someone being half committed. 

 

21:52:05 - 22:15:01 

from a, from a cost perspective. Our costs will range from about 10 to $20,000, depending on the size and the complexity. The firm the moving needle for Australia's, the number of employees you've got because, designing the team a really thorough. So I'll try to talk to as many people in business as possible. Right. a real value out of that, though, is we get all this rich data which business owners can take about different things. 

 

22:15:01 - 22:30:01 

I discover through the process that you need to know what's happening around that. So I think there's value in the thoroughness, as well. But the other important part is we don't let our clients go at that point. We actually help them execute and implement. So, a lot of our clients will have an ongoing relationship with us. 

 

22:30:01 - 22:52:08 

We become almost like a CTO extension of that business to help them project, manage and execute, work with software vendors, which is always a big challenge for businesses as well, and be an extension of the firm. So as I've said, he's quite involved. But, if you are serious about the tech, if you've got, you know, trying to do things in the future like Grow arm and I, it's a really important piece of the puzzle to get right. 

 

22:52:10 - 23:11:18 

And all we'd ever ask with our clients is they dedicate the due, you know, the due effort to it and side. This is this is our key initiative this quarter. And we're going now this, rather than trying to do too many things at the same time. Okay. Yeah. Okay. Makes sense. All right. And introducing Steve and on my right, Steve, welcome. 

 

23:11:23 - 23:31:24 

Steve's the founder and managing director of the Link Wealth Group. you founded Link in 2012. got an accounting background. tell us a bit about links. So, yeah, so, so clearly for families back in 2012 and myself, my business partner Josh, like we have built it up to about 500 families on that time. it's a multifaceted business. 

 

23:31:24 - 23:52:06 

I've got a wealth business roles got Lavada solutions, which is an outsourcing admin service to other finance practices here in Australia. We've got a liberal finance and accounting as well. So it's a it's a multifaceted business and hence why technology so important. Yeah Luke when I first met you, Steve, I think it struck me that I think your business is quite digitally savvy. 

 

23:52:08 - 24:17:12 

So can you just maybe talk a little bit about the types of clients that you service and, and, and how, they interact with your business digitally? Yeah. Look, we probably in the, 30s to 40s, 50s accumulations space. And so they're generally tech driven anyway, so it's important for us to be leading on that, that edge, as we go, we do we transform the business a lot in the last couple of years to a lot of online systems and processes. 

 

24:17:12 - 24:40:23 

So that was important to get right as well. But over that journey, we clearly start to unpack some issues that we could see that the disengagement really helped us with. Yeah. Okay. Fantastic. And look your more towards the beginning of this, transformation journey. But at the end of the review phase, what triggered you to work with furniture and move into this review? 

 

24:41:03 - 25:02:16 

Yeah, I think, a look, we saw some bottlenecks, especially in client, data capture that was pretty evident. But more importantly, we also because of all the technology we had and there was a range of different ways you could use all the privileges that before that, the staff didn't quite know some of the intricacies of the, the technology that we did have. 

 

25:02:17 - 25:26:10 

So it was just it unpacked and uncovered the fact that we did have inefficiencies across the board because the staff are using it in different ways that was in sync with each other. So straight away we started to uncover, we were the team in Danni in particular, just real efficiencies popped out straight away because we, we had great tech, but we weren't really implementing as good as we could. 

 

25:26:12 - 25:47:15 

And then on top of that, there was some other technology that came to the table that we could really utilize to get that data capture. Right? Right. Got it. Okay. And look, there's over 60 staff in your business. so, I guess I'm interested in, you know, did you feel that you had the in-house capability to undertake a review like this yourself? 

 

25:48:13 - 26:12:02 

or why did you partner with a specialist, firm, like from Europe? Yeah. I think the major benefit here is the, the, the expertise I bring to the table. clearly, this is an ongoing, issue. Whether it's cyber security, the best tech, how to process advice effectively and efficiently. And that's our biggest issue. But we need that that expertise for these guys. 

 

26:12:02 - 26:33:14 

And that's what they brought to the table. we reality's all kind of style on top of those issues that and it's an ongoing every days a new sort of something is popping out. So, yeah, I was super impressed by just the efficiencies I brought to the table, the ideas I brought to the table, and it's really added to our business and the output for the advisors and it's got it all on the same journey. 

 

26:33:14 - 27:16 

Now, whether it's my link wealth group, all of your solutions and that take place coming together, it's really important. Yeah. I can't emphasize enough. I mean, you saw the slide, how much tech is out there. It's a really specialist area. So even when you've got a large firm and you might have somebody in-house, that's your ops and tech guy, I think it's really valuable to get, a third party that independence, that expertise into the business, to undertake a review like this. 

 

27:01:12 - 27:24:24 

so, Danni, Steve came to you with some pretty big objectives. so can you just tell us about the early stages of the review that you undertook and what kinds of issues that that you uncovered? Yeah. So, we did went through a discovery session. So we, thanks to the, the team at link, gave us access to quite a lot of that, team members. 

 

27:24:24 - 27:45:24 

So we were able to get a really good overview of how technology was being used across, the business, which was really great to see. we have a slide coming up shortly that, just shows the, the technology that was that's being used in Link Wealth. And really it helps us to helps the business to sort of say the visual of all the technology that's actually being used. 

 

27:45:24 - 28:04:10 

You might not sort of always be aware of all the different pieces of tech that's being used across the business. and then what we could see there with the pain points, with the particularly when it came to advice production and the business had it's obviously got really, aspirational growth plans. And we want the advisors to be able to see more clients. 

 

28:04:10 - 28:21:20 

But there was a block in that advice production area. So, we identified that and we also identified some issues with the client service team, and the way that the processes were being run. So we had sort of Excel spreadsheets still being worked on. sometimes some of the Microsoft suite still being worked on for workflow and that sort of thing. 

 

28:21:20 - 28:45:06 

So that was leading to inconsistent data models as well, which is making it difficult to report back up to the owners of the business and get those succinct insights into what was going on. so really we just sort of pulled out those key areas. and then from a client engagement perspective as well, the guys wanted to really, uplift the way that they're engaging their clients and also look to enhance the cyber security overlay as well. 

 

28:45:06 - 29:06:01 

So we, we addressed the client engagement piece to okay. And I might just drill into a couple of those areas a little bit, if that's okay. so you mentioned tech being used inconsistently between teams. and then you mentioned, the fragmentation of data as well across the business and the need to, to kind of bring that together. 

 

29:06:10 - 29:26:12 

can you unpack that a little bit more for us? Yeah. So, probably the advice production area, just given we do have a lot of technology being used in that advice production space. if you look to that slide, you'll say that a lot of those, a lot of the research tools, for example, a sort of standalone, are not sitting in an integrated type of a system. 

 

29:26:12 - 29:43:23 

So, we sort of brought that to the attention of the guys. That was really important to where we can, especially with advice production, is to consolidate, where we're doing all of the modelling and using the tools when it comes to advice production. So that was a really big deal as well. the other thing we wanted to do was to integrate technology where we could. 

 

29:43:23 - 30:02:05 

So once we sort of looked at the technology we were going to be using, across the business, we wanted to make sure that those technology providers could provide an integration as well, because we wanted to reduce that double handling of the information, which was probably really happening in the client service team with manual focus on entering and that sort of thing. 

 

30:02:05 - 30:22:15 

So, just making sure that we're choosing tech that could accommodate, good integration. Yeah. Okay. Fantastic. and look, in a larger business like this, I think you'll often see tech that have overlapping functions. so how do you kind of work through that, recommending, you know, which piece of tech do you use for what function? 

 

30:22:17 - 30:50:09 

Well, we sort of unpack why, potentially there is that overlapping technology being used. And quite often it's just because the business has been too busy, really, to address the fact, to grab something off the shelf. It's working. and, and we're just going business as usual, I guess, using those off the shelf tools. And it's probably not until you get to that point, we actually take a look and look at the visual of what we're using across that process that we can kind of ask the question why we're using these tools. 

 

30:50:14 - 31:12:05 

And quite often, you know, there's no sort of overly compelling reason to not dismantle some of those tools and move them into a more centralized area. Yeah. Okay. But that reduction of takes, not always the outcome. I think it's a good goal, obviously, to reduce the amount of tick and reduce complexity, wherever you can, but where it makes sense. 

 

31:12:18 - 31:30:15 

so in this case, was, was it a consolidation story, a simplification story, or was it a actually you're missing some take. We need to add back in probably more a consolidated story really. So what we ended up with was reduce tech in across the tech stack. But what we did end up with was a more well integrated, technologies. 

 

31:30:15 - 31:57:20 

We still have several things sitting in the in the tech stack, but the they're more integrated now. Yeah. Great. Okay. And Steve, so the review has been completed quite recently. Yeah. Any surprises? No. Unfortunately I'm excited about before. No single bullets. I wish it was that simple. Bullet for the complete. No. Yeah. looking, I think, well, tying the table to the title is like, every practice is sort of different, and I think there's no one size fits all. 

 

31:57:20 - 32:21:12 

Everyone's got a different way to do things. Everyone's got a different call until, interaction piece. And the drivers of that business is different for everyone. So it really does open your the. Yeah. The solution for my practice not going to be maybe the next one and said that that customer's fit is important. But you know it's just it was really good to get some that that I've you on the whole situation and get that really good technical expertise brought to the table. 

 

32:21:12 - 32:42:17 

So it was, really, really good for us. Okay, brilliant. okay. And so the reviews done. Danni. What's next? So what we've done is given, link, list of priorities. And what we wanted to do with those priorities is just sort of look at maybe those high impact, technology changes that can really impact positively across the team members. 

 

32:42:17 - 33:04:16 

And probably the biggest one that we identified was, that advice production pace, where that backlog was sitting. and with, you know, we want the advisors out. And as I said earlier, to be single clients and hitting those business goals. So that was a really big priority. also the client engagement piece, the client portal really important, obviously very tech savvy team, very, sort of younger client base as well. 

 

33:04:16 - 33:22:01 

So having that, client portal is really important for the crew. but again, you know, sort of pivoting, I think, on some of those decisions, which is also very normal to do in a tech review as well. I think client portal probably, prioritized a little bit over the, to the top of the priority list there. 

 

33:22:01 - 33:45:21 

So, we will pivot on those depending on how our recommendations have been digested across the. Craig. Yeah, make sense to adapt to changing business priorities and so on? Absolutely. Yeah. so Steve, Pete spoke about making sure that these reviews, you know, make sense from a ROI cost perspective. But there's always lots of upside as well. 

 

33:47:04 - 34:19:16 

tell me how that looks for you. And, are there any reasons that you would accelerate moving forward or delay moving forward with the findings? No, I don't know. Look at the ROI. What if we stacked up? we've seen a lot of benefits, coming out of our review in full. So, we sort of as getting alerted to, maybe raging when we pulled the trigger on some of the aspects of it, because we had to have a bottleneck at the minute through that collection of data that we're really focusing on, that I'm sure a lot of practices, how we get that data easier, more succinct and a better format. 

 

34:19:18 - 34:37:12 

So we put that at the top of the agenda. But, there's been no delay in sort of rolling with this. And from an ROI perspective, it definitely has stacked up from our perspective. Okay. I think just to add those two, we can some of these tech projects, depending on the resources in the business, can be run in parallel with each other as well. 

 

34:37:17 - 34:59:21 

So I well, as we put the priorities in place potentially, you know, we can run projects side by side again depending on the resources in the. Yeah, sure. It's not just a sequential kind of set of actions. There's some planning and a roadmap that you build around it. Yeah, yeah. Makes perfect sense. Okay. well, that leads us into the final part of our case study, today. 

 

34:59:23 - 35:28:08

So thanks, Steve. I'll introduce now Drew Meredith from Wattle Partners. now, Wattle Partners are in the home stretch of their tech transformation. So I think we'll get a different perspective from you today. Drew, you're the founder of Wattle Partners. it's a specialist financial advisory firm, really focused solely on retirement. and congratulations on the success of your, podcast, Australian Investors Podcast. 

 

35:28:08 - 35:45:13 

I'll give it a plug for you. and I often see you in trade press and so on. So you're well known around the industry. Thanks for joining us today. Thanks for having me. Okay. So, let's start with the same question that I asked Steve. So what were the triggers for you? What were the reasons why you embarked on a tech review? 

 

35:45:19 - 36:03:07 

I think we were seeing this massive surge in client interest and organic growth. So just a lot of growth coming through to the point that the number of clients we had was being outweighed by the number of prospects, and there were prospects that were actually in our target market. So it wasn't. And we had these bottlenecks were popping up everywhere. 

