27 February 2017 Last updated at 03:25 GMT

Follow your own path

Follow your own pathWhen Principal Partners decided to become a stand-alone business, it was to enable them to follow their own charter of independence. Jonathan Jackson speaks with Matthew Morley about how this independence allows the company to really get to know their clients’ personal and financial needs.

Approximately 18 months ago, BDO Wealth Management made the decision to separate itself from its parent BDO. This Victorian-based business was moving in a different direction, with a more holistic range of services and a rounded way of looking at client management.

“Over time we developed more external relationships than the BDO accounting practice,” Matthew says. “We had fostered some relationships with independent banks, and we had more of a natural fit with them, than with the direction that BDO was going.”

According to Matthew, the main advantage of the breakaway was to create autonomy; they could part from the 51% ownership that BDO held and forge their own path.

Their service offering wouldn’t change, but it would grow and they wouldn’t be beholden to big financial institutions, which could play havoc with an independent charter.

So the firm’s major shareholder John Brady and key executive staff, of which Matthew is part, created Principal Partners from the ashes of BDO Wealth Management Victoria. The idea: to expand client services and further develop relationships with new accounting, banking and professional services firms.

“We were involved with an accounting practice, they were a passive shareholder and we wanted to get more clients through,” Matthew says.

“It was a destiny choice. BDO and Grant Thornton merged, so it became a crowded space and we wanted to jump out of that noise and create our own piece of history.”

The stance has allowed Principal Partners to look into acquisitions.

“We have been able to look at purchasing other smaller financial planning practices, which we felt precluded from doing under BDO. We have also commenced some capital raising for a land development and formed relationships we were otherwise unable to do. We like the freedom of making our decisions, however we do have an investment review committee that passes its eye over all decisions.”

Independence allows Principal Partners to make a unique stance in a saturated market. Matthew says while larger institutions swallow up smaller financial planner firms, it brings into question their ability to remain independent – something that is of paramount importance. The ability to remain independent creates the freedom to be open with their services.

“We are a fee for service model and deliver a clearly enunciated value proposition around strategic advice. The financial planning market has wrapped asset management and advice under one solution, but we have a clear line under strategy and solutions, a clear service line under core asset management and then an enhanced wealth product. The delineation of the three parts really lets us say this is the cost and this is the quantifiable benefit.”

It means clients know the dollar cost and can understand the benefit of each strategy.

This open and honest approach creates client trust, which is particularly important in such a fragile and volatile market. Although Matthew says few people are jumping out of the market, what they are looking for is a management company who understand their needs.

“You need to take a client perspective. People invest with their gut more than their head. So as a client manager, we need to win trust – it is the first thing we need to do. How we win trust is in our fee model. Fee for service gives people an opt-in chance. We set fees for 12 months and then reset. Clients are not locked in for the long term.”

Matthew admits it is a tougher market to win clients, but Principal Partners has the strategies in place to do so.

“People are looking for asset return and performance, but it is strategy structure as well. Have we got proper insurances, superannuation or self-managed super, are we directing cash flow the right way? We are not market linked, so if we do those things and do those things well, then we are on the right path.”

The last few months have been a busy time for Principal Partners, not only have they ceded from BDO and bought back the business John Brady began 32 years ago, they have conducted the due diligence on buying another firm, built the new website, found new premises, conducted a capital raise, and rebranded, while continuing client management and recruitment.

“It’s more rewarding when there’s a clear means to an end,” Matthew says.

As for the future, Matthew says the key to success is to understand client needs.

“Unless you are embracing a fee for service model, taking heed of all the regulatory changes and engaging with clients you won’t survive. You need to find out the non-financial things that make your clients tick; keep engaging clients on financial and non-financial matters and you will win clients. Many businesses only talk about asset management, but if all you have is performance and performance disappears you won’t keep clients.”

Principal Partners is dedicated to the client and understanding clients’ needs. It’s what sets them apart and what makes their independence so tangible.

If you are interested in updates from Principal Partners, visit http://www.principalpartnersvic.com.au/

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