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'Hard slog for solo advisers'

New Zealand’s market is not an easy one to work in as a sole-trader adviser, the head of one franchise says.

Thursday, January 23rd 2014, 6:00AM 13 Comments

by Susan Edmunds

Cecilia Farrow is the founder and executive director of Triplejump, a human capital risk specialist franchise turned software developer.

She started the firm in 2007.

Advisers in 2014 would find it very difficult to remain independent and carry the costs of compliance, marketing and any business expansion, she said. “You’re going to have to be a pretty special individual to build a business in this environment. Unless you’ve got a really distinguishable value proposition, this would be a hard market to be in.”

It was not feasible for most advisers to deal with a full range of providers and offer a wide range of products to clients because they would not get good enough remuneration terms, she said. Instead, they ended up focusing on one or two providers, which limited what they could then provide their customers.

“It’s logical for independent advisers to be part of some form of network.”

She said, depending on what an adviser wanted to focus on or their plans for the business, that could be an aggregator, a dealer group or a franchise such as Triplejump that would allow advisers to share branding and resources.

Triplejump now has 14 franchises across the country but Farrow said the firm was taking a very targeted approach to any new additions. “They have to be businesses that have got a professional service offer and are looking for an opportunity at that very high end of professional, compliant, best-practice advice.”

Being part of a wider network also allowed advisers to bring on younger recruits, she said.

Triplejump was largely hiring university graduates to work in its business.

“Compared to the traditional risk sector, the profile of our people is very different. It’s a very young distribution team compared to the industry average and very highly qualified.”

Many other advice businesses recognised the need to bring young people in but did not have the infrastructure to do so, Farrow said. “They want people to come in on commission, build up a client base, and then they want to own that client base. They don’t have the resources to help advisers build themselves into the business… a franchise model offers all that support.”

Triplejump is preparing to list on the stockmarket in the middle of this year.

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Comments from our readers

On 23 January 2014 at 9:01 am Mac said:
"a human capital risk specialist". Does that mean they sell life insurance?
On 23 January 2014 at 6:25 pm Independent Observer said:
...and yet I'm aware of many 'solo' advisers who are doing extremely well.... through sound relationships, a strong value proposition, and comparative advantage
On 24 January 2014 at 10:05 am AFA Muggins said:
Cecelia is right.

It's probably time for a paradigm shift away from 'advice' being product distribution.

If advice is driven by a fee based, knowledge base, the client will feel happier with the service they are receiving, real value is added and the umbilical cord of commission based revenue is no longer necessary for the adviser.

Differentiation is key. Advice should not be on the premise of commission based product flogging. It should never have been.
On 24 January 2014 at 10:26 am Danna Burton said:
I agree with AFA Muggins to a degree, yet having come from Canada (who have been trying to shift from "fee" base for quite some time - about 20 years - I think it is not quite there yet. However, as a "solo" advisor - I am happy to be here doing just that as my "network" of other professionals is always growing.
On 24 January 2014 at 11:01 am johnny said:
A big front-end fee, plus a slightly discounted premium than standard RRP due to you zeroing the commission, versus no fee plus a slighly higher premium.

Good luck on that model; honestly, I wish you luck as you're going to need it.
On 24 January 2014 at 12:25 pm billy the broker said:
Why is it when people (mostly AFAs) describe commission based product recommended for a client..the word flog/flogging is used?? Bit holier than though don't you think......especially with some of the mishaps in 2013!!
On 24 January 2014 at 2:06 pm Amused said:
"Advisers in 2014 would find it very difficult to remain independent and carry the costs of compliance, marketing and any business expansion, she said."

So we should all go and join a franchise then? Sorry. With respect to the head of Triplejump the franchise model does not and has not worked in the financial services industry for some time. Any independent adviser with a shred of common sense will affirm that the only model to be under nowadays as an insurance or mortgage adviser is the aggregator model i.e. through a group such as NZFSG or TNP etc.

The aggregator model offers far superior remuneration to members than the franchise model can, provides first class client management software and perhaps most importantly is a damn sight more attractive to sell to prospective purchasers also when that adviser decides to exit the industry!

The main issue with the franchise model is that it tells members that they will get new business simply because of the branded sign hanging above their office door when in fact as any experienced adviser will tell you the adviser themselves is the “brand” and clients will choose to deal with that individual if they are good at what they do no matter what name they trade under.

On 24 January 2014 at 2:12 pm Giles Thorman said:
I do find the people that permanently market themselves as the only option a little tiresome to say the least. This industry has survived for years without dealer groups and Franchises and I would suggest could do so again without too much difficulty. If the Insurance Companies ALL decide that from next month that they will not do business via dealer Groups, are people suggesting the Adviser Industry would cease to exist?

I also struggle with this concept that somehow if we charge people a fee and then "give" them a product that the advice they get is somehow better than if we get paid a commission and "sell" them exactly the same product. Go figure that one!
On 24 January 2014 at 6:08 pm Richard Pykett said:
I'm cured, I'm cured! I'm no longer constipated!

Solo adviser and software developer...
On 27 January 2014 at 10:16 pm Frustrated said:
Another head of a group self promoting via Good Returns - enough of these sort of articles it is nothing more than free advertising - Last year it was Peter Chote from Advicefirst stating the only way one man bands could possibly survive is to join a group and now Cecilia - bad form if they are so certain of their business model then they should stick to it and not have to advertise surely
On 28 January 2014 at 4:25 pm brent sheather said:
Well said frustrated. I would rather shut my business than inflict these groups on my clients. Most people would be better off in bank deposits.
On 28 January 2014 at 6:20 pm savvy said:
Agree absolutely with 'Frustrated' free advertising is the only comment worth making. Cecilia needs to wake up and realize that us 'solo advisers' have a far better relationship with our clients than some business model that only benefits her wealth will run thin.
On 29 January 2014 at 2:56 pm graemetee said:
Good on you frustrated for saying how it is. The advisor groups and others have predicting the end of small operators because it suits their agenda. Our small firm has just been audited the FMA and I think (fingers crossed) from the feed back so far, we did OK.

We did this without any help from lawyers, advisor group or professional assn. We did on our own because we have always tried to attain best practice even before regulation required us to. So there, it is not easy but it can be done.

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