 

36:03:18 - 36:20:14 

and what concerned myself, my business partner Jamie, was being able to not necessarily just deal with the prospects, but actually continually deliver the same service to our existing clients at the same time. So you don't want that. Obviously, you don't want to drop your service level while dealing with new prospects. And how do you combine both of those at the same time? 

 

36:20:14 - 36:39:11 

We've got ambitions. We on retirement is something that we're very big on. We only prefer over time. So, we've got ambitions to be national. So how do you have an advisor in Adelaide, an advisor in Perth, without having a really consistent, process for everybody business. So that was kind of the big driver of engaging for sure. 

 

36:39:13 - 37:04 

Fantastic. So it's all about growth for you really, and supporting that growth of your business and efficient growth I think is key. Yeah. Yeah. Makes sense okay. And Danni, can you just talk us through the steps that you undertook with portal, and the work that was done. Yeah. So similar. to Link Wealth, we went through our discovery sessions with the model crew. 

 

37:12 - 37:25:16 

and what we discovered, the to Drew’s point was a business that does have a very high volume of leads coming through. So that was probably, you know, the, the high level, issue that we needed to sort through before we moved down into advice. so we, we sort of worked on the system that was going to handle and manage those leads, and then get it down into the, the implementation and, and client engagement piece as well. 

 

37:25:18 - 37:47:06 

The other thing was there was probably, lack of really good processes, but not consistent processes being used across the board as well. So we needed system that was the team could move into that was going to be able to handle the workflow. and a very high volume of workflow as well. So more automation around the processes that, that were using and around the tasks and that sort of thing. 

 

37:47:16 - 38:05:15 

client engagement, of course. Obviously really high touch, high value clients, for, for the model crew. So we needed to investigate a client engagement solution as well. and we also did look at the cyber security as well and make sure that we were sort of ticking off, the cyber security points for the business as well. 

 

38:05:15 - 38:24:02 

I think, like every planning firm, we thought we had good processes and to actually put them under pressure and real pressure. Yeah, right. They like they were breaking down everywhere. It was just bottlenecks. And now our role is to work out those bottlenecks and think, you know, 3 or 4 years ahead, rather than letting them become databases. 

 

38:24:04 - 38:41:14 

I think reporting as well for you, us, it was all it was also a bit of an issue because we had the data sitting on in different areas. We had processes sitting in different areas. Getting a consolidated view was tricky for anyone who was putting together reports. They had to go to different sources to, to get those that information to compile the reports. 

 

38:41:16 - 39:03:13 

Got it, got it. Okay, so we're in the final stages of the implementation. When was the review done? Can you just talk us through the timeline here. So when was it done. How long did it take. You know, and when? There was a bit of discussion before we got to the review. Rashard of my colleague who's, who's out of this project entirely would be completely on top of that. 

 

39:03:13 - 39:28:05 

But I feel like it was around August, September last year, you know. okay. So let's take in what's that for nine months and we're almost fully executing it. I think the issue there was, more so that we took the opportunity to review every part of our business rises and workflow and tasks. and we'd also introduced quite a new, quite a few new team members to business as well. 

 

39:28:05 - 39:44:17 

So everyone has slightly different ways of doing things. So, I think you probably tell us you can execute the tech stack in, you know, weeks if you were building from scratch. Yeah, but the business is very different. Yeah. And you need to, I think, for us to make sure that process that all the tech is being used properly. 

 

39:44:24 - 40:03:21 

we actually had to redo, rethink about our entire workflow to make sure it was going to be completely, you know, executed by every member of our team. Yeah, but I think I said, Drew, at some point, I mean, every business could run very well without customers, staff. on that side, you know, so anything we put in pipeline, yes, can be executed really efficiently. 

 

40:03:21 - 40:22:17 

But I think that, probably the value we add is the empathy of understanding. It's not a static environment. And so having that ongoing dialog with one was really important to be across even just what those people changes were, what you were working on. so we could adapt our execution plan for that. So that's how intimate we have to be that close. 

 

40:22:17 - 40:41:19 

And is this pretty consistent with what you're seeing in the industry, Pete? businesses have a trigger. They command such a review and then kind of think, hang on, we might need to zoom out a bit here and think about our model, think about our processes, think about our people and so on. And how do you kind of stitch those various elements together? 

 

40:41:21 - 41:17 

Yeah, it always does. I think whenever someone comes in the outside, we even experience that scenario when we have external partners we work with. You always ask ourselves those questions. and I think in a business like model, in many of our clients, they are tend to be high grade businesses. They're doing a lot. so there's all these external variables that come into the picture. 

 

41:17 - 41:17:09 

And actually we love that. That's actually what makes the value, because we know the stuff we're going to implement, we're really going to make a difference in the business. So and from a vendor perspective, we we're, we're all for let's keep shopping the X before we start swinging with tech. So we're happy to take a breath, get the client comfortable. 

 

41:17:12 - 41:32:19 

There's other variables we're not sure of yet. And hit the pause button on certain initiatives and just focus on things we know we're a no brainer. Things that have to be executed. and the more we know our client, the better at that, I think. I think it's probably fair to say we, we do open up a can of worms as well. 

 

41:32:19 - 41:51:18 

So when we get to each of the, the areas of, we're looking at advice for client engagement, client engagement especially, it's a whole strategy in itself. You have to rethink and reimagine the way that you want to interact with your clients moving forward. Because if they've been getting emails from you, you know forever that they've have to log in to a portal or whatever it might be. 

 

41:52:09 - 42:06:14 

and what are they going to say when they get into that portal? And are they going to need to be trained and all that stuff? It's a whole it's a whole piece of work in itself. Yeah. Okay. I can see how that would throw up a whole range of questions for a business owner. Yeah, this is probably something we're going to be as good at in Australia. 

 

42:06:15 - 42:25:24 

Maybe that's because the tech hasn't been as good. But so we travelled to future person in the US for the last year, and the entire event for three days was that client experience nation, you know, Funny Nation. And how do you give each client the same experience all the way through, whether it's, you know, they've clearly got better tech the way you do in most cases, yeah, there's a much bigger market for sure. 

 

42:25:24 - 42:48:16 

But and that's something that's always been our focus, as we're growing or just running our business, you know. And it's a really balance, isn't it, because we have such a highly regulated environment still, with so many processes, just have to be done irrespective. but equally, firms like Wattle and Link revolving so much they want to really push the limits of that and do things differently because they consider marketing that. 

 

42:48:16 - 43:06:15 

So getting that balance right, it's going to be a real challenge for this industry for next five changes. Yeah. Absolutely. Yeah. Got it. Okay. And in this case how does a business feel about the recommendations. Are you feeling any resistance in the business to change or any people related issues coming up like that? I didn't know this. 

 

43:06:15 - 43:24:21 

When Danni would come into the office about what's coming next. I think the our team is very close. So everyone was kind of getting frustrated about the same things, and everyone could see the bottlenecks in their vocal, letting us know when there's things, that are frustrating then. so everyone was kind of, open to it. 

 

43:25:12 - 43:41:24 

I think it was more making sure they're involved in the process. And we ran a few strategy days where we talked about what it look like. We kind of restructured our team. So not a traditional associate advisor, structure as well, and then involved them in each step. So each time, each and occasionally the meetings with the Nero. 

 

43:42:08 - 44:08 

but I think it was also important not to have had this isn't who has a subcommittee or not having too much involvement from day to day, from every part, every member of the team. Because we know everyone has different ideas and different experiences. So we have to kind of blend those in to a one solution, to make sure it's, you know, fully implemented. 

 

44:10 - 44:18:20 

Got it. I think you've also at the bottle, could have done really well, getting one person in the business to own this, because we can we can only do so much. We do need people on the other side to actually own, the area or whatever it is you're doing. You've got one person managing that which has been really effective. 

 

44:19:03 - 44:35:03 

it's one person for us that we need to deal with. And, and one person from your side is sort of rolling out that strategy and communicating that strategy, which has been, really effective at the fact we shot off that. Yeah, yeah. And that was, I think one of the other questions was about what were the issues. 

 

44:35:05 - 44:52:08 

Has it been delayed? and I think it was probably, unexpected how much involvement we needed to have. Yeah. Okay. And it was dealing with business as usual while we were trying to execute code change. I kind of compared it to trying to turn a cruise ship that was going quite quickly. That, everything's going really quickly to try to change everything at the same time. 

 

44:52:08 - 45:20:20 

So, yeah, essentially we took old client work, away from Shayna so she could only focus on this, implementation across the cross business in setting us up. Yeah. Look, I think all up, that's a great recommendation for people out there, right? Pete spoke about you need capacity to get these things done and to do it well, having a single point of contact to just take accountability and drive that into the business, taking all the work of that person so that they've got the capacity that you need to be able to manage it. 

 

45:20:20 - 45:37:12 

So that the whole thing kind of keeps that keeps rolling. I think, great recommendation. And in 99% of cases, it's not the business owner. In fact, we often discourage it. being the business owner, there's always someone like over on or in a, in a business. And in fact, they're ready to step up if you give them that opportunity. 

 

45:37:12 - 45:52:20 

And I love it. You know, it's a great career development opportunity for them as well. So, it doesn't have to be on your shoulders as a business owner. Okay. Drew, just talk us through the results so far. Is it is it been worth it? What are the results that you're saying? It helps me sleep at night. 

 

45:52:21 - 46:12:15 

I think a bit better if that, knowing that the process for new people coming in, they're being welcomed appropriately. They're all receiving the same, experience and same for our existing clients. So that helps a lot. in terms of, like, cost. I'm confident we'll cut probably 10 or 15% from our tech investment. And, you probably know better than maybe what my take investment is. 

 

46:12:15 - 46:35:19 

I think 100 and 250. Yeah. So if you think 10 to 20% of that in saving 10 to $20,000. Yep. Yep. Great. and I think it's also allowed us to focus more on the when it bottlenecks our, in our business and not necessarily now we we're confident we can double our number of clients without adding double the amount of staff, which means we have to hire less administration probably. 

 

46:35:19 - 47:02:03 

And junior staff and if you think that we probably need two more if we if we want to do it. So that's probably 120 or 30,000 in annual staff costs as well. Yeah. Okay. Fantastic. And is this pretty consistent with what you see Pete. So assume these savings are coming from either list or fuel licenses. Yeah, we tend to we always find initially firms when we do a date diagnostic they're paying for things that we realize they're paying for, that we're not using. 

 

47:02:10 - 47:19:19 

so SAS companies are really, really good at getting credit card details and billing you in a way that sort of slips out of it. Right? So, often always find low hanging fruit there. but we absolutely look at utilization and all those things as well. So 10% is not an unusual scenario. What we find, from initial cost perspective. 

 

47:19:19 - 47:36:15 

And then you add the people side of it, that's a that's another equation. But in all cases it's actually about getting people out of mundane tasks and actually doing stuff that really impacts the client and the business. And that's business a level. That's what they need, not people behind the scenes doing double data entry systems. Yeah, I mean, totally. 

 

47:36:15 - 47:55:14 

I mean, obviously this review was all about enabling growth. It was. But if you can just underwrite that with some efficiency savings in the business, introducing any the change is kind of painful. and then ultimately the tech improvement is enabling that growth as well. And that's the upside. The other latter is a lot of that clients, outsource. 

 

47:55:14 - 48:17:22 

So they'll use offshore, resources which, you know, I know are cheaper than local resources but not inexpensive. and there is often a thing of if you just pass on port prices and systems to offshore stuff, you're still having the same issues as well. So we do find, if we get this right and we involve those offshore partners, particularly, they get a lot more bang for buck out of those relationships as well. 

 

48:17:23 - 48:39:05 

Right. Make sense? And you said before the review that there was staff that were frustrated. Yeah. How are they feeling now. How are they feeling about the the outcome. And are they seeing any improvements there? I think they're relieved. And because we've gone through this workflow review, it's given them more confidence. And you know, I think in most part we're not a huge practice that we're up to like 12, 12, 12 team members. 

 

48:39:08 - 48:59:02 

Yep. and I think there's always overlap within advanced practices of and who's responsible for what. And then errors come when no one's truly responsible. So I think hopefully they'll give me the feedback when I get back to the office. But, I think that they're more clear on what their role is. And it's, and we and then products are easier to identify, easy to fix now. 

 

48:59:08 - 49:21:10 

Yeah. And in different areas. And that way before. Yeah. Okay. Fantastic. and any model there on the home stretch. so tell me the review was commenced in August. So last year, is this kind of like painting the Harbor Bridge like you've finished and now you've got to go back again? Oh, yeah. You know, we all know that tech does move quickly. 

