Practice of the Month: Profile Financial Services

22-Aug-2017

By Sarah Kendell

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As the financial advice industry begins its transition into a true profession, many practices are assessing the viability of their current business model and looking at new ways to adapt to incoming legislative and technological change, whether that be moving away from bank-owned dealer groups, getting their own financial services licence or planning for succession or expansion.

As a self-licensed firm since it broke away from AMP-aligned group Hillross in the early 2000s, Profile Financial Services jumped on board these trends earlier than most, and when practice founder Gary Ohlsson decided to retire in 2010 the firm was determined not to lose its independent, client-centric culture by selling to an institution.

Instead, the group appointed Sarah Abood, an industry veteran whose career has included senior roles at Fidelity, BT and Colonial First State, as chief executive to transform the business from a family-run, single-owner practice to a professional advice partnership with a scalable investment approach and an eye to a national adviser footprint within the next decade.

Abood says the first step to expanding the firm’s capabilities and positioning it for growth has been to develop a staff equity scheme, which has helped to incentivise Profile’s eight financial planners while removing key-person risk.

“We don’t do authorised rep agreements, so when planners come in they join as employees and have the opportunity to buy into the business after 12 months,” she explains.

“The ownership piece is how we overcome the challenge of getting engagement from senior planners – if they are just an employee, it’s harder for them to feel they are in control of their own destiny and you have the danger they are going to go off and start their own business, so that’s something we’ve been able to do that gives us an edge.”

Another key task when Abood came on board was to add more structure to the firm’s investment philosophy and approach, as the global financial crisis had revealed the flaws in the traditional risk profiling and static asset allocation models used by most advice firms.

“Profile came through [the crisis] well because our planners had positioned clients conservatively, but we realised there was a disconnect between how planners felt clients should invest and the way they were being advised because they felt constrained by this framework of deriving a volatility tolerance and implementing a strategic asset allocation portfolio that reflected that,” she says.

“We needed a framework that was consistent and robust so that clients understood why they were being implemented in a certain way, so we moved to basing our advice on the client’s goals and what they needed to earn rather than their preference for volatility.”

Out of this change in philosophy the firm developed its own goals-based advice tool, Pathways, after Abood scoured the technology market and failed to find a tool that brought client goals and investment implementation together in a simple and efficient way.

“I think there is a big disconnect in the tools in the marketplace – there are tools that will discover client goals and there are tools that will construct a robust portfolio with algorithms and stochastic modelling, but there is no connection between the two,” she points out.

“Having turned your client’s goals into SMART (specific, measurable, achievable, realistic and time-based) goals, there seems to be no link between the investment strategy you implement – you then have to put your risk preference hat back on and say: ‘Thanks for telling me all about your goals, but I’m going to implement a strategy based on your risk preference.’

“We built [Pathways] because we wanted to close that loop and create a link between the advice we gave the client and the goal the client told us they wanted to hit.”

Having set the firm’s operations on a more structured and scalable path, Abood has national expansion in her sights, saying she wants Profile to be the “EY or KPMG for planning”.

“We want to be the home for planners that see [advice] as a profession and want a business that supports them in the best interests duty and gives them the tools and scope they need to do the right thing for clients in a professional way,” she says.

“Growth is a really important part of our DNA, absolutely not at the expense of culture, but we want to be a known brand within the next five to 10 years.”

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