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Podcast Transcript

Episode 49, Season 1

The compliance point of view, with Rhett Dass


Rhett Das: 00:00 What is your sweet spot? Stick to what you’re good at. If you’re not really good at admin work or you’re not good at certain things, outsource it. That’s probably one of the lessons I learnt in business a long time ago. I can do certain things and take a long time to do them, or I can just accept that I need to pay someone else.

Fraser jack: 00:20 Hello, and welcome to The Goals Based Advice Podcast where I have conversations with pioneers in the new world of financial advice. I’m your host Fraser Jack and I want to thank you so much for tuning in today. And a big shout out for all the feedback and reviews that I’ve received so far. If you’re enjoying this podcast, then please help me spread the word by mentioning it to your friends and colleagues.

I’d also like to thank our supporting partner Advice Intelligence for powering this podcast. In this episode, I chat with Rhett Das from Integrity Compliance. Rhett specializes in working with advisors and small licensees on both a client or the Australian Financial Servicing Licenses, as well as maintaining their compliance standards.

Rhett has seen it all. And in this episode, we dig a little deeper into the world of compliance. So, if you want to understand what it would be like to own or run your own licensing, keep listening to my chat with Rhett as we jump straight in now.

Welcome to the show, Rhett.

Rhett Das: 01:16 Thank you very much for having me, Fraser.

Fraser jack: 01:18 You’re very welcome. Now, you’re in Melbourne, I’m in the Gold Coast at the moment, so we’re doing a little bit of long distance communication. Now, tell me, can you give the listeners a bit of an overview of what you’re doing at the moment?

Rhett Das: 01:33 So, what’s been happening? So, three years I left a licensee where I’d been working there for approximately four years. And I’d made the decision that it was time to go out and do my own thing. And so, the last three years, I’ve been running a compliance business and a legal business. And we provide services predominantly to the independent space. And that’s probably because of the environment out of which I came when I was working at Centrepoint helping a lot of the licensees there. And it’s just sort of grown from there.

So, we provide a varying myriad of services, we provide ongoing services to licensees. Whenever people ask me, I always say there’s really two types of clients that we have. We’ve got what I term the heart attack clients, where the client’s had something actually go wrong for them and they’ve had that heart attack and they’re coming to us for help. I also term them the mopping up blood clients where something terrible has happened and we’re helping mop up their blood.

  And then we’ve got the other clients who we work with who don’t want to be like that and we try to take the lessons from the other clients and share them with those clients. So, we work with them on an ongoing basis to help design and build frameworks from a compliance perspective. We provide legal advice to clients.

And then other practices will engage us for one-off pieces, whether that’s acting as an independent expert or an enforceable undertaking, although that’s not as busy as it used to be because we’re now just getting called to ask to appear at a hearing to whether or not someone’s license should be canceled or suspended. And we’re still working in that space in terms of we’ve got clients who’ve come to us with license conditions, we’re either, again, acting as the expert there or we’re helping them navigate those license conditions.

Fraser jack: 03:26 Yeah, so really interesting compliance business. And in the compliance business, you’ve also got the proactive and the reactive type of client. One that might come for one off ad hoc advice, and also one that has an ongoing relationship.

Rhett Das: 03:44 Yeah. We ran the numbers about six months ago, and roughly 50% of our revenue comes from the ongoing engagement, and the other 50% ... it’s 49%, 51%. So, 51%’s ongoing engagement, and 49% is from these sort of strategic projects, if you like, where we’re running remediation programs and we’re trying to save a license or work with someone to redesign their license or their business. So, they’re probably the interesting jobs where you learn a lot. That’s where you’re in front of a regulator. And they’re also, I think, probably the most rewarding when you get the right outcome in terms of actually helping people go on that journey, change behaviors for the positive. And then hopefully if it works out for the client, then they will go on to become an ongoing client.

Fraser jack: 04:34 Yeah, there’s so many questions I want to ask you about that, but before we do, do you want to just give us a bit of an overview of how you got into becoming a compliance manager?