 

49:22:01 - 49:42:22 

and things do change and businesses change should priorities and so on and so forth. So tell us what the process looks like from here on in. Yeah definitely I'm Sydney Harbor Bridge situation. Sorry just for us, but so yeah, I think, technology is evolving and it's evolving really quickly. And I think it's really important to stay on top of the technology that you're using. 

 

49:42:22 - 50:14:09 

You know, what's working today may hopefully have some really good features into the future or might not really work for you into the future. So you've got to constantly assess that every 12 months. and I think just sort of being really, cautious to stay on track, don't sort of go off track, I think is probably l am advice stick with what you've got, give it a chance to, to work in the business and then, you know, do you do your reviews after that I think is probably the advice moving forward and help and our model for that. 

 

50:14:11 - 50:37:06 

So we, we obviously dial back our intensity with clients when they come off projects, but we don't want to sort of let them go completely because you don't want to come back in two years time and it's all broken. so, so our view is that we would come back and visit those firms semi-regularly, maybe even join their management meetings to discuss what's going on with tech, how things are tracking, and keep them updated on what's happening in the broader ecosystem of the things that are relevant for them. 

 

50:37:06 - 50:56:17 

We would say our role is providing that insight. Yeah. Okay. and look, we did see a slide earlier with lots of tech providers. And we know that we spoke about each business is unique. So it's not a one size fits all. But how do you help a business like juries through deciding which bits of tech are the right ones. 

 

50:56:17 - 51:14:05 

So who should you partner with kind of where should you put your chips in terms of which partners should you use for your business? Do you wanna go? Yeah. I got there's a couple of things. So, we obviously look at, you know, Fazeley is the solution doesn't stack up on its own merits, doesn't do what it claims to do. 

 

51:14:05 - 51:27:09 

And Danni and the time do a lot of research in the space, so we're on top of that. So that's fundamental. but the second point is we look at, does that software vendor have a good support model? Yes, I can, I work with a firm like a Wattle or can they support that or I very much a hands off tech firm. 

 

51:27:11 - 51:50:20 

And the third one is, is it a is it a company that's actually going to be in business in the long run. So there is zero value in partnering with companies that maybe don't have that longevity. and, and equally, if firms like model or others want to acquire and do different things or merge with other practices, we, we really try and avoid going for anything that's too bespoke or unique because it actually can make it really hard to integrate in the future. 

 

51:50:20 - 52:09:10 

So it's not just one factor, but we do think there's a there's got to be an element of consistency in the call. because otherwise you, you can end up with something really bespoke that no one understands how it works as well. Yeah, yeah. And just another question. you know, in tech we sometimes think about tech moving at two speeds. 

 

52:09:10 - 52:25:23 

You've got that kind of core tech that you want to be nice and stable and reliable. but there's other parts of the business where you want your tech to kind of move quickly, where you need to innovate and so on. So is that do you kind of think about that in a similar way for advice businesses? 

 

52:26:00 - 52:46:12 

Yeah, I do all the time. And I think there's two elements. One is the tech that gets those common jobs to be done across the business done. So reduction of device, getting data off clients client experience. And then there's other tech that I think is more personal. You know, that helps us in our daily productivity and, things why we use Microsoft, the why we use all the other apps, calendar management apps and all these sort of things. 

 

52:46:12 - 53:11:22 

So that's probably for me where the real innovation and agility comes in, where we'll see more and more things happen, and I'm sure we'll will talk about AI a lot more. But that's where we see the value in those tools. and so we're pretty, you know, realistic with that clients. We say, look, let's get to get the core stable, the things that are business critical, but allow the business to the freedom to explore and experiment with other things that we know we're going to have, you know, good marginal productivity improvements and make them happy. 

 

53:11:24 - 53:25:12 

I think for us about knowing our client and who the in cloud is as well. So a lot of like a lot of advice for firms. I think the client would have lots of 60 and 70 and even things like, you know, DocuSign can be challenging. You know, a lot of people use iPads and these things don't always work perfectly. 

 

53:25:12 - 53:44:23 

So one is knowing who that is. And and for us, we're doing like a call it a beta test. So not just executing that to 200 people at the same time, because we we know will become a help desk for software if we do that. Yeah. So testing it and finding out what the issues are, then educating and taking our clients on the journey while we're executing it. 

 

53:45:01 - 54:03:16 

Yeah. and I think that should hopefully, you know, speed up the process of, full adoption of it. Yeah. Brilliant. okay. That makes that makes a lot of sense. Any other recommendations or suggestions for business owners out there that might be thinking about going through this kind of process? Can I like can I knock this guy, just do it? 

 

54:03:16 - 54:21:14 

Is that, so we've been, Jamie, I've been doing this since, like 2005, and I think we've tried to execute every new piece of technology sells, whether it's plugging things in here and there and trying to take on. So while doing well, trying to grow the business, and, you know, like, we're not particularly big fan. 

 

54:21:15 - 54:39:13 

So it's find a professional and execute it properly because particularly if you have a if you have a growth outlook and you want to you say minimize it. Planning for him to say organic growth anyway. but if you got a growth outlook just execute it, get it done and and reduce your stress. Trust me. yeah. Fantastic. 

 

54:39:15 - 55:02:24 

Okay. thanks a lot. True. Look, it wouldn't be a tech webinar without a question on AI. so, you know, we've seen this explosion of, hype around ChatGPT and copilot, and so on. And, look, I do think there's so much potential here. talk to us about the role that you think this kind of tech complaint advice business people. 

 

55:04:04 - 55:21:23 

so it's still very early days where we're, you know, oh, just in the first stage of I think we're still all learning as we go. I was to say, a lot of our clients come to us asking about AI and the and I call it hitting everything that the AI stick AI will solve that. I will solve that. 

 

55:21:23 - 55:40:05 

But but what's really important now is that, I, I only works really, really well for you if your data is well structured and accessible. so, for example, a lot of clients we know have tried to turn on copilot and pay for those things on Microsoft's Copilot, which is the AI capability. But then we find out they don't have all that data in SharePoint. 

 

55:40:09 - 55:59:18 

They've got data on people's desktops, and someone uses Dropbox and someone needs Google Drive, and they got all these types of things that are good and well. Of course it's not good because it can't access your information to get contextual support. So, I think there's a real need for, safe curiosity. I would call it with using AI from a personal perspective. 

 

55:59:18 - 56:14:07 

And so we, we use it for, but we're still learning as we go our way and just pick a couple of small use cases that you think are good for you. Obviously, things like content generation and helping you write better emails. I think a lot of us have younger, younger staff with 40 years of cop. Right. 

 

56:14:07 - 56:34:24 

Very well. Used to writing everything in 147 characters and need to write differently for mature clients. So a great example with generative AI is I'm writing an email to a seven year old client. This is what he or she is like. Can you help me write it in a way that they would resonate? Yeah, I think that's a great way of using AI, sure, but I want to talking about changing the entire world. 

 

56:34:24 - 56:54:02 

So, our advice is always experiment really safely. Use the Microsoft version of Copilot dive pretty common data into open AI. Yeah. Those things. And in fact, Danni and the guys have been some of our partners been working on a safer usage of AI, framework for licensees. Okay. Rolling that out in the next month, we're all in that out. 

 

56:54:11 - 57:14:12 

because we decided we want to, you know, at the end, the government and the industry pretty slow on this stuff. So we just thought, let's let's put something out there to help licensees have a framework, at least for usage. Oh, fantastic. Yeah. Okay. I think just to echo that, the research that we've done confirms that there are cyber risks around using standalone AI tools. 

 

57:14:14 - 57:41:17 

So, you know, taking private sensitive information, client information and sending that over the internet to, you know, a ChatGPT or open AI type tool. definitely has a lot of cyber risk associated with it. but when you're talking about an embedded AI to, like Copilot embedded into the Microsoft ecosystem where you might already have, a lot of client information or other business information available for that tool to, to synthesize. 

 

57:41:24 - 58:02:11 

looks like that's where the real value is for businesses going forward. And we see AI is being a feature of products people already use. So we're seeing, some of the big CRM, like Salesforce and Zoho started putting AI features, helping you complete data on those things, which is great. I'm sure you see opportunities for sure that your platform is to use AI features, and I think that's where the best value will be. 

 

58:02:12 - 58:25:22 

Yeah. Okay. Brilliant. All right. Well, I think that brings us to the end of the webinar. So thanks everyone for joining us. I'd like to thank, Pete, Danni Drew, Steve. I think that was really useful. So hopefully, everyone watching, got some really good takeaways and, and some useful tips that you can take into your own tech stack review. 

 

58:26:11 - 58:54:16 

we'll be sending out the CPD certificates next week. if you want any more information about tech transformations or CFS 10x, contact your CFS BDM. If you want to share or rewatch this webinar, just head to CFS.com.au/10x. We've got two more webinars coming up. One on the 6th of June and one on the 12th of June. 

 

58:54:18 - 59:16:04 

And those two are all about ethics. so we'll give you two ethics hours of CPD for those webinars also coming up. and of course, I’m the exec in charge of CFS Edge. So it would be remiss of me not to suggest that you guys check out CFS Edge, a new market leading platform. Reach out to your BDM and we'll help you with that. 

 

59:16:06 - 59:21:08 

So thanks everyone and have a great day. 

Well good morning everyone. My name is Chris Mather. I'm the executive director of New Business here at CFS. I would like to acknowledge the traditional owners of the land on Gadigal land, and I would like to pay my respects to elders past, present and emerging. Last month was another milestone for CFS with the launch of CFS 10x. It's a differentiated offer for advice practices and professionals.

 

10x is all about joining education and capability with your objectives, your objectives for your business, for your clients, for your team and for you. And you can expect access to best in class subject matter experts and thought leadership delivered in forums such as this webinar, roundtable discussions, whitepapers, research, and industry events. Many of you will have leveraged the expertise of Craig Day's award winning technical team. Or for your younger advisers, a professional year by CFS. CFS 10x is designed to empower you to execute your strategy. 

 

Last month, we launched our insights called Operations, Obstacles and Opportunities in partnership with research by Elixir Consulting. And for those who missed it, you can find on demand, you go to cfs.com.au and search 10x. But now I'm delighted to be bringing you the second webinar in our 10x series, Striking Deals.

 

The CFS team have the privilege of engaging with around 1500 practices a month, and is probably the hottest topic that we come up against. Many firms of all shapes and sizes are questioning whether they'd benefit from a purchase or merger, to futureproof their business, to scale and to grow. And for others, it's all about how to realise some value and to take some value off the table for lifestyle reasons and to execute a succession plan.

 

The catalyst for these decisions varies. And whether it's around growth or retirement being the goal, becoming a contemporary business that is ready for a transaction is a journey, and there is much to learn from those who've navigated it before. CFS to put together an expert panel of advisers, investors and legal specialists who all have extensive experience in buying, selling, and merging, in the advice practice landscape. 

 

You'll have the opportunity to post questions as we go today, but due to the nature of the agenda, we will be moving really, really quickly. So if there's any questions we won't get to it. I'll give you my assurance. We will answer those, after the session, but for now, let's get into it.

 

So our first speaker is Luke Grundy of Humblebee Financial Planning. And Luke was faced with many decisions similar to many business owners that we see, at some point in their professional career to either sell or to expand. And Luke has worked in financial services for close to 15 years, seven as a planner, three of those as his own practitioner, and owning a business.

 

02:43:13 - 03:13:12

 

He's worked in a number of boutique financial planning practices and decided to start his own business in 2017, which is when Humblebee Financial Planning was born. So welcome, Luke can I Chris area very, very well. Thanks for joining us. So Luke, you sold your practice in 2020. Why did you make the decision to leave financial planning? I think ultimately it was because when I really looked at it and decided, did I actually want to be a planner, the answer was probably no.

 

03:13:17 - 03:33:09

 

There was a myriad of different reasons. for it. I remember having a conversation with the late Michael Harrison from synchrony at the start of 2020, and I said, this year, I'm even going to buy a business merger sell, because I was a one man band and I felt that I had to do something. They were kind of the options and that was kind of the year of Covid.

 

03:33:09 - 03:50:00

 

And by the time we got to the end of that, really ultimately looking at it, it was like, do I want to continue being a financial planner? Because that's probably what I need to do for at least the next five years to get this business to where it is. And the ultimate answer to that question was no. So that's why I decided then to, to ultimately so bold, bold decision.

 

03:50:00 - 04:05:09

 

And so how did you find a buyer? What was the process you went about to find a buyer for the business? it was actually relatively painless. I might have done it. I might do it a bit different now that I'm on the other side. And I've seen it happen in different ways, but I was part of a licensee synchrony.

