Intro: 00:00 This episode was recorded live at United, the 2019 AFA conference in Adelaide. The Association of Financial Advisors is the association of choice for financial advice professionals, and it powers them to transform the lives of Australians through quality financial advice. For more information, check out afa.asn.au.
Fraser Jack: 00:21 Hello, and welcome to the Goals Based Advice podcast where I’ve conversations with pioneers of the new world of financial advice like Felicity Cooper who’s sitting right next to me. I’d like to thank our supporting partners, Advice Intelligence, for powering this podcast. To the AFA, thank you for hosting us here at this beautiful location in Adelaide, and to Oh My Pod, the podcasting editing team for editing these podcasts and getting them out as soon as we can. Felicity, welcome to the show.
Felicity Cooper: 00:53 Thank you for having me. Its my first podcast.
Fraser Jack: 00:55 Is it really?
Felicity Cooper: 00:56 So I feel like a pioneer today.
Fraser Jack: 00:57 Well, pioneer and certainly you’ve had a busy conference. You’ve got a couple of presentations to do and one still to do. Is that correct?
Felicity Cooper: 01:06 I still have two to do. So I’m talking on both preparing for the Fussier Award and also on setting up your own license.
Fraser Jack: 01:13 Fantastic. Now, do you want to give us a quick overview of yourself and your business?
Felicity Cooper: 01:16 Sure. So I’ve been in the industry for just over 20 years. Firstly, in stockbroking. So I was going to be an accountant but I was told actually that I have the attention span of a goldfish and I talk way too much, but somewhere in there I’m good with numbers. So I went from accounting over to stockbroking and then got a little frustrated with the process. So it was a very male dominated industry. We’re only looking at such a small piece of the advice part, and I found that frustrating because you can get all of the investments right, but if you don’t do it in the right way and in the right structure, you’re wasting the opportunity.
So I went from broking into financial planning, worked for some of the big firms. I’ve worked for the JBWere, Goldman Sachs, Macquarie, Morgans, and then decided that the only way I was ever going to do it the way that I really wanted to was to set up my own business, which I did four years ago.
Fraser Jack: 02:06 So coming from that corporate background, were you essentially being told what to do or how to do it and those sorts of things?
Felicity Cooper: 02:12 I think that changed over the years. So in the early days, no, it was every man for himself. And in stockbroking it was a commission only type of role. So if you didn’t sell and buy shares, you didn’t get paid. So you definitely had research to follow and you had to figure out how to do portfolio construction well, but there wasn’t really a you get told to do something apart from probably the odd IPO or placement or something.
I think it changed though. So as it got bigger, compliance became a bigger role or got a bigger role in that industry and we had new entrants coming from the U.S. It was a bit of a everybody should get the same thing because that’s how we make it efficient. And that’s not the kind of person I am.
Fraser Jack: 02:55 Yap. So you made the decision to start your own business. How did that go? Then what did you do? What was the process for you?
Felicity Cooper: 03:04 I’m one of those people that once I’ve decided something that’s it, I’m going to work out how to do it. So it was a fairly short process for me. I think talked to Morgan’s about becoming a partner at the franchise that I was at, and in the end thought actually if I’m going to do that step of being a business owner I would rather have the buck stop with me. And so went out, I actually got somebody to help me get my AFSL, which I highly recommend. I think trying to do that process completely by yourself if you get it wrong, you’re not going to get a license. So go and spend some money and help get some help.
And then it was that realization of, “Hang on a sec, I’m not actually being a financial planner. Now I have to be a business owner.” So it’s been challenging but rewarding at the same time, like everything.
Fraser Jack: 03:51 Yeah. So you had somebody help you set it up but then it’s obviously a lot more to it than just the setting up, isn’t it?
Felicity Cooper: 03:57 There is. So we still have a external compliance officer. It’s such a changing environment that I think without someone to help you through it the risk is that you miss an update or you’re not implementing it properly. So I find that ability to have somebody that I can throw an idea, so this is how I’ve read that change, does that mean I can make my SOA look like this? And they’ll go, “Actually no, it’s still too long,” or, :”No, you needed this in it,” or, “No, you don’t really need to have that.” So I would still use an external compliance person just to keep you on best practices, make sure that you’re doing the right thing.
Fraser Jack: 04:33 Yeah. And so you’re running your own license. It’s also independent license?
Felicity Cooper: 04:38 Yeah. So yes, in it being... So our own license. So I’m the only responsible manager of the AFSL. We are independent. So we made that move in a process, I guess, over the last two years. And I spoke about on the AFA road show. We decided or I decided that every month we would turn off some kind of trail commission. So we would turn something off, take a hit to the bottom line, build that out with new clients or new revenue streams. As soon as we got back to where we were before we turned the next thing off.
So for two years we didn’t make any more money than we had previously, but we at least controlled this change. So now we’re not hit with... Maybe we’ll lose grandfathered revenue or something like that because we took the pain. So it’s not that there isn’t pain, but we took it incrementally in a way that we could control it rather than one day somebody else coming through and switching it off.
Yeah. Now, you mentioned the switching off and turning off, not exactly a simple task though.
Fraser Jack: 05:39 No. Some of them are simpler than others. So some you can have rebated. Some when it comes up to an annual review we say, “Look, we’re doing it differently. We’re going to be switching this off or we’re going to be rebating that to you, but it means that the fees are going to change.” Some of them we are still writing checks every three months to actually rebate money back to people, some of which were a bit of an inherited book. We don’t even know where... We don’t have that relationship with them. So we write checks and put it in the post.
Felicity Cooper: 06:14 Well-
Fraser Jack: 06:15 It’s pain in the backside. But for a lot of, particularly unfortunately the insurances, you can’t actually just turn off trail for every one of them, or you can, you can say I don’t want it but the client is no better off for it because it’s not going back to them, and that defeats the purpose in our opinion.
Felicity Cooper: 06:32 How does this work with the superannuation regime where maybe someone’s paying their insurance premium out of a superannuation in that case and then they get a rebate?
So it’s still just the commission part that we’re having to deal with. So if we’ve set that up so that there’s no commission involved, then it’s not an issue. If it’s that we’ve received commission from a super fund, we have to put the commission back into the super fund. Otherwise, they’re getting a personal benefit from it-
Fraser Jack: 07:01 Correct, yes, yes.
Felicity Cooper: 07:02 ... when they shouldn’t. So it has to go back to wherever it came from.
Fraser Jack: 07:06 Yap. Okay. Fantastic. So you’ve got the the license set up and tell me about the business. What size is the business?
Felicity Cooper: 07:11 So we have five staff. We actually just brought on our third financial planner this week, which is exciting and then two support staff on top of that. So we’re still small. I don’t know that we’ll ever get particularly big. I like the idea of boutique. I like the idea that everybody gets a different solution, that we all really actually know our clients.
So we’ll only have a 100 to 120 clients each. It also means that every other person in our staff might not have that deep relationship with that client, but we’ll know them. So everyone kind of is across everyone’s clients. Every SOA that we do gets brainstormed with the whole group. So everybody actually has some level of understanding already with every single client that comes into the book.
Fraser Jack: 08:00 Okay. And