Rhett Das: 04:45 Yeah. So, I started out originally as a solicitor on the Sunshine Coast and I’d lived there for quite some time and went to uni there, and then found a job back on the Coast. And it was a great time when you’re in your 20s living by the beach. And then I met my wife, and she’s got a very specialized degree, so we have to move to a major city. And I was working for the ACCC in the Enforcement Department. And a job at the Financial Ombudsman came up. And so, I took that job, and that was really my foray into financial services. And I remember when I was being interviewed for the job, they said, “Look, we really find it hard to find people with the right skillset, so we just basically take people in if we think they can adopt or learn to adapt.” And that’s how I fell into it.

And from there, I went to work for AAP, which is part of Centrepoint Group. And from there became the Head of Prof Standards for AAP and PIS businesses. And that was when I was involved in the OMP and that was a great journey, great event for me from a learning perspective. And from there, I moved on to start my own business. And yeah, it’s been a lot of hard work, but it’s ... what do they say with small business? You work twice as hard for half as much money, but I’ve enjoyed it. I’ve just enjoyed being able to relate to the advisors to say, “I understand what it’s like running your own business because we do the same thing and we have the same challenges.” And it’s been very rewarding. And now there’s five of us, five full-time staff and five compliance consultants and some support staff that help us run the business.

Fraser jack: 06:30 Yeah, fantastic. So, it’s really interesting coming out of the Ombudsman Service as you did, you would have seen all the worst case scenarios, I guess, to start with?

Rhett Das: 06:41 Yeah. Well, I joined the Financial Ombudsman pretty much right as the GFC was kicking in, so there was a lot of work back then. Yeah, and it’s interesting looking back watching the transition from the industry because even ... I remember when I left the Ombudsman, I was there for approximately three years, we were referred in the compliance space as the sales prevention team. And attitudes have changed. And I do think that attitudes are definitely a lot better than where they have been. And I think we’ll continue to see that, sort of more acceptance about compliance. But yeah, it’s always hard to sell that message, particularly if you’re dealing, say with a business coach or someone who might come in and say, “Well, look, if I could help you turn over your ... increase your turnover by 50%, would you pay me X?” Whereas, we are coming to a business and saying, “We can prevent something from happening. How would you like to pay for that?”

So, I think the other challenge that we have too is in the past dealer groups have given things away for free. And when things are given away for free, people don’t always place a value on them. But I think people now are starting to see that you only get what you pay for. And we’ve been fortunate that we’ve got some really good quality businesses that we work with who have this real appetite to learn and improve. And for us, I think they’re probably the best.

Fraser jack: 08:05 So, you would see a massive growth area, I guess, in a lot of self-licensed groups at the moment, wouldn’t you? Is that what your main areas are?

Rhett Das: 08:15 That’s been a big area of growth for the business in terms of seeing a lot of people leave larger groups and go out and get their licenses. But a lot of people say they’re selective about who they deal with. But we really do try to triage people who we think would be suitable. We’re not really in the business of selling licenses to people. And maybe that means we don’t obtain or we don’t generate the revenue of other people. But we’ve had in the last 12 months quite a few people come to us who we’ve actually had to help close down their licenses because they probably shouldn’t have got them in the first place, but they were basically sold a license. And it’s sad, and it’s not something we enjoy. But when people say to you, “Look, you’re the first person that’s been really honest with us about our situation,” it does make you wonder.

But yeah, we’re getting a lot of growth in self-licensed or new people. And we do enjoy working with people who are starting out on this journey because you can really shape them and basically set them up with the right foundations if you like, so that the attitudes ... they’re very open to new ideas. And a lot of them will realize it’s their head on the block, and they’ll take onboard everything you say. And a lot of them will just constantly engage you, which is great because then when you see them four times a year every quarter, you really know what’s going on in their business and you can really try to set them on that right trajectory.

Fraser jack: 09:52 Yeah, there’s a lot of ... I guess there’s pros and cons with self-licensing or not or going with a larger group. And some of the thoughts for somebody who’s thinking about self-licensing, things that run through their mind is do they do it alone? Or do they do it with a couple of others or a small group? What would your thoughts be around that?

Rhett Das: 10:14 Look, we have a lot of people who are leaving larger institutions and groups at the moment and approaching us because they’re concerned about the uncertainty and what’s happening in those groups. And I guess if you’re coming into this because you think you’re going to save money, you’re probably not. It’s probably going to cost you more. And so, we actually try to really say, “Look, make sure you budget a certain amount of money and then maybe add another 10% or 20% because you just don’t know.” And so, that’s probably one of the key things for us is to ensure people actually can prove or can satisfy themselves that they’ve got the right setup.