 

04:05:09 - 04:26:04

 

So really the conversation was hot with my, sort of state representative from synchrony to say, listen, this is what I'm thinking of doing. I'm thinking of selling, like, what was the process that I have to go through? And, and so he walked me through the process and said, listen, there's a few advisers within the, the community over here in WA looking at buying businesses.

 

04:26:04 - 04:44:19

 

Do you want me to introduce you to those advisers and let them know? So I obviously already knew them because they were part of my dealer group. And ultimately I got introduced to sort of 2 or 3 of them that that touch base. And the conversation started from that. And so when you start talking around the process itself, how did you land on the methodology?

 

04:44:19 - 05:04:14

 

What was the process for for getting to that final price that was agreed to? I think so I had a price in mind because I had looked at buying businesses prior to to their start coming up to this decision. So really for me, I had it was it was a multiple of of what the ongoing revenue of that client was, but a different multiple depending on the client.

 

05:04:14 - 05:22:03

 

So a different multiple for an insurance only client that was only one year in, so still had a clawback, a different multiple for an ongoing client that had been with me for three years, and saw a line by line came up with what that multiple ultimately looked like at the end and what that kind of end figure came up with.

 

05:22:05 - 05:40:15

 

and then it was just around sort of that sitting down and negotiating with the buyer to see where they came in. we were relatively close to each other, so we weren't too far, far apart. And with what we wanted to do and it was it was honestly done over a glass of wine in a bar. And we just sort of had a chat and said, what do you want?

 

05:40:15 - 05:57:19

 

What do you want out of it? And that was kind of we sort of came to that decision. So there was there was two offers really given to me. So the offer was I could have a higher multiple, but I needed to work for six months in the business. And then there was 12 months. So it's kind of like 75% from 25% 12 months down the line.

 

05:57:21 - 06:18:21

 

And depending on who left the business and that sort of back with Clawbacks, or I could accept a lower multiple and just walk away from the client so that do the whole transaction, hand them over, come up with how we were going to do that. But ultimately, once the money was handed over, that was that there was no clawbacks they were taking on what they were taking on, and I was happy to walk away with what it was.

 

06:18:21 - 06:35:10

 

And ultimately we went with that second option. And probably the biggest reason was I knew I was probably going to stay in the industry. I knew I was going to. I'm actually the BDM of the adviser. That's all my business now. So I thought I didn't want that kind of 12 month period of it being back and forth, and then we have to sit down again and talk.

 

06:35:10 - 06:55:06

 

And it was just I just felt it was a lot cleaner just to sort of finish up, walk away. there were a few things in there. So there are a few clients that we've kind of we just started their work, so she got that and was able to then charge them what she wanted. So I felt there was enough of a buffer there that even if you did leave, which ultimately that the probably going to in this.

 

06:55:06 - 07:18:01

 

So I think I felt that it was fair that it would work out that way. So and yeah, it's all worked out really well. And it's a risk reward of you staying in the business and potentially slightly higher retention. And so just on that, how was the client transition managed, and were there any unexpected surprises that came out either from your perspective or the practice, the your business.

 

07:18:03 - 07:43:04

 

So what we said is that we would so I said that I would, I would phone and document the conversation for them. with every client that was an ongoing service fee paying client. so I would phone them, they would receive an email with that new adviser's details, and she'd book it into my email. But anyone that was just like that insurance only, we would just be able to email them with her details and say, this is what's happening.

 

07:43:06 - 08:03

 

so the majority of my book was on going service clients. That's probably about 75% was on going service is probably 2025 that were on that side. So we did that. I also introduced the to who was my main, probably referral source, which is a mortgage broker, just because he had a relationship with a lot of my clients.

 

08:05 - 08:16:23

 

So ultimately they didn't end up doing a referral relationship together. He went with a different planet, but she still talks. And because most of the clients that his clients say to try and make that a lot easier for her as well. so that was kind of that transition. So it was get it to a point. Once she takes over, this is what we do.

 

08:17:00 - 08:41:08

 

before we would say that was, I think probably the hardest day. It was a Wednesday. I remember it well, 10 a.m. sitting down and just getting on the phone and calling all these clients that you build a relationship with and being like, oh, ultimately, this is what's happening. So that was that was quite interesting. I think the most interesting thing for me was that's the purchaser of the business was really surprised when I didn't drop off any paper files to our office.

 

08:41:10 - 08:57:19

 

so she asked me when I was going to drop the client files off and I said, oh, I can just sell on Google Drive. I can just give you a, you know, just give you a hard drive with all the details on there and you just upload it all on. So I think because I'd started a business only three years earlier, it was a very clean business.

 

08:57:19 - 09:17:12

 

I didn't have any of this, any legacy clients. I started from scratch with no clients. So I think that was the biggest surprise, that obviously one of the big things sometimes taking on older businesses is I'm sure others are going to talk and I've done the same. When you got dropped off paper files, it must be quite interesting to go through and actually work through what that client journey has been.

 

09:17:14 - 09:33:24

 

so I think that was probably the biggest surprise on that side of things. other than that, I'm pretty sure I think maybe 80% of the clients stayed with that. I think one life straight away, and then the rest of you were dropped off. So she's done really well. And yeah, I think ultimately I was happy with who she was and what advice she gave. And that's how it worked out.

 

09:37:20 - 09:59:08

 

Fantastic clean business. Clean handover. Well congratulations Luke and thank you. Thank you for joining us this morning. Now I would like to hand over to our next speaker, which is Lee Wapling from FMD. And I might actually start asking Lee if he’s found any, any of those handover that have been largely paper based as part of this part of the next, session.

 

09:59:08 - 10:23:09

 

But Lee has been the CEO of FMD financial, head offices in Melbourne since 2001. He has 20 years of experience in financial services. And prior to joining FMD, Lee was a senior executive with Perpetual. So welcome Lee if you're online. Thank you for joining us. Thank you. Thanks for having me. just if we could just start just with a really quick summary of the FMD business, just for context for our for our audience.

 

10:23:11 - 11:05:21

 

Yeah, sure. So we've got three sites Melbourne, Adelaide and Brisbane. Approximately 20 advisers is and around about 2400 clients. And we're, exclusively wealth and insurance business. And fair to say FMD have been acquisitive over the years. Lee how do you identify potential acquisition targets, who's operating in many jurisdictions around the country? Well, it's a combination of, talking to all the, the business brokers that you'd expect in the markets, along with personal prospecting and talking to people like you, Chris, about what's happening in the market and, asking questions and, and making it known that we're interested.

 

11:05:21 - 11:35:18

 

And, you know, we're really interested in, practices where the founder might be retiring. We've got a good program to manage that, client succession. And so making it known, talking to brokers and, you know, put a. And what sort of shape then do you sort of like to see the target company in it? You'd like to see a bit of a turnaround opportunity for yourselves, or do you like it to be really clean and look a lot like an FMG, just perhaps a bit smaller?

 

11:35:20 - 11:56:21

 

Yeah, we certainly don't expect businesses to be perfect. That perfect match for, if any. For us, the most important factor is the seller's motivation, actually. Why? they want to exit. And once we understand that really clearly, then we can have a look at the business. In fact, you know, an opportunity to, to clean up a book.

 

11:56:21 - 12:28:07

 

We've got strong processes. We can handle those paper files we can handle explain transitions. We've got strong processes around all of those things. And so we're happy to take on a business. And you know obviously compliance is really important. And ongoing service agreements are crucial. But a business doesn't have to be a perfect fit for us. We can we can handle the things that might be on number of platforms and maybe some clients that are perhaps on some legacy, where the adviser had intentions, perhaps to move things along but hadn't quite got to it yet.

 

12:28:07 - 12:50:18

 

We're very happy to say that as well. And so then how do you assess and adjust the value, based on the financial condition of the, of the sale on the book, like how do you sort of dial up or dial down what you prepared to pay? Yeah, we look at a business and we value it as its contribution to FMG.

 

12:50:19 - 13:14:01

 

So we, we look at the financials, we model what it would look like to have that business as part of our business and what the future state will be. 12, 18 months, two years away. And that's our upside. And then we look at well, what are the risks on that. And the risks are typically, either the age of the clients, the fee that the clients banks are lower Fe clients.

 

13:14:01 - 13:39:22

 

We obviously the value of it was that more expensive for us to service, perhaps less profitable then. And it's often more difficult to demonstrate long term value. So we really put all of those things together, make up based on our experience. We make a forecast about where we expect that that future value to be. But typically then we'll come back to the selling practice with a multiple of recurring revenue.

 

13:39:22 - 14:02:22

 

And that might be just in two parts. One is the part for the high value clients, and is a fee of any for those lower, fee paying clients. So it's very much value to us. And we make a bunch of assumptions about client retention, about can we increase the fees? Not in the first year where there's a new net that's very difficult to have a seller to accept.

 

14:02:22 - 14:30:18

 

But beyond that, and, if there any other opportunities to drive efficiency in the practice of through introducing MBA portfolios and so forth, and typically how long I know this is going to be hard to generalize, but how long from sort of start to finish, would a transaction type go on to say that you're always going to be on the look on the lookout for opportunities, but from the time of sort of restarting due to execution, what's the shortest in the longest time in your experience?

 

14:30:20 - 14:51:20

 

Yeah. Well, I think if you're doing it in six months, it's a pretty reasonable timeframe if you're getting from the first look at the business to completing and making that the completion payment. So there's a monthly 12 months from there to the integration and it's done. But that's a pretty good time frame. We've had 18 months. We've had four months probably this year.

 

14:52:00 - 15:14:11

 

We haven't done that. But six months is a great outcome. I think if you can get it done in that time frame, it just takes you all day. Day takes a while, particularly for small businesses that have not had to put a data pack together before. And legal agreements always take a bit longer than we hope. And so in closing, what's next for FMD?

 

15:14:13 - 15:38:01

 

Well, I mean, we're very keen to continue that acquisition through, the time of retiring glass. But we've got a great program. We bring advisers young people through on a seven step program to advisers. And as so we build capacity within our business group. And so that's a really important thing we want to continue. But I said at the start, we're really wealth and insurance only at the moment.

 

15:38:02 - 16:02:03

 

But we do think, that there's a good opportunity for us to bring finance breaking into our business. And so that's something that we'll be looking deeply at in 2024. And just to call out to, if you've got any PE wise coming through with those young advisers later, don't forget about the The People program by CFS, because the reason is available to you.

 

16:02:05 - 16:28:19

 

Thanks here. And thanks very much for joining us. Thank you. Changing gears slightly now, many advisers might not be planning to buy in the short term, but rather focusing on a really long term exit strategy. And our next speaker has done exactly that. Well, now I’d like to introduce Michael Misiti from Smart Financial. Michael has been focused on succession and the longevity of his practice from the day established it over 15 years ago.

 

16:28:21 - 16:48:18

 

And so starting as a one man band from now, where he has over 35 staff, including nine advisers, succession planning is a really key strategy since you started the business. So welcome, Michael. As a as a quick summary, your practices say down the south coast of New South Wales. Just a really quick overview of your business context for our audience, please.

 

16:48:20 - 17:10:12

 

Oh hi, Chris. Thanks for that. yeah. We're down on the South coast, town code show Harbor. it's growing really strongly in here. And, we're pretty excited about the future prospects for our practice. when you introduce being a this is like a 15 year plan. It really sounds crazy when I hear it out loud, but it's true.

 

17:10:13 - 17:31:12

 

What the day I started was the day I started planning for my exit. just based on my prior experience, that where an adviser had difficulty, with his succession plan, I just never wanted to be in that position. And just like we talk to clients, we always say the plan early. So then when the time comes, you've got a choice.

 

17:31:14 - 17:52:04

 

if you want to retire from what you. You know, and if it's not the right time, at least you've got that choice. And and that's what I always wanted. And funny enough that 15 years is up now. I could walk away any time. the business will be fine. It's might even run a little bit better than me being, the anchor here.

 

17:52:06 - 18:12:13

 

guys, but, now mean I'm enjoying the ride, and, it's great seeing that young energy in the practice, that we've all planned for. So. Yeah. And so when you when you, you do begin with the end in mind, which, you know, I really applaud that approach. How did you actually go around the, the planning strategy.

 

18:12:13 - 18:32:19

 

Like so yes. You want to finish from a certain time you had a number one ask you later on what you actually plan on doing. when you do exit the business just from a personal perspective, that how did you actually how do you sort of go about that then working backwards from the endpoint. So when I first started, I was just on my own.

