Matthew Rowe has talked the talk, and now he’s limbering up to walk the walk. At stake might be nothing less than the future of the financial advice profession itself.
The chief executive officer of ASX-listed Countplus Ltd will, from October this year, head one of the country’s largest financial planning licensees when a deal to purchase Count Financial from Commonwealth Bank of Australia is finalised. With it come about 370 authorised representatives, largely operating within accounting firms.
For Rowe, the acquisition of Count represents a chance to give practical expression to a belief in the future of financial advice as a profession that he has long spoken about in a variety of former roles, notably as managing partner of the Adelaide accounting and advice firm Hood Sweeney, as chair of the Financial Planning Association (FPA), as Australia’s representative on the global financial planning standards-setting body, and as an inaugural director of the Financial Adviser Standards and Ethics Authority (FASEA).
“You’ve got to have a higher purpose behind what you do,” Rowe says.
“I’ve been a big part in the change of remuneration models and banning commission; I led that in my time at the FPA. I’ve been a big part of lifting education standards and ethics, and the code of ethics; I’ve done that through the FPA and I’ve also done that through my role with FASEA. So my higher purpose now is to build out a team, and build out a business model, that takes all of that and can at the same time monetise that and commercialise that, so we can make a decent profit, decently.”
Rowe says Countplus must show advisers that it is “OK to act in your clients’ best interests, because it’s not mutually exclusive with shareholders’ best interests”.
“If somebody can’t do that then vertical integration and the old model wins,” he says.
“But if somebody like me can do that and can make it financially viable and do it the right way, that means there’s a future for the financial advice profession.”
Sunlight and transparency
Rowe says the fundamental outlook for financial advice is bright, provided advice services can be delivered to consumers the right way – which is to say, as a recognisably professional service.
“There’s still unmet need for financial advice,” Rowe says.
“It’s intimate subject matter; people want to talk to people about matters that are important to them. What’s important to them? Their health, and their financial well-being. When people have peace of mind around their financial wellbeing, it’s also good for their state of mind. And let’s face it, if you come into a client’s live and they breathe easier because you’ve come into their life, that is of enormous value. And that’s why the future for advice will be bright. If we bring sunlight and transparency as part of the [advice] process, that’s a winning combination.”
Rowe says the new model licensee will provide quality assurance frameworks for advisers and advice practices, in an important shift away from using the term “compliance” and everything that word conjures up.
“There needs to be a quality assurance mindset,” he says.
“To have a quality assurance mindset you do need a framework in place and you need to have the resources that back you, and there needs to be a technology piece that sits behind that. And there also needs to be best practice.”
Rowe says he will focus on working with firms within the Countplus and Count Financial network to create best practice and use those firms as models for other businesses.
“If you want to move away from tick-a-box compliance to what ‘good’ looks like, and you’ve got that network to tap into, and the capital – both intellectual and financial – and the technology aspect, that’s the winning combination,” he says.
“That’s the secret sauce.”
A level playing field for licensees
Along with a shift in how licensees support advisers, there will be a shift in how advisers pay for licensee services, Rowe says. It’s now a level playing field between licensees, because the subsidies that have propped up the larger, institutionally owned licensees have been removed.
“That’s going to go,” he says.
“It will be a user-pays model. You do not have to do everything for everybody, you just have to do the things that are important. And what’s important for an adviser is quality assurance, professional standards training and education, product solutions that are best practice and best-of-breed – so open-architecture APLs – and a technology solution that comes with scale, and to be able to share best practice.”
“Instead of relying on products, we’re relying on the firms generating
revenue, doing it the right way and being profitable”– Matthew Rowe
Rowe says his aim is to allow advisers to operate with “freedom within a framework”, allowing individual advisers to exercise professional judgement, but within a structure that ensures it’s delivered in the best interests of clients.
“[If] they can get paid for that in a transparent manner, and they can deliver it in a profitable manner we as the licensee are also profitable because it’s a user-pays environment,” he says.
“Instead of relying on products, we’re relying on the firms generating revenue, doing it the right way and being profitable – because if they’re profitable we’re successful.”
Capital adequacy and professional indemnity
Sustainable profitability for licensees will become of even greater significance if, as Rowe anticipates, licensee capital adequacy requirements come into force.
“I’ve had my own AFSL in a corporate environment, and I believe there should be a capital adequacy requirement for AFSLs,” he says.
Rowe says it will become increasingly difficult for businesses to rely on PI insurance to make things good for clients if they go wrong. The get cover in the first place they will need to demonstrate they have adequate risk-management systems – operating in real-time – and ensure the integrity of the information flowing into these systems.
“That requires skill, tech infrastructure, and a focus on that,” Rowe says.
“Somebody who’s running a licence with two or three advisers, they are busy running their practice. They don’t have the resources or the bandwidth to worry about all that – but they’re going to have to in the future.
“Just having policy and procedures manuals and saying we’re good blokes and we do the right thing, is not going to cut it for a PI insurer.”
Moving to a user-pays system
Rowe says that far from being an open and transparent value chain, financial advice has historically had “opaqueness, we’ve had grey, we’ve had shadows”. But trust in advice will only be restored – and advisers and licensees only have a viable future – if there’s transparency, not “having stuff tucked away on page 89 of a disclosure statement or in six-point font in the footer of an FDS”.
Transparency leads, inevitably, to a user-pays system, where all participants – advisers and clients included – pay only for the services they receive, and no one is paid for any service they do not actually provide.
“[An adviser’s] engagement process with clients will be forward-looking,” Rowe says.
“You’ll have an engagement letter with clients, saying here’s the fee and this is what I’m going to do for you. It will be transparent and they will understand what they are paying and who they are paying it to.”
It follows, Rowe says, that the licensee must deal with the adviser the same way. There can be no subsidisation of the fees advisers pay to licensees, and no fudging of the services licensees provide to advisers.
“There’s no more subsidies through all this ticket-clipping and other things that happened in the background, so the adviser will be able to say to the client, I pay Count Financial this much per annum to be part of that network, and for that I get quality assurance, technology support, professional standards, training, product research, all the things that I require to deliver to you a quality outcome that is in your best interest,” Rowe says.
“That’s the sunlight and that’s the transparency that will
ensure trust will start to grow and thrive again”Matthew Rowe
“[The adviser says] that’s a cost of me being in business in the advice space. I’m going to charge you this, and I’m going to deliver this to you; my licensee is charging me this and this is what they deliver to me; they are ultimately responsible for the advice that I give you.”
This system leaves no space for product manufacturers to interpose themselves, in any way, between client and adviser, or between adviser and licensee.
“There might be a product solution and [if there is, the adviser tells the client] you’re going to pay the product guys this, this and this,” Rowe says.
“But what you pay them has no bearing on what my licensee does [for me] and what I do for you. That’s the sunlight and that’s the transparency that will ensure trust will start to grow and thrive again.”