And some people will try and sort of merge with other groups to split the cost, and I don’t think that’s always a great idea, only because you’ve probably got different philosophies on how to run a business or different investment philosophies. And if you’re coming together because you’re friends outside of the business or you think you run similar businesses, I really caution people who do that because from our experience, a lot of it can end up in tears. And you either do it because you want to do it or you believe in something. And some people have come together and made it work. But I think for most people, if you are looking to go down that self-license path, get your processes right, get your business set up the way that you want it set up. And then down the track if you do decide to bring other people in, that’s all fine and well. But it really needs to be a sustainable model from the start.

Fraser jack: 11:49 Yeah. Now, when you mentioned earlier the idea of having an ongoing relationship with our advisors or just helping them get through a particular spot, there’s a lot of talk around at the moment in the industry around this exact thing, this whole idea of most advisors see clients on an ongoing fee-paid relationship. Yet, some of the stuff that’s coming out at the moment, there’s a lot of talk around how the future could look a lot more as a one-off type engage and then walk away type thing. Obviously, like you said, you’re a bit of both. But it seems to me that the true value for the advisor is in that ongoing relationship.

Rhett Das: 12:34 Yeah, look, we are engaged to do one-off pieces of work, one-off projects. But we used to say to the advisors, “Look, we can see you once a year or twice a year or four times a year.” And we actually did away with the once a year and twice a year offer because it’s just too hard in this environment to be able to say, “Look, I’ll see you,” for example, “Twice a year,” and then in between that time, there’s been developments with [Fascia 00:12:56], we’ve had, for example, the Royal Commission, where we’ve had to update policies and procedures to reflect some of the things that have come out of those events.

And so, we made a decision in our business to say if people don’t want to work with us four times a year, then we don’t want to work with them because we’re just not culturally aligned. And so, we want to be able to regularly see the advisors to say, “Look, have you implemented this change in your business? Are you aware of this?” And obviously if we hear things that happened to other clients, then we can pass on those experiences or those stories so that they can make sure that those things don’t happen to them.

Just a couple of weeks ago, we had clients receiving letters from the Tax Practitioners Board because they hadn’t renewed their membership for different reasons. Some emails were being sent to junk, some people didn’t have ... The Tax Practitioners Board was sending the letters to office addresses where there was no mail service, and they had PO boxes. And so, we were able to respond quite quickly and just send out a group email to all our clients and say, “Look, just be alert to this.” And as it’s turned out, we’ve had three other people contact us saying, “Thanks for that because we’ve contacted and we got a similar letter.” So, they’ve been able to respond. And again, if you’re not seeing people regularly, it’s really hard to pass this information on or to really know what’s happening.

Fraser jack: 14:21 Yeah. Now, this is the Goals Based Advice Podcast, so really keen to know how that’s all changing with advice documents, and really focusing on clients. Obviously there’s been a lot of change in behaviors over the past few years as businesses have really turned around and made everything client-centric. Are you seeing that in some of the documentation as well in regards to goals and goals based advice?

Rhett Das: 14:47 Yeah, look, it’s a really interesting point because quite often we regularly review advice for clients, whether it’s an ongoing engagement or, like I said, if it’s a one-off piece. And one of the things we see a lot is people speak in strategies. So, the client will come to the advisor with a number of goals, and the problem when you’re dealing with advice, that information is what we would call foundation data. And if you get the foundation data wrong, then it’s very difficult for the advice to stand up on its own.

And it comes to mind where the advisor will just say, “Look, the client’s got a list to review their superannuation and to review their insurances.” And you say, “Well, that’s not really the goal. That was the reason they came to see you, that’s, if you like, the subject matter.” But when you scratch the surface and say, “What is it you’re trying to achieve with your superannuation? What is it you’re trying to achieve with your insurances?” And they’re the goals. And then when the advisor either speaks to a para-planner or they prepare their documents themself, and if they’re using, for example, software, the software might speak in strategies. And so, then there’s a bit of a disconnect sometimes between the strategy and the actual goal. And it doesn’t always talk.