 

18:32:21 - 18:57:14

 

I had a, a couple of, administrators to help me along and the practice search quickly within the middle of the GFC. But there's a little bit of regulatory, change coming on board, in the financial planning industry back then with the crash, which just snowballed and it just became bigger and bigger. And what I realized at the time is I needed some scale to cope with that.

 

18:57:16 - 19:22:13

 

I just couldn't be on my own and handle it all properly. So to manage clients and do a good job there, but also have a practice that can be nimble enough to move with whatever the the regulation change would be. So I scaled up, organic growth all the way through, and then an opportunity popped up for me to acquire a practice that was similar in size to what I was at the time.

 

19:22:15 - 19:45:02

 

So pretty much we doubled the practice in a very quick fashion. it was a bit of a, an opportunity, which I'm really glad we did that. It really helped out at the time. And within practice, how do you identify equity stakeholders? How do you invite them in to start taking some equity in the practice as part of the overall succession plan?

 

19:45:02 - 20:08:14

 

How do you how do you approach that? So we've always had a program to bring our smart people through. So we bring them out of university we employ and put them in an admin role. just let them have a feel for the industry, make sure they're right, and it's got the right, ethics call it the right, personality.

 

20:08:16 - 20:34:20

 

and they're willing to work hard. And we, we tend to see that over that first 12 months when they're just doing admin. And it's so routine and there's a lot of volume. but if they get through that, then it's into the tech space where they, quasi power, adviser assistant, they spend some time producing statements of advice and, getting through that and we at the time, we were running a pretty high volume practice.

 

20:34:22 - 20:56:02

 

the compliance load wasn't as high. So we're able to, get required a lot of, client work quickly. So these young, university graduates were able to, have a lot of exposure to that volume and, and built up their experience pretty quickly. Then after that, I'll bring them into meetings with me for 12 months.

 

20:56:02 - 21:20:02

 

So they'll sit right next to me, take notes, and, just observe the discussions. And then exactly 12 months later, they're in front of the same clients running the meeting. And then after the before and after the meeting, I'm sort of, helping them with their soft skills, and making sure they understand what it takes to look after that client, all those normal things.

 

21:20:02 - 21:47:07

 

And once I'm through that process, it's pretty obvious to see who who's going to make it and who's not. And I was lucky enough to have a cohort of, what I call cadets who showed signs that they might have some skin in the game. And I'd actually be honest. so working that out was a challenge. how to reward them financially?

 

21:47:09 - 22:13:09

 

bring them on board as owners. And it helped them succeed me. So, the way I discovered the best for my situation was to sign them in as owners. their share of the profits would pay off their, they allowed and, And once was. How did you find it? So you found that off balance sheet on a on a sort of a goodwill initially basis?

 

22:13:11 - 22:30:11

 

that sort of secured them in the business and then they pay that off over time. That's exactly right, Chris. And it was difficult to sort of put that in front of the bank because at the time. But our growth projection was that would you do the modeling? And it was actually that good. That was hard to believe.

 

22:30:13 - 22:50:04

 

and I really didn't believe it at the time, but here we are. so when I approached the bank, I explained it all to them, and, I worked with my accountants to make sure it was going to work, and it was fine. And, introducing that to a call it a 25 to 30 year old who spent five years in the business.

 

22:50:04 - 23:11:08

 

I he he's a part of ownership. he's it's it was an open book. We showed him the profits of the business, the revenues, the everything. And then this is how, it would pay off over time. And once it's paid off, then the dividends would be yours. And away you go. So I'd be delighted. Yeah, well, that's a great story.

 

23:11:08 - 23:35:04

 

Thank you for sharing. So then back on, on other acquisitions that you may be considering buying apart from financials, what else. What else are you looking for. So to continue that scale growth. organic growth was fantastic. But as we got that little bit bigger, the opportunity was there to acquire the practices and we're doing that well.

 

23:35:04 - 24:01:14

 

So it just made sense. And we did a good job of that first acquisition. So we looked around for, good opportunities. And even though I spoke to quite a few advisers along the way, it was only 1 or 2 really that suited what I wanted to do. and look, that was just getting some nice, easy, acquisitions which weren't going to trouble us that already nail lined all these of things.

 

24:01:14 - 24:24:07

 

And we prefer the pre and post retirees. So we're focusing on that. So retiring it was it was a sweet spot. but we found some one man band advisers who are over the compliance stuff. Understandably were passionate about their advice and their clients. And we offered them opportunity to come work for us and, work on a bonus scheme.

 

24:24:07 - 24:50:23

 

And we take ownership of the clients. And that worked really well. We did two of those, and then we also did, to two other ones where the adviser was retiring. So we had great success with those. we made sure the advisers exit was really good too. And, we promoted them and, and made sure they had a good, transition to retirement themselves.

 

24:51:00 - 25:09:05

 

and we did a great job with the clients, and that helped us scale up. And with the high end service that we provide, having those that acquisition come in, we looked at those clients that well that we ended up getting referrals from them. And then the business exploded. And now it's all about hanging on to that growth.

 

25:09:05 - 25:13:21

 

It's it's actually quite a challenge.

 

25:13:23 - 25:45:02

 

And so then I've got two more questions. One personal, one professional. so what's next for smart? Well, a couple of years ago, we, we you were running out of space, so we, took a massive leap and took a 25 year lease on a 2000 square meter building. That's right. At the time, we're in 330 squares, and we're sitting on each other's lap since that time.

 

25:45:04 - 26:07:20

 

so the sitting at about 25, 30 staff. but look, the business is that good? not just our business. The financial planning industry is an amazing industry. If you can do a good job by your clients, it's really not that hard to be successful. so just using that as our front of it, doing a great job of the service levels.

 

26:07:20 - 26:33:03

 

We were growing so fast. The banks have got out of it, boss, which just catapulted everything. So nearly all, inquiries pretty high. So moving over to the new building, we're we're utilizing a thousand squares, even though it's only really about 4 or 500 square, a lot of empty space to grow into. But our cost profile is now lower than what we were at the other office for a bunch of reasons.

 

26:33:03 - 26:57:15

 

So it's fantastic. And we got a brand new office, and we're so excited to grow the practice. Now, we've sort of just settled in now and we've reshaped our had been processes and looking at our phase. So, and I think this might be a challenging industry. How do you futureproof your fees against the inflation? it's really hard talking at slides every year about fees.

 

26:57:15 - 27:23:13

 

It's that's a challenge. We're trying to sort out. But basically that's where the practice got you to succeed me and, you know, keep growing. I think it's going to be a bit of a juggernaut. once I leave. And so just on that, final question, if you happy to share what what are your plans personally when you, when you do end up realizing the value of your of the amazing practice that you've built.

 

27:23:15 - 27:48:02

 

So I, I bought acreage down the coast, and, I've actually learned how to drive attract that, which is scary, but a lot of fun. And, I'm really enjoying that, spending more time with my kids at the moment. And, just, just general family life. That's also stuff I like being down at the beach. Those sorts of things, and just having the time and space to to think clearly.

 

27:48:04 - 28:16:16

 

I am enjoying what we're doing right now. so I'll, we'll stick around for a little bit longer, probably five years, I'd say at the moment. but I'm really working hard to allow the other, directors to, succeed me. that we have come up against. The problem with a practice is that big. Now that it's really hard to finance then in any further, soccer, sort that solution out.

 

28:16:18 - 28:38:23

 

but that's that's one of my projects this year to, to work out how to do that going forward. So, but it it's really exciting. We're pumped for it. And, that's a good problem to have. I'm not worried about that at all. Absolutely, Michael. Thank you. Congratulations on building an amazing practice. And frankly, for realizing that goal that you set yourself 15 years ago.

 

28:38:23 - 28:48:24

 

I think that's aspirational. And I'm sure the audience will find so. So look, thank you very much for your time. Thanks, Chris. And thanks for CFS’s support along the way has been really helpful. Cheers.

 

28:49:16 - 29:11:24

 

Looking to grow a business and finding capital to lay off the expansion has become increasingly complex and competitive space. And our next speaker has specialised in this area in his capacity as a licensee director and also establishing his own consulting business in 2015, in searching for solutions to find capital to expand advanced businesses, David also started work with Merchant and decided to bring the model to Australia.

 

29:11:24 - 29:36:09

 

So welcome, David. Thank you for joining us. Thanks Chris. It's lovely to see you. so I think just the context for the audience. Just tell us a little bit about Merchant. Sure. so on 33 years in wealth management now, I was a founding director of Shadforth in 2008, where we took 30 businesses and, and did a script, a script merger, that was IDB revenue day 124 million.

 

29:36:12 - 30:02:07

 

But we're able to at least that grow that and upon exiting in 2015, and consulting two firms, I just saw it was a gap in the marketplace for significant minority non-controlling capital partners. and I think one of the items that will come out today is there's a capital partner for everyone. You've got to act like, sure, it's horses for courses.

 

30:02:09 - 30:31:22

 

and I saw a real, dearth of, providers in the, in the space of, expansion capital. So it's a firms that we're looking to double down on their growth and really grow quite dramatically. So I guess combining that with the fact that, US multiples and UK multiples are quite dramatically higher than Australian multiples, we decided to bring the Merchant model to Australia.

 

30:31:24 - 31:04:20

 

And so how do you identify the opportunities? Look, we don't like to use the term PE. I think, the money that we bring to the table is private and the positions we take are equity positions. But firstly, I just sort of differentiate by saying that we're not a fund, we're operating company. And what I mean by that is we're not the, the, Investec fund number one or the, you know, PE fund number two with a seven year shot clock.

 

31:04:22 - 31:28:09

 

we take a long term view. capital is a minimum 15 year duration. And so we tend to use the words, you know, partnership and alignment as opposed to creating opportunities. you know, semantics. I know, but we're taking that long term view up for distinction. Yeah, yeah. And so how do we find those opportunities? look, we're not for everyone and everyone's not for us.

 

31:28:11 - 31:51:21

 

we, typically, an expansion capital partner. And so we're looking for, typically younger, advisers and principals, not older, people that have got a long runway and vision, those that are looking to grow, and grow quite dramatically, you know, over and above the organic growth rates and, and so how do we find them?

 

31:51:21 - 32:17:20

 

Look, I guess, through word of mouth, through series of influence. but, you know, the number of firms that we're looking to partner with in Australia is, you know, we're looking for 8 to 12 have or cornerstone partners and, and to build those out. So we're not looking for the dozens or hundreds. I think we get defined by not only by the partners we take on, but, but by the partners that we don't take on.

 

32:17:20 - 32:38:21

 

So we're quite discerning, and we we need to kiss a lot of frogs. Yeah. Where are the shoe leather? And so you made the point. You know, it very deliberately is a minority position in the business to partner with. just talk us through, you know, minority versus sort of taking up positions. Yeah. So look, it's it's my view.

 

32:38:21 - 33:08:20

 

And look, different people have got different views. But it's my view that in any professional services firm, whether it's engineering, accounting, the law or wealth management, that you want to keep the majority of equity in people that are going up and down the elevator. and, and so for that reason, the minority positions that we're taking, sort of 20, 25% positions, keeps the incentivization keeps the script in the hands of the people that are doing the vast majority of the work.

 

33:08:22 - 33:44:04

 

and that's not to say that majority controlling positions don't work. You know, if you're, you know, 62 or 64.5, but looking to work on your golf game and embark on the retirement tour, then you are looking to exit and sell your business. That's fine. That's a different type of capital PLI, a different type of capital partner. But we're we're very much partnering with people who've got a long term view, long term vision and are looking to maintain growth rates around that 15% per annum compared mark, which is it's got a double the, double a revenue Ebit, the earnings per share every, every five years at that type of growth.

 

33:44:04 - 34:04:16

 

Right. So that's that's not for everyone. And so that value creation plan and the key growth strategy for the businesses. What what is it you look for. Is it is it Ebit year on year consistent growth. Is it I mean is there impulse to to expand into a quadrant to get to a certain scale, like how do you sort of think about the metrics?

 

34:04:18 - 34:27:11

 

Well, I'm very proud to say that Merchants got 85. How about Cornerstone Partners in six countries, mainly in the US? but when we look at the growth rate of those firms, it's averaging averaging 14.5% compound. So it's it's you know, they are growth firms with a growth strategy. And you know we talk about this concept of a value creation plan.

 

34:27:11 - 34:48:14

 

And I'm going all firms are out there trying to increase their revenue. all firms are out. They try to maintain or decrease their expenses. That gives the Ebit margin. But I think what differentiates the, the real growth firms is, yeah, sure, they're trying to increase revenue typically organically, and maintain the, the expenses Ebit margin.

 

34:48:14 - 35:14:11

 

But it's it's getting some debt leverage. You know, they start to think about this not just as an adviser, not just as a manager, but as a practitioner as as a, as an entrepreneur. saying that my business has got good will, it's got some value. And, and, and so really starting to look at, look at it not only from a client perspective and a team member perspective, but also from a, a value to them.

 

35:14:13 - 35:33:04

 

And so that third lever would be getting some debt leverage. You can borrow money from the banks today at seven and a half or 8% and get a 15 or 20% return on investment if you're buying the right, book of business or the right business at the right price. And that fourth lever, that the entrepreneur is looking at, he's had a one move.

 

35:33:04 - 36:00

 

My, my my multiple my valuation multiple from six or 7 or 8 times Ebit to a higher valuation. in our case, it shed fourth as a listed company. we got taken over and I live in for what, eight times Ebit, but we're able to double our Ebit from 25 million to 58 million. So essentially we got a 24 time multiplier, not a six time multiplier on that.

 

36:00 - 36:23:21

 

So the firms that we're working with are looking at it from all four of those levers, perspectives. And and so they hit those growth rates and, you know, give or take 50% compound. It's very, very difficult to do that purely organically. And the larger you get, the more you're likely to have to bring in some, you know, organic growth as well.

 

36:23:23 - 36:41:23

 

and so that's only been operating, you know, two and a half years in Australia, you've made seven some partnerships. So we've got we've got two cornerstone partnerships. today and seven bolt ons and tuck ins to those partnerships. Yeah. And what's the role that you play ongoing with those practices? Do you, do you sit on the board.

 

36:41:23 - 37:03:07

 

You sit on a board seat. as a minority shareholder. Yeah. So we don't need a one board representation. we're probably more interested in having our phone numbers on speed dial to help those firms to grow out. So it would be, you know, we're partnering with people that are great entrepreneurs and great executives with a strategy and vision, and we want to help support that growth.

 

37:03:07 - 37:32:11

 

So whether that's through capital, whether that's through my expertise, some origination of opportunities in the marketplace. you know, we've got 85 pot affiliates throughout the world and doing some great stuff. So getting that collaborative ecosystem where we can connect up firms in the US with some Australian firms to help them to expand their growth. So really it's understanding what the strategies of our partner firm and helping to to turbocharge that strategy.

 

37:32:13 - 37:56:16

 

Sounds like extension to your consulting. Well, sort of it's exactly what it is. And so, you know, the reason Merchants here is because my consulting clients, we're looking for a capital expansion partner, and, I was looking around for the right one. Yeah. And so finally, David, what's next for Merchant in Australia? Well, look, we just work towards building at sort of 8 to 12 Cornerstone Partners.

 

37:56:18 - 38:18:17

 

and, you know, we've got two in the ground now that are growing at pretty, pretty significant. Right. and we've got a couple more that we're hoping to, to partner with over the next month, so. Well, yeah. Look, as I said, I think we get defined not only by the partners we take on, but as we take on them making sure they have a great experience and get a great, great growth.

 

38:18:17 - 38:35:10

 

Right. Well, congratulations. You've, certainly, made some great inroads in the short time you have been operating as Merchant Australia. So congratulations. And, it's been great working with you and my, my along with that. Continue. Thanks for having me, Chris. That helped the, the listeners. It's great. Thanks, Dave.

 

38:35:16 - 39:01:16

 

Okay. Now, continuing in the same theme of advice business growth, I'm now pleased to introduce, Yasemin Onat from AZ NGA. Yasemin is a specialist corporate governance, mergers and acquisitions professional to help businesses identify suitable targets, conduct due diligence structure and execute deals plans. I guess that's to say thanks for having you're very welcome. Very welcome. Now, there wouldn't be too many of our audience that haven't heard or met with eyes at NCI.

 

39:01:18 - 39:43:19

 

you know, over the past sort of 5 or 7 years, but roughly what sort has been the velocity of activity for the group? a lot. So, we've done 84 deals in the last five years. we yeah. Nudging towards 140 over nine years. Yeah. Well, congratulations. Thank you. So that is huge. And so when when you are looking at, businesses to acquire, what are the key factors that you consider, given that we have done that level of acquisition and that we've got 34 practices in our group, you know, what we're looking for in a direct deal to buy a new practice or with our practices of doing deals,

 

39:44:00 - 40:04:13

 

we look for different things. So there's actually quite, a range of opportunities that we can look across. but broadly, we've got three categories, one category, very much mirrors. What, David and Merchant, we're talking about that sort of we call them growers. And so that cohort is really it's got a long runway. They want to grow.

 

40:04:15 - 40:24:15

 

They don't really want to take any cash off the table. They prefer capitalization. They're ambitious. I really want to build a, what we would call a firm of the future and do a lot of M&A. And so in them, we just really look for good people with, you know, that desire to grow and people that we can partner with that you know, want to be part of something bigger.

 

40:24:21 - 40:47:16

 

And so we would call them the growers. They sort of an anchor that then you can talk about practices. Yeah, absolutely. So they would have, you know, if we've got 34 practices that other circa it deals that we've done. but it's been those sorts of tuck ins into those practices. And then sort of the, you know, what's been our core business over the last nine years, we call seller growers.

 

40:47:16 - 41:09:01

 

And they're those typical practices where there's multiple partners or shareholders and they might have differing timelines. So you might have the old a founding partner who's ready to cash out and hit the golf course. They might be a younger partner in there that has a small amount of shares or wants, you know, doesn't have shares yet but wants to be been financed in.

 

41:09:01 - 41:29:22

 

And there might be some, you know, partners that are sort of halfway through their journey. They're not ready to cash out. They still want to have a runway of good 5 to 10 years. And we can really structure that deal so that, you know, the cash and share mix in that deal is it's tilted towards each of the individual partners and shareholders.

 

41:29:22 - 41:49:08

 

So we can cash out that old founder and send him to the golf course if that's what they like doing. And then we can help those younger successes get, shares. And those ones in the middle can take some cash off the table, de-risk a little bit, get a little bit of a payday, but then still hold some scrip and, really stay in for the journey.

 

41:49:08 - 42:11:13

 

And so with them I'd say we're still looking for, you know, again, these are people businesses. So we're looking for good people that, have that partnership mindset and that has something that we can, help solve for them, whether it be growth or succession. And then a probably a third cohort is, sellers, and they're the ones that really want to cash out completely.

 

42:11:13 - 42:29:20

 

Although when I say cash out completely, they might not want to retire. So a seller could be a 65 year old wanting to sell and sell off into the sunset. it could be someone who's been going it alone and has reached a point where they're going. I'm doing the advice myself, the admin myself. I'm on my own.

 

42:29:20 - 42:50:20

 

I want to join someone bigger. I can't do this anymore. so I still want to sell 100%, but, I don't want to sell off into the sunset. And they those sort of firms that would get tucked into existing practices. And given that we've got 34 practices, what they're looking for can be really different. So I'm just looking for scale and clients.

 

42:50:20 - 43:14:03

 

Some are looking for advisers to help with capacity. Some are looking for a specialist capability or a, a new revenue stream that they don't already have. So really, you know, there's a lot there's quite a vast cohort that we can talk to. And there's so much optionality because you have those 35 or so growers. This is almost sort of a need for every, every, every wants.

 

43:14:07 - 43:43:21

 

Yeah. Yeah. And it sounds like every, every arrangement is almost structured very individually to the needs of that, that practice. So yeah. Flexibility. Absolutely. red flags I'm sure doesn't all go, well, what should we be telling our audience to, to look out. well, obviously there's a few. look, culture is a big one. At the end of the day, people getting along is a it's a big factor to a successful relationship.

 

43:43:21 - 44:29:16

 

So there's high staff turnover or short tenure of staff that can be a red flag on leadership and have the businesses run another people. One is if the partners are, actually having issues with each others or the exit or so a partnership breakdown can really, destroy value. So that's one I'd definitely look out for, compliance issues, risky models that might be selling to close to the sun in terms of if a regulator had a look, balance sheet and panels, if, if the accounts for that, you just don't really line up with the accounts for previous years and look like that's potentially been gamed for sale and it's inconsistent,

 

44:29:18 - 45:08:00

 

with historical, torturing numbers until I confess. Yeah, yeah. Of the picture. Like, we're nicer than that. And and look, even just the balance sheet, showing signs of distress. and a we need to sell because we're in financial distress. But even then, I'd say context is important. Is that balance sheet in distress? because practice really just wanted to grow and has done some acquisitions and just maybe just bitten off more than they can chew and really with some help and, and capitalization that back on track and well underway.

 

45:08:02 - 45:30:20

 

Or is it symptomatic of a business owner that's really, drained the business, put their personal finances ahead of the health of the business, and is maybe not going to be, a good partner that can work with other people on that. It's it's about them rather than in the business. So that's another one to look out for.

 

45:30:22 - 45:54:24

 

and we typically you'll, you'll take a board seat in most cases. So not not necessarily. Yeah. In most cases we'll take a board say yeah. And you work with the the practitioners around, you know, improvements growth. Yeah. Absolutely. Yeah. and then so you mentioned the cultural bit is a really key non-financial metric. what are the key things financially that you, you really focus on?

 

45:55:01 - 46:24:17

 

Well, in terms of revenue. Yeah. Yeah, absolutely. I mean, Ebit margin is obviously a good proxy for the health of the business. employee costs to revenue ratio is an interesting one. So if those employee cost to revenue is quite high, it's it's it's negatively correlated to the profit margin. So if you've got a high employee cost to revenue has low profit margin.

 

46:24:19 - 46:45:23

 

not necessarily the worst thing in the world. It's it doesn't it's not a deal breaker. It's just something where you go, maybe we can help these people. Yeah. Yeah. So some of these measures, they're not necessarily feeding into the valuation, but they're performance measures where we go, oh we can help this business. We'll be able to give them some benchmarks.

 

46:46:00 - 47:04:11

 

We can help guide them, help them with their budgeting and help them get to a better place and optimize their business. And everyone sort of wins out of that. And so then on the I guess, on the topic of winning. So what are the performance benchmarks? Typical time frames, I guess it's going to depend on which of those three categories the practices fall into.

 

47:04:11 - 47:37:17

 

But say what the growers what? What are the performance benchmarks that you would have expectations of? Well, yeah, it's profit margin. I mean, and this note when I say benchmarks, these are again guides to help them. They're not KPIs that they must meet. So we don't have otherwise. And that they must meet. This is more where partnering with you will help you with your budget, will help you with giving you guides on best practice benchmarks to aim towards.

 

47:37:19 - 48:05:05

 

And some of those are profit margin. the employee cost to revenue ratio will have other cost ratios in terms of, admin costs, licensee costs, occupancy costs. But these are all sort of guides that we help them with rather than a return profile that they must make to them. Yeah. And again, it sounds like it's really largely individually kind of designed with the practice and the ambitions.

 

48:05:06 - 48:26:12

 

Yeah. And it's ultimately a value creation but also the possibly requirement. And another thing we'd also look at is just as they doing M&A, those grow as we monitor their debt to earnings ratios and just make sure that they're keeping that balance sheet at an appropriate leverage. Right. That doesn't put them in trouble. But gives them the leverage to grow.

 

48:26:14 - 48:59:05

 

final question what's next phrase that enjoy. Oh, that from your perspective, right. Yeah. oh. What are you excited about? Oh, look, I'm always excited to see how the industry is changing. I think, you know, Merchants entry into the market. There's a lot of interest in the Australian market at the moment. So I just think that we're getting that external validation that the practices and these industries is a good industry with a lot of opportunity, and there's some regulatory tailwinds at the moment.

 

48:59:05 - 49:20:05

 

So I'm excited to see what we can do. I'm excited to see, what we can do with our existing firms around building super firms and maybe having less firms, but bigger ones. Yeah, that's what I'm excited about. You know, I completely agree that the Australian financial advice landscape, it's you know, it's got some great use here. Yeah.

 

49:20:05 - 49:27:13

 

Yeah. Thank you for your talk, Chris. obviously, thanks for coming on and sharing some of your experience with our audience. Welcome.

 

49:27:15 - 49:56:01

 

I’d now like to invite Christine Yazbeck from Hamilton Blackstone Lawyers and Natalie Isborn from JNP to join me on the panel. Christine is managing director with over 17 years experience in financial services law, providing legal expertise to large and small licenses, as well as for corporate and individual advisers. And Natalie has over 20 years experience in advising companies on public and private mergers, acquisitions, capital and debt raisings, corporate governance, joint ventures, and corporate and commercial issues.