And then we find when we’re reviewing the advice that sometimes certain goals or objectives might be left out because they haven’t been captured by the strategy. So, that becomes problematic. And then, a lot of times too when advisors are trying to either work with a client or trying to prepare their advice, just things that we believe because we deal in this space all the time that should be straightforward, but they don’t always come through that way is making sure that those goals and objectives are specific and measurable. And that’s so important because if you’re going to be charging an ongoing fee, what are you aiming for? If you haven’t got something to aim for, then where are you headed?

And so, we try to really emphasize that those goals and objectives need to be specific and measurable in time and quantum because when you’re having that review, you’ll be able to come back to the client and say, “Well, we saw you six months ago or 12 months ago, and this is where we’re at, and this is what we’re looking to achieve. And yes, I think we’re on track,” or, “Potentially because there’s movement in markets or whatever, we’re not on track. Are you still comfortable? And are these the things that we need to look at.” And there’s the ROA so that obviously if you’ve been caught up in the FDS project with ASIC, that’s important. But that is probably one of the two big things that we see that does cause concerns or problems with the advice, particularly if it’s scrutinized by the regulator.

Fraser jack: 17:36 Yeah. And you did mention the FDS project there. Now, that’s fairly well-known around the industry that ASIC are very much targeting what’s been happening with FDS and big disclosure statements with the advisors. Do you know if the FDS project’s still going with ASIC?

Rhett Das: 17:56 Yeah, so we were engaged by a couple of clients who received letters and asked us to help them with those responses. And so, we’ve had some clients who’ve had to put their hand up and admit that they’ve breached and they’ve lodged their reports or their breach reports, and we’ve recommended they commence remediation. So, the three phases, if you like, of that project, now the time to respond is closed and the responses have been received. The next thing that I would expect to see from the regulator is some kind of report saying, “This is what we’ve found as a result of this.”

And look, if the response is not to the regulator’s liking, then they could potentially look to expand that piece of work and do more surveillance or, I think most likely what will happen is they’ll wait to see what remediation comes back and prepare their report, and then they will have a better idea of where they go. But I’d be very interested in the data that comes out from that report, because I think it’ll sort of give the industry an indication of who’s doing things well and who’s not. And if you cast your mind back to the SMSF report that came out a while ago, ASIC came out and said, “Look, 90% of people aren’t preparing SMSF advice in the way that they would deem appropriate.” So, I’m hoping that we don’t get a report back saying that 90% of FDS’ aren’t in a way that ASIC liked. But I guess we’ll have to wait and see.

Fraser jack: 19:29 Yeah, I imagine there’ll definitely be something to report. So, we’ll find out when that’s done. What sort of things are you seeing the regulators really pushing at the moment?

Rhett Das: 19:40 Well, I think at the moment, we’ve obviously got a regulator now that’s sort of dealing with the fallout, if you like, from the Royal Commission. And so, one of the things that we’ve witnessed is that the consultative approach where in the past the regulators were still willing to work with licencees or let licencees try and sort things out themselves. It’s being said by regulators, and I don’t want to say it’s a mantra, but they’re saying, raising the question of why not litigate? And I know in some of the matters with which we’ve been dealing, they’re just simply not interested in accepting enforceable undertakings anymore, and clients who have been found to have done the wrong thing or potentially done the wrong thing, the matters are being referred straight to hearings where it’s basically put your case forward and the delegate will make a decision on whether or not a condition is placed on your license or your AR status is canceled or they cancel the license. And we’ve been engaged to work in some of those matters.

So, I think we’ll probably see more of that type of enforcement, if you like, where it’s really important that licensees realize that ... the licencees with whom we’ve worked where they have found themselves in these situations, it’s really what you can prove. Like, what have you done to demonstrate that you’ve actually tried to take steps? And how reactive or proactive have you been? Like, once you’ve realized there is an issue, can you demonstrate that you’ve taken steps to remediate clients? And what were those steps? And how deep or how far down the rabbit’s warren did you go? And we’re finding that licensees who can come to, if you like, the hearing with a delegate with real evidence, demonstrable evidence of things that they’ve done to turn the ship around, they seem to have better chances of either keeping a license, avoiding a condition, or surviving. So, the licensees that sort of argue or try to argue, send legalistic letters back to the regulator, they’re the ones that seem to be dealt with more harshly. And if I had to guess, I’d say it comes back to cultural piece and whether they can demonstrate they’ve got the culture that the regulator’s looking for.

Fraser jack: 22:20 Yeah, that’s a really interesting piece, because at the end of the day it’s the relationship with the regulator, so it’s working with, not against, I suppose.

Rhett Das: 22:28 Well, yeah. I mean, if you’ve been asked to attend a hearing before a delegate, it’s not usually because you’ve been doing a great job. But yeah, we unfortunately still have people that want to argue, they argue points when the evidence is there to suggest that things aren’t fabulous. And don’t focus on that, focus on what can you do to improve the situation. And again, I think that comes back to culture as well.

Fraser jack: 22:56 Now, you mentioned cost earlier. It’s probably an intriguing one for the listeners. If I was to set up my own practice now, run my own license, what sort of costs approximately would I be up for? But also the ongoing?

Rhett Das: 23:09 So, it’s always hard to sort of say, “This is the perfect amount of money.” But if you’re a sole practitioner or a two-person business, we used to say budget $50,000. But we’ve revised those estimates now to say you’re probably going to need at least 70 because by the time you have regard to things such as PI, there’s $20,000. If you’re running software, then depending on the software provider you use and the software ability, you could be looking at another $20,000. So, we’re already at the $40,000 mark. Then you’re looking at all the different subscriptions that you’ll need. For example, research, your ASIC Advisor levies, professional association memberships and the like, you know? You can very quickly run up another $5,000 plus, up to a $10,000 bill depending on what you’re doing. So, you’re already at $50,000. And if you’re looking to engage people like us on an ongoing basis, then you’re pushing the $70,000 mark.

And then some people want to join different groups, whether it’s for community or ongoing support, like dealer services. And they can be charging $10,000, $20,000. So, we’re well and truly past the $70,000 mark now. So, some people do try to do things cheaply. I mean, I’m not here to advocate what’s the best way because everyone’s different. But yeah, the cost is ... I don’t want to say it’s prohibitive, but it’s a huge cost. But then if people truly believe in something and that’s what they want to do, then they will find a way.

Fraser jack: 24:58 Yeah, I see the cost as slightly prohibitive to the practice, but very prohibitive to clients or consumers who really have to end up forking the bill. And if an advisor’s paying $70,000 a year up to $100,000 a year and they’ve got 100 fee-paying clients, that’s $700 to $1,000 a year that clients or consumers have to pay before they even get advice.

Rhett Das: 25:24 Yeah. And I think that’s the reality that a lot of people are grappling with. And when I talk about these things, I don’t usually win friends. But I guess what we always try to say to people is, “We’ll give you honesty.” And when you look at what’s happening overseas, for example in the UK where they went through a reshuffling of the deck chairs, if you like, or a change in their industry, a lot of clients who were at that lower end were basically no longer lawfully advisors. And I think this is the new environment in which we live. And people can say, “It’s being over-regulated and that’s driving up cost of the business.”

But then, one of the things that we see a lot of is people say, “It’s not me, it’s other people in the industry,” but then, when we ... obviously we work in an area where we see a lot of bad advice or poor outcomes for clients, and it’s probably not something we can cover off in the time that we have today. And I spend a lot of time working and dealing with ethical dilemmas, and we talk about ethics a lot. And obviously with the changes with Fascia as well, then you’ve got the requirement now to do your ethics points. And I think a lot of people are resenting all this additional education.

And I talk about ... I try to use different analogies from films and pop culture that people can relate to. And basically, there was a scene in The Matrix for those of you who remember that film, probably showing my age, but they say, “There’s a difference between knowing the path and walking the path.” And really, if you know the path and you walk the path, then basically, you know what you have to do, just get out there and do it.

I think there are positives. I think that people who can set up their businesses properly and realize that there are huge barriers to entry now in terms of being degree qualified and meeting all those requirements, plus the costs that we’ve spoken about, and lots of people leaving, for those that can survive and can adapt, they will be in a good position.

Fraser jack: 27:42 Yeah, I know you do a lot of education stuff as well. And that’s certainly ... and that ethical part’s a big part of it. And I think most people when they do additional education, they can complain about it. But then when they do it, they go, “Actually, that was quite good. I got something out of it.” And as you mentioned, you’ve done a lot of work around the ethical space. Are you able to share any of that with us?