 

49:56:03 - 50:16:12

 

Today, we discuss some of the different models and recent examples and ways that businesses can buy, sell and merge, but make sure the deal is a success can also come to infrastructure from the deal appropriately. So, Cristean, I can start with you. Good afternoon. Good to be here. Thank you for joining us. So ensuring a successful transaction with sort of heard comes down a little bit to preparation.

 

50:16:12 - 50:36:18

 

And I get a strong sense the earlier the better. we've spoken about the who the what in the why and also the win of the transaction. But from your perspective, can you talk us through each of these areas and what a business can do to set themselves up for success? So we can start with the Who. And you're absolutely right about early preparation being the key.

 

50:36:20 - 51:03:05

 

And for reasons which will become more obvious as we talk the who, what, why, when and how. It sounds simple conceptually, but it is a really useful reference in preparation point for practices, and I know Natalie will spend a fair bit of time sharing her expertise on Mahal from a legal and transactional, perspective. The her one the what one would think conceptually sounds very simple, very straightforward.

 

51:03:07 - 51:38:07

 

But interestingly enough, in my experience, give rise to some of the most, misconceptions and complications transactionally, particularly the who, where we've got corporate groups that have more than one entity, whether it's part of a consolidated or corporate enterprise, where there are multiple service lines, being provided across the group where we may have, for example, one entity or multiple entities holding assets and other clients, sorry, other entities in the group servicing the clients.

 

51:38:08 - 52:08:05

 

So that might be the car of the licensee. So getting that clarity and understanding as to who the transacting party is going to be is critical. That becomes particularly important as well, where we deal with questions like conflicted remuneration, you know, where multiple services are being provided across the group, are we inadvertently creating a road for ourselves on conflicts and conflict, remuneration and those sorts of things for what, is another interesting one.

 

52:08:05 - 52:30:19

 

And certainly if anyone asks, you know, where to most of the war stories come from, Chris. It's usually the ones where there is typically, and no doubt Natalie, elaborate on this, where there is typically, a disagreement or misalignment as to actually what's been acquired. Is it the client book? Is it the business as a whole? They're very different.

 

52:31:00 - 53:07:22

 

The business typically includes IP, goodwill with the debtors, as opposed to a client book being a distinct category of asset being servicing rights over our clients. Or are we actually buying the company? So is it a share sale agreement? it's not uncommon for me to run into, stumbling blocks early as part of a deal where, a term sheet has been agreed, on a common misunderstanding, shall I say, where the vendor thinks they're only selling the client book, and the purchaser thinks they're buying the whole enterprise for that particular purchase price.

 

53:07:22 - 53:33:06

 

So having that clarity, probably difference, if just slightly. Yeah. And then we haven't even mentioned, where one thinks they're buying, the actual shares in the group, so. And again, not an uncommon scenario. Chris. the who one the what the conceptually the most straightforward but interestingly enough, give rise to some of the bigger complications.

 

53:33:08 - 54:02:20

 

The why and the win allows us to think more about what we're seeking to achieve with the transaction. I heard my colleague, Yasemin earlier speak about cultural integration and that being a key piece and and I couldn't agree more. I even putting my lawyer hat on, on a transaction cultural integration, particularly for the purchaser, particularly where the purchaser is expanding through the acquisition of a larger client book.

 

54:02:22 - 54:30:17

 

Cultural integration becomes important when we start to stress test our capacity to service that larger book. But it's also about operational integration as well. So particularly, for example, I know many of the practices in the audience will be on ongoing federal agents with their clients. What does the increase in our client book mean for our existing FDS and ongoing federation obligations?

 

54:30:19 - 55:02:07

 

What does it mean for anniversary periods? we are in a position where operationally, we can still make, our existing obligations. So the, the critical questions where the focus is not so much on the legals, but, more the, the why we're doing this transaction. But more relevantly, why are we doing this transaction now? And that will lead to other relevant considerations around transition plans, integration plans.

 

55:02:09 - 55:25:22

 

What does it mean for advisers who are transitioning to retirement? Those sorts of questions I mean, presumably the war is really around. Yet what is ultimately the purpose and motivation? And and then the win is helping set expectations. If there's no alignment there, then that's going to change. And I and that's a good point. And those that misalignment usually starts to reveal itself before too long into the transaction.

 

55:25:22 - 55:27:01

 

That's absolutely right.

 

55:27:01 - 55:48:23

 

so, Natalie, issues that are critical in structuring a deal to hell. Yeah. So let's let's unpack this one. so let's let's talk, first of all, just fundamentally, what is the difference between a business sale and an asset sale? So it usually, and it is a blurred line. So there's not apart from for tax reasons this people call it different things.

 

55:48:23 - 56:14:14

 

So if you're doing an asset so in this industry it is generally the client that's what you're buying. So you're buying sort of one group. And you go this is a client list. And you say this is the list. You're buying the servicing rights. And the and the records and that's your asset. But then you'll get creep. So then you'll get into, oh, but I'm taking three employees and I might take the lease for three months and I might transition that bit.

 

56:14:16 - 56:43:07

 

And then the more you're adding, you get into a business sale so you can have this sort of hybrid, type of agreement that's really an asset. So some employees and it sort of does, move into and then once you get to a real business, so it's thinking about can you operate the business, do you have all the assets then to operate the business as it so as it so and so you would have and that gets into the business names and the goodwill will.

 

56:43:09 - 57:05:05

 

And then you get into the tax definitions and whether you're buying something is a going concern. So the accountants will sort of give some input into have you tipped over to then a GST free. And you know so there's GST implications. And sometimes deals are structured so that you do get into that buckets of tax reasons etc..

 

57:05:05 - 57:28:11

 

So the business out is, is really a continuum. and that's why it's really important, as question saying to know what the assets are. So in the term sheet, I think people just quite, you know, it's the clients and yeah, sort of things that you can get into. oh, I thought I was buying the domain name and the email addresses and the sale.

 

57:28:11 - 57:46:19

 

It's like, no, I, I need to use that, you know, so you do need to be and I think we're in agreement having a good time sheet where you really identify quite early and you get on the same page because you don't want to start instructing us and then get our phase when you haven't actually worked out what you're really doing.

 

57:46:21 - 58:04:24

 

So it's good to really nut out, what is it that you're selling? So term sheet sort of sets the game plan for the transaction upfront. So you run that really, really quickly because you could get you know, and if you get a term sheet that's not really agreed. It comes to the lawyers. And we we act on instructions.

 

58:04:24 - 58:22:20

 

So we look at the time sheet and sometimes people say, oh there it is. That's everything you need to know. And you write it up and then it goes the other side and about oh, oh, but I thought I was getting something else or this extra thing or oh, when I wrote that word, because a timesheet is just a summary, I meant something different.

 

58:22:22 - 58:46:03

 

So being really clear about what it is without making it too long is is really important to do that. So, yeah it does. People think sometimes it's maybe overly technical to try and work those things out, but it will say it's like time is of the essence when you're doing M&A, and it will make things work much more efficiently if you can work it out at the start.

 

58:46:03 - 59:10:13

 

And also pushing things to the end, like one of the things that I often say in a the principles employment contract, it's always pushed to the end of the transactions, but it's really important if they're coming across that they get that done, but they push it to push it and it can blow up the whole transaction because they don't want to have maybe difficult conversation about Ram upfront.

 

59:10:15 - 59:30:02

 

So that push it to the to the end. So I always try to push people if they're going to have a difficult conversation, maybe try to do it upfront because you don't want to waste time and so on, on, on deals. And we heard from, really all the panellists that are and what they, what they sort of look for and what they covering usually is from a legal perspective.

 

59:30:04 - 59:49:07

 

they usually both you've used what what are you covering? And then apart from things like the principles, employment contracts, pretty critical if they get into in the business. like what other utilities should you be doing in it and at what stage I can talk to sort of more of the commercial. And so it does depend on your risk appetite.

 

59:49:09 - 01:08:22

 

So, I know some, buyers that are not that fast and they'll do a little bit on, you know, the client get the client list and maybe some, licensee audit reports, and they'll be quite happy with that. And that's their risk appetite. others will want to really understand the business, in a, in a lot more depth.

 

01:08:22 - 01:31:04

 

And again, it depends if you're buying assets all the way through it, if you're buying, the shares. So there's sort of there are buckets. So if you're doing it the client book. So if you're just going to put in an indicative offer, you might just want to look at the client, list, sort of do some demographics and you might want to get the compliance report upfront.

 

01:31:06 - 01:55:05

 

and then you've got enough information just to put your expression of interest. It's non-binding. You can put that in and you're happy and say, am I in the market? Can we go to the next step? And then when you get into the next step with the due diligence, that's when. So for a client book you're looking at all the client information which the guys would have talked about from that commercial perspective, the products licensee requirements, which Cristean could talk to a bit more about.

 

01:55:11 - 01:01:17:12

 

Just like understanding if it comes across to you, can you still provide the services that the clients are expecting? Is this, something different? how many just hold off appointments. So how do you do client proposition. That's it. Yeah. That's it. So there's a few things in that, you want to know about their fee billing arrangements.

 

01:01:17:14 - 01:01:37:21

 

because that will then when, if you talk about the purchase price and how you're calculating it, you know, over all the phase upfront. And so, there is a difference in financial planning and accounting. So I do space in this a number of businesses that have both. And you do find the billing is different. So when you're then trading that into the legal agreements.

 

01:01:37:22 - 01:02:01:20

 

So the due diligence feeds into the agreements. you need to understand, how would that building to determine do I need to do a work in progress and work in progress payment like a schedule and pay for that upfront? Do I not need to do it? How are they billing the client? you know, financial planning. It's pretty consistent, but there are different ways.

 

01:02:01:22 - 01:02:18:18

 

then when you get into like the business, if you're doing data on the business, then you need to to get the payroll reports, the depreciation schedules, to find out your plans and equipment. So there's a lot more schedules that will go into the legal agreement because that's explaining the assets. And you want to understand what are you buying?

 

01:02:18:20 - 01:02:35:07

 

I sometimes you don't. People think, oh well I'm buying all the assets that I need. But if you already got a flat in your office, do you need to buy all the tables and chairs? Is there a price that they pay? You know that you're paying for that. And also, do you want to have to pay to get rid of them?

 

01:02:35:09 - 01:02:53:15

 

So I have a business I do work for and I often say we have we write it in the contract. We don't. You have to get rid of the tables and chairs before we go because we don't want to your it. We don't want the monitors because there's a cost of disposal. So there's things like that. And then the next level up is doing your data on the share.

 

01:02:53:15 - 01:03:28:05

 

So because then you've got to get into the tax on your tax returns and things like that. So there are levels risk appetite. And then what you're also buying. But you would also look at more of the compliance, the compliance and regulatory, particularly in a from a financial planning and licensing perspective, Chris. And Natalie's right, particularly where we're taking on a crime book and depending on what's expected of us in terms of the ongoing servicing of those clients, and in particular with, for example, we we as the purchaser are going to be liable for the sins of the past.

 

01:03:28:07 - 01:03:55:00

 

So if, for example, that old chestnut thief in our service, if that rears its head, if this historical advice filings, if so, was defective, if we have been collecting ongoing fees without providing services under the vendor. and those issues read they had at the purchaser's level, who pays those responsibilities? The indignities must be must be, as you can see, where, by the way, is coming.

 

01:03:55:03 - 01:04:24:04

 

Correct. So warranties and indemnities are a critical component. Having said that as well, the two go back to Natalie's point about due diligence. There is a very strong correlation between good solid due diligence. Natalie touched on looking at audit reports. Looking at sample size. Those sorts of things will usually go a fair way to giving the purchaser some comfort about what skeletons might lie in the closet.

 

01:04:24:06 - 01:04:42:22

 

We've had a question come through, so it's probably a good time to to pose this to both of you. And it's kind of throughout the panel as well. Just the core retention average drop off rates. you know, how do you how do you sort of protect for that. how do you sort of deep to build a buffer and how do you sort of begin to assess what that's likely to be?

 

01:04:42:22 - 01:05:14:15

 

Or do you have a an assessment at a point in time in the future and based on a targeted retention rate, whether that hurdle or not? Yeah, I'm sure Natalie may speak to some of what is typical in the transaction documents, on those. But certainly my experience has been, that there is a real correlation between going back to your point, start early preparation, the who, what, why, when and how getting those right typically create the cultural integration.

 

01:05:14:15 - 01:05:48:11

 

Create the employee adviser integration. And it brings the clients on a journey as well. So this is a client journey, not just an employee or planner journey. as part of any transaction. Certainly my experience has been that the better we bring all stakeholders on the journey through proper preparation and early preparation. As you as you've suggested, particularly our clients, that tends to minimize the client drop off when we send the standard 14 day letter to clients, inviting them to opt out of the new world.

 

01:05:48:13 - 01:06:10:22

 

You know, those numbers tend to stay pretty low if, if, if not negligible. when we bring the clients on the journey, you know, communications plans are relevant, not only as part of the deal, but also in terms of client communications and other stakeholder communications. It makes sense and I think in agreement, you know, it's very common in this, industry to have deferred payments.

 

01:06:10:24 - 01:06:33:07

 

So that's, that's very common. and how the percentage that you may offer, is generally, you know, can be based on the riskiness and the profile. So, you know, if there's an adviser coming along, you think there's probably less likely to be drop off. Yeah. you know what's happening. Why are they leaving in the first place?

 

01:06:33:07 - 01:07:13

 

The advice on why they're selling and how would that, might be? Impact. So you've got the initial opt out period where you might lose. generally, I've only seen a few get lost. and then you've got those that deferred period. And what, that, what that looks like. And one of the things I think people, don't really think about is what's and what's really important in for protections, in legal grounds is what's going to happen in that deferred period.

 

01:07:13 - 01:07:26:12

 

So in this industry it's generally 1 to 2 years depending on, on what's happening. and what as a purchaser, are you going to be allowed to do, with the clients. So talking about, you know, are you increasing fees, etc., etc., what are you allowed to do. in that period to that might change it. So from a sellers perspective, they might be saying, I don't want you changing too many things for the clients because they'll drop off.

 

01:07:26:14 - 01:07:45:15

 

And then that puts my deferred payment at risk. So we always get into this discussion, and I think people don't think about this enough upfront, but you'll get into a discussion about what should be happening. in that deferred period, because it's both sides. You know, somebody wants to make sure that the clients don't drop off because, they don't want, you know, the payment.

 

01:07:45:15 - 01:08:22

 

But other people are like, well, I want to, you know, make the best of this acquisition. I might need to increase fees, change products because I've brought them on because I want to put them on my products. So there's a lot of that sort of thing that if you don't think about it, ultimately, the client, at the end.

 

01:08:24 - 01:08:27:09

 

Yeah. At the end, when the calculation, they'll say, oh, no, but they did all these things, which meant there was client drop off. And if you haven't put anything in the agreement and then it's going to be difficult to do something about it. I've got a couple more questions for you then. We do have some other questions coming through in the morning for, David and you asked to come back in a moment and also, sort of a couple of, couple of things that are bubbling around.

 

01:08:27:13 - 01:09:02:00

 

But again, red flags, you know, what issues typically arise in agreements post completion in in your experience, what are some of the war stories that you've, you've seen? are so happy to start? just touching on my earlier point, actually around the scenes of the past, that is a, that is the sleeper typically in this and it usually arises as a product of poor or inadequate due diligence, or where the transaction documents don't properly define the lines of liability and responsibility.

 

01:09:02:02 - 01:09:47:11

 

Some, purchasers and their licensees, pretty strict on what they expect to happen with clients on completion. That might entail, for example, new advice documents, new reviews being done within, for example, a 6 or 12 month period to try and mitigate that exposure or that risk of the sins of the past coming back to bite us. Because we've reviewed the clients fresh under our new license, we've issued new advice, documents that may be an example of one or that contractual obligation or risk mitigation factor, but certainly that old chestnut around and advice kind been might there might be defective advice a client suffered loss who pays those responsibilities.

 

01:09:47:13 - 01:10:14:10

 

And then also the usual regulatory pain points around FDS as an opt ins and renewal notices. Have we use the correct anniversary dates? Have we operationally allowed for the expansion in our client book to cater for our ongoing disclosure obligations as licenses change the cost change management of the old chestnut? And I think, the main things that people come back to.

 

01:10:14:10 - 01:10:31:19

 

So warranties, as lawyers, we get excited about and, and have a lot of time that we spend on them. but the thing that people call me about is the deferred payment and what how that's made up. So how do I calculate it when it gets to the end? And have they put the right, numbers in, etc., etc.

 

01:10:31:19 - 01:10:52:08

 

And it's about getting things really clear upfront in the agreement as to what are you measuring at the start, and then are you going to measure the same thing at the end? Because the words will make a difference. There's, you know, is it the the clients that are invoices that the clients the revenues received? Is it just the annual agreements?

 

01:10:52:08 - 01:11:12:15

 

Is it lost clients? There's these things all mean different things. And that's what people mostly come back for is, oh, I didn't actually understand what it was that we were calculating at the end. So I like to put what examples in agreement so that people can at least say, oh, this is how we sold 12 months ago. We were going to do it.

 

01:11:12:17 - 01:11:31:15

 

but that's a big one. I think that, it's come and then you've got you, you the questions that always have happened and quite common to the poaching clients. So advisers that didn't come across and things like that. So there's this sort of the main buckets we say fantastic. panel session. Guys, I really appreciate your time.

 

01:11:31:15 - 01:12:12:02

 

Just really quickly. in summary, there is anyone in the audience that's looking, you know, in contemplating a transaction, what sort of practices do you do you tend to lot will say like to work with at the most value to. Yeah. Thank you. And that's typically in my case licenses cars and individual advisers. So my practice is heavily focused on the regulatory and compliance aspects of running a financial services business that extends not only to the day to day compliance that comes with being a car or a licensee, but also transactions, buying and selling and putting that in services or regulatory and compliance lenses over the deal.

 

01:12:12:02 - 01:12:30:15

 

For example, with some of those points I mentioned around, who takes on responsibility with with things like where the lines of liability rests in that and those sorts of questions. So know I'm known to be known to small. Absolutely. The big enough to acquire the, the right fit the right. That's a good Steve. Thank you. Thanks, Chris.

 

01:12:30:15 - 01:12:53:21

 

And then yeah. And I think, you know, I steer away from the bigger transactions that have probably over 100 million tons of revenue, which probably lots of people think is quite big. So in this space, financial sector. So accountants, financial planning obviously broking, different, all sort of different ones. and I do some work outside of the financial sector as well.

 

01:12:53:21 - 01:13:14:05

 

But it's usually in this space, where we can add the most value. I work as part of a bigger, group as well. That is able to offer that interchange. So they do the broking and also valuations and things like that, which are, come into play with doing the transactions as well. So we sort of can work together, with the work that we do.

 

01:13:14:05 - 01:13:38:00

 

So definitely the financial, services space is what we're looking at. Fantastic. Well, thank you both so much for your time. It's been outstanding. And if there are any other questions coming through for our legal colleagues. So make sure we follow up as well. yes. And David, Kelly questions coming through. So thank you for joining us.

 

01:13:38:02 - 01:14:06:00

 

just really interested that the quiz shows us asking, Cristean and Natalie, then just average drop off of clients. What what is sort of good, good or bad? What you typically experience quickly, a few questions coming in around that thing. Yeah. look, it depends. there's a couple of things to look at. Depends on how, you engage and agree that that, outgoing adviser will help with the client transition and also differences in your pricing models.

 

01:14:06:00 - 01:14:28:14

 

If you're buying a client book where it's quite low fees for a client, for a client, and they don't have to make a massive jump, then things like that and create risk. So really there's a lot of there's a lot of inputs that you kind of have to look at. But you know, some have very little drop off and you're paying big rise payments on that first anniversary.

 

01:14:28:16 - 01:14:54:06

 

And, and likewise, it can be the opposite. Really hard to give a specific answer on that one. like personally, we're in the business of taking significant minorities, not acquiring SSL partner firms to the acquisitions. And, you know, clearly, a lot of the acquisitions would be structured, you know, 70, 20, 10 or 80, 20 or 90, you know, there's a retention payment.

 

01:14:54:08 - 01:15:23:20

 

my, my experience is that more often than not, those retention payments are made in some way, shape or form. But as to what percentage drop off? Very hard to be specific. Yeah. Okay. this process probably will be also little bit hard to be too specific. And there's a great quote from both Neil that I often cite, which is when practices are asking what people are paying from an older perspective, the response is, well, it's not what, but what people are paying is what what you should pay, what what the value is to your practice.

 

01:15:23:20 - 01:15:48:24

 

But there are a lot of questions coming through around the multiple, the ongoing revenue that's being discussed in 2024 from a valuation perspective and and assumptions that what is a good cost to revenue ratio so that, okay. So firstly, I think you're right. The market down into smaller practices and books. that would typically trade on a multiple of recurring revenue.

 

01:15:49:01 - 01:16:13:12

 

call it up to $1.5 million. and ranges might be and that went on acquiring by the way. But at partner firms that would be making those acquisitions, let's say two and a half to at the high end, three, three times recurring revenue. there'd be an overlay on that for, the age of the clients, the size of the revenue, the location of the clients.

 

01:16:13:12 - 01:16:31:23

 

So it could be less than two and a half. It could be more than three. But, putting a hula-hoop around two and a half to three, all things being equal, at the upper end of the market, once you start to look at, you know, firms north of 1.5 million revenue, typically moving from a multiple of recurring revenue to a multiple.

 

01:16:32:04 - 01:16:53:00

 

But, again, it depends on whether it's text accounting, whether it's wealth, you know, the make up of the revenue, the growth profile of that particular company. but again, if you put a, a hoop around, you know, at the low end five times Ebit up to seven and a half times Ebit might be a broad range.

 

01:16:53:02 - 01:17:22:12

 

you could say transactions lower than that and you can see transactions higher than that. But that's a rough a rough guide. Yeah. The only other thing I'd add to that revenue multiple in terms of client demographics and location and scale is even just for that theta client. And that difference that you might have to make if you've got a lot of clients on a low fees, and that's not only as attractive as a handful of clients on high fees.

 

01:17:22:12 - 01:17:45:15

 

So that overlay can play into that revenue multiple as well. I think, Chris, probably the other key point here, it's not just the, the multiples that have been paid, it's the terms that have been put in those, contracts. So yet how much of that money, you know, back to my previous question on retention, you know, how much of that money's going to wind up in the vendors pockets into, what, three years time?

 

01:17:45:17 - 01:18:10:19

 

That's the ultimate multiple that counts. Not not what's on, mate. The term sheet. Yeah. Cross court. two more really quick questions. Getting close to the end of the session. the client book sale only. Does the sale typically attract GST for the purchase versus a business sale and CGT implications for the seller. It's a continual question. What type that one to notice.

 

01:18:10:21 - 01:18:29:16

 

and so I guess I guess it was related to the commission at least having the time sheet around, what are you actually selling and how are you doing it. And the structure of the deal will have tax implications. I think it's the, the sideboard in that point. and then what about finance deal structuring, vendor finance, deal structuring.

 

01:18:29:18 - 01:18:52:15

 

so I'm not sure I'm not sure if there was another part of that question, but what I think what the question is getting at is if you are looking at internal succession, you know, Gen one is selling, they have the Gen two more Gen two selling to Gen three. I think where they're getting it, where the question is, you spend will finance available.

 

01:18:52:17 - 01:19:10:05

 

and that would be a situation where Gen one goes to one of the banks and arranges or gen to the acquirer, internal transfer would go to one of the banks. and arrange a loan would be secured against the script of the firm or the balance sheet of the firm. So there needs to be an arrangement between Gen one and G.

 

01:19:10:05 - 01:19:33:20

 

Into which into in Gen three, to make sure that everybody's comfortable with that transaction. because the security of that debt is going to be on the balance sheet. So, we have, accident. I, we do actually been to finance in those future leaders. So we do help some of those junior partners buy that existing equity of exiting shareholders where there's a.

 

01:19:33:22 - 01:19:53:15

 

Fantastic. Thank you for coming back to the panel. so that that concludes today's webinar. But, I really want to thank everyone for your interest in this topic. I think we had about 350 or so practices register their interest. So there is clearly interest in this sort of session, and I hope it's been valuable for you all.

 

01:19:53:17 - 01:20:17:12

 

There will be CPD available that will follow over the next week. Please register for our next webinar, which is on the 8th of May, which is where we're talking tech transformation. And as I said at the start, CFS 10x is an investment that we're making in the profession. So please contact me. Contact the State Managers at CFS. Contact your BDM. If there are topics that we can bring expertise like you've seen today together to help you and your objectives within practice.

 

01:20:17:14 - 01:20:32:22

 

Finally, on behalf the entire team at CFS, I want to thank you. I want to also wish you good luck, with your endeavour, whatever stage it may be. And we really look forward to working with you and how we can support that. And to reiterate, we are absolutely with you all the way. So thank you very much and good afternoon.