Rhett Das: 28:04 Sure. It’s funny, it’s one of those things that, for me, they say, “If you enjoy what you do, it won’t feel like work.” And we do a lot of research, a lot of reading to back up the presentations we put together on this space because we’re not ethicists, it’s everything that we just learnt on the journey. And I provided a session to the FPA last week, I think. Yes, and then I had a lady email me on the Sunday saying, “Look, I was really grateful for the presentation. Initially I was quite skeptical, but I’ve listened to it, and it was quite good.” So, I guess when you get that kind of feedback, it makes it all the more worthwhile.

But I think from an ethical perspective, there are a lot of advisors who genuinely believe that they’re doing the right thing by clients, when they’re not. That can be for a number of reasons. And that could be the environment that they’re working in. We talk a lot about bad apples, and we talk a lot about bad barrels of apples, and then we talk about barrel makers. And if the advisor is ... If you’re a barrel maker and you’re creating an environment where it becomes very difficult for people to do the right thing, they could genuinely be nice people, but when you put them in the wrong environment, they can do terrible things. And it’s not just in financial advice, it’s throughout history. It’s in a number of different professions. And I think it’s just ... part of it is people being able to recognize when they’re in those environments or they’ve got people like that who are creating these environments, if you like, as the barrel makers, whether it’s ...

We had a case where there was a young ... she was an admin person working for an advice practice. And I drew the parallels between her practice and what happened with Sam Henderson where the Royal Commission, they played the tape recording of a lady who had impersonated the client. And we had a similar case where a client had rang up on the industry funds and had tried to impersonate the client by guessing the secret password. I don’t think that this lady who did this was a bad person, but for whatever reason she was in this environment where she felt that she had to get an outcome. And when we asked her, “Why did you do this?” She said, “Well, I didn’t want to go and upset the client or bother the client to get them to sign a new authority, so I thought I’d guess the password.” And she failed, but the barrel maker in her case said, “Well, look, this is your first and final warning, and don’t ever do it again.” And I guess that was an example of the barrel maker in that case, or the licensee saying, “Look, this is what I stand for. And this is clearly not acceptable.” And it was a hard lesson for this young woman to learn, but it sort of sets the tone of what this licensee would accept and wouldn’t accept.

And we have lots of people who will ring us with their ethical dilemmas. And yeah, they make great case studies for other advisors.

Fraser jack: 31:24 Yeah, certainly do. Yeah. As you mentioned, the history is full of situations where people were put in bad situations and just reacted the way that they thought they were expected to react amongst their peers, rather than what the right thing.

Rhett Das: 31:39 Yeah, and sadly it’s usually the people who work in the front line are the ones that get punished. It’s not the barrel makers, as such, it’s the frontline staff who end up being told, “You’re just a bad apple,” and they’re not really. It’s just where you put them, or look what you expected of them. And so, I mean, it’s interesting from a psychology perspective. But it’s also interesting for us because we work for so many different businesses, and you can walk in and you can get a sense for how these businesses are run, and you can get a sense for how the staff sort of react and behave. And sometimes you can really feel it with some kind of sixth sense.

Fraser jack: 32:20 Yep. Now, there’s a lot of change going on, obviously with the new regulations and guidelines with regards to education and the exam. That’s going to force a lot of change with regards to businesses selling or moving on. And there’s obviously a lot of price pressures out of the Royal Commission and other things that need to be changed. So, how do you see it going in the next short space of time? It feels like it’s contracting a little bit, and then it might be okay, but what are your thoughts?

Rhett Das: 32:50 Someone asked me this a while ago, and said, “How many advisors do you think as a percentage, how many do you think will leave the industry?” And I think when you look at the demographic, if you like, of advisors at the moment, there’s a lot of older males who will, whether with age or education requirements be forced out. Now, is that number 30%? Or is it 40%? I think in the short-term you could see potentially 50% of people leave over the next couple of years. But I think those numbers will recover because even though people will still need advice, we’ll have to wait for people to go through, to obtain the qualifications, to complete their professional years, but I think the reality is, we will see less advisors in the medium-term. And in the longer-term, will those numbers recover? I wouldn’t want to guess at this stage, but I think for those advisors who can accept that it is what it is now and structure their businesses accordingly, they will survive and they will run good businesses.

Fraser jack: 34:02 Yeah, so lot of work to be done, obviously, to make sure that ... to get through these next few years. You must see though a lot of people also at the point where they ... and this comes back down to the 50% that are leaving, suffering I guess mentally from the changes.

Rhett Das: 34:21 Yeah. I think so. I mean, if I look at different industries, and I’m not suggesting or trying to compare a financial advisor to a taxi driver. But if you look what happened in the taxi industry, the state governments around the country one day made a decision that they would allow Uber to come into the market. And there were people who’d borrowed large sums of money to buy a taxi license, and those licenses were now pretty much worthless and they still have a debt. And I’m not suggesting for one minute that was a great outcome for those people, but the industry changed. And I’m not saying it’s right or it’s wrong. But people had to adapt. And it happens in so many different industries. And I think the people who turn a lot of their energy into just being negative and just pushing against it, it’s a waste of energy.

I think if it was me, I would be saying, “Well, yes, I’ve been kicked in the guts,” but you’ve just got to dust yourself off and get up and get back on and put the mouth guard back in and start boxing.

Fraser jack: 35:21 Yep. Yeah, I think you’re right. There’s a lot of anger that needs to be redirected to-

Rhett Das: 35:27 We receive the anger all the time, you know? We walk in and we get abused. And that ethics sessions we ran the other week, we had people very complimentary, and other people said, “You know, I’m ethical. That was an error of my life I’ll never get back.” I didn’t make the rules, I’ve just been asked to present.

Fraser jack: 35:44 Yeah, fair enough. But how do you see it panning out over the next say ... push us forward three, four, five years, how do you see it then?

Rhett Das: 35:53 Well, I think we’ll definitely still have an industry. People will still definitely need advice. And I think if I was a practice today, I’d be looking at how do I run a business where I think the flat-fee model is probably more sustainable in the long-term. And that’s just my personal view. I think the businesses that can clearly articulate the value that they provide, whether it’s from a fee disclosure statement perspective to say, “Look, this is what you pay. And this is what we’ve delivered and what you’re entitled to.” And that will marry up with the forward looking FDS as well, I think.

If you can get those things right and you can work out, “Well, this is what the cost is to keep the doors open. This is what I need to make,” I think those businesses will continue to grow. I know I’ve looked in the newspaper about a couple of months ago, and I noticed that one of the industries where people actually salaries have gone backwards was in financial services. And I do expect those salaries will recover. But yeah, there is no doubt that across the board we’re all feeling it, you know? We feel it in our business too.

Fraser jack: 37:09 Yep. Now, you’ve seen a lot of things, as we mentioned, with your past history from the Ombudsman Services all the way through to helping advisors. If you were chatting to a client or a friend of yours, let’s say somebody who hasn’t had financial advice yet, they’re thinking about it and they come to you and ask you, what sort of tips do you give to those people?

Rhett Das: 37:32 People who are asking me if they can-

Fraser jack: 37:35 Yeah, about seeking advice.

Rhett Das: 37:37 Well, I’d usually try to match the advisor with the personality of the person for starters so that hopefully they will open up to the advisor and speak to them. And also, depending on ... because obviously we know lots of different advisors, but we’ll try to say, “This person might have ... this is their investment philosophy,” for example, and that may align with what the client believes in or likes. So, we really do when people come to speak to us try to find out what they’re about so we can say, “You can speak to any of these people.” I’m not really sure I’ve answered your question though.

Fraser jack: 38:16 Yeah, it sort of sounds to me like you’re saying more around the alignment of the client and the advisor and their values, probably.

Rhett Das: 38:24 Yeah. I think it’s, again, if you look at different sort of industries, there’s certainly GPs or doctors that I’ve been to and I haven’t really enjoyed the experience, but there’s others that I would go line up and wait an hour in the waiting room or longer to go and see because they’re the people that I want to work with.

There’s one advisor that comes to mind in Brisbane, and he’s got this philosophy. And when I tell people about him, a lot of people get excited and will want to see him. And he’s one of these advisors that runs a flat-fee model. And I think last time I checked, he rang me out of the blue and he said, “I’ve got a waiting list of about three weeks of people to come and see me.” So, he’s quite good at articulating what he stands for and what he’s about.

Fraser jack: 39:13 Yep. Yeah, it’s an interesting one that I find comes back, again, to this ad hoc versus ongoing relationship. And whenever I speak to a lot of people inside the industry, they automatically go to that idea of alignment of personality and alignment of values, alignment of, “They offer the sort of thing that I’m going to find of value over the long period of time,” because automatically jump to this relationship conversation, it’s a relationship. But yeah, I am feeling like I’m seeing an increasing amount of conversation come back from ... maybe not the regulator, but from the expectations of some things the regulators say that a lot of the time could be a one-off ad hoc transaction. And to me, a lot of ... also the idea of the qualifications and everything going up also feels to me a little bit more like it’s around transactional ad hoc advice.

Rhett Das: 40:15 Yeah. There’s definitely an element of that. I try to avoid getting into sessions where people just start bashing the regulator because I don’t think it really ... it’s probably not going to achieve a lot. But there are people who’ve worked in the regulator who have been financial advisors, and some people like to point out, “They must have been failed advisors.” And I say, “Well, I’m not going to really comment on that either.” But the regulator has a view, and they have their objectives, if you like, and what they want to see and how they see themselves in the market. And if you want to play the game, then know what the rules are and swim between the flags, whatever analogy you want. But it’s there and you need to be aware of it.

Fraser jack: 40:59 Yeah. Fair enough.

Rhett Das: 41:01 I’ve come off 27 days of a suspended drivers license and I work in compliance and I’ve got caught speeding. It just frustrates the daylights out of me because I wasn’t playing with a mobile phone and I feel as though there’s other people out there who are worse drivers than me, but it is what it is, you know? I’ve just got to serve it out.

Fraser jack: 41:21 You’ve got to cop it on the chin.

Rhett Das: 41:22 Yeah, as much as I hate it. It’s just the way it is.

Fraser jack: 41:26 Now, what tips do you give to people that are thinking about setting up their license or going out on their own?

Rhett Das: 41:31 I think it probably comes back to a lot of what we talked about before, which is really know what you stand for, know what it is that you want to achieve. I think the best thing you can do is talk to other advisors. Don’t be sold a license. There’s plenty of people out there who will try and sell it to you and say, “It’s wonderful. It’s great.” I ask people, “How much work did I have to put in the first year to get this up and running?” You know? Not just from a PI perspective, but there have been plenty of decisions that have been handed down from the Ombudsman where they would say that over a period of time our client does need a new SOA. Talk to your peers, talk to people who’ve done it. I’m sure people will say, “Look, I’ve enjoyed it, but it was a lot of hard work.” And really make sure you know what you’re getting into. That’s probably the first piece of advice that I would give to people who are looking at that.

Obviously if you were going to apply for a license, you need to provide the regulator with a business description which sets out what you’re about, what you’re looking to do, who your target clients are. I think another thing too that I would encourage people to think about is what is your sweet spot? Stick to what you’re good at. If you’re not really good at admin work or you’re not good at certain things, outsource it. That’s probably one of the lessons I learnt in business a long time ago is I can do certain things and take a long time to do them, or I can just accept that I need to pay someone else to do, for example, my IT. I’m rubbish at IT. I could spend hours Googling things and setting things up and eventually getting there, but I’m better off just paying someone else to do it. And I’m better off paying someone else to do my bookkeeping because it’s just not my strength.

Fraser jack: 43:15 Yeah, fair enough too. I was going to actually just ask you that as the next question, if you could go back in time and have a do-over, what sort of tips would you give yourself along the way?

Rhett Das: 43:26 Well, I told myself when I did jump, not to pack a parachute, because I think if you’ve got that, I think when you jump, you just need to jump and say, “Well, there is no coming back,” because if you’ve got the parachute, there’s always the temptation to pull the cord. So, I think you go. And I think if I could go back and give myself advice, don’t be afraid to take a risk. I like to think that I’ve got quite a high tolerance for risk, but I think there’s probably been a couple of opportunities that I should have backed myself or moved on quicker, and I lost those opportunities. And I think, again, from an advisor perspective, just get out there and walk the path, just have a go.

Fraser jack: 44:11 Fantastic. Thanks for your time today, Rhett. Really appreciate you coming on and sharing your experience around the compliance section.

Rhett Das: 44:18 Excellent, Fraser. Well, thanks for having me.

Fraser jack: 44:20 Thank you. If you haven’t already, I’d love you to subscribe to the podcast on your podcast platform of choice. And to continue the conversation, head over to our social media channels. We’ll catch you next time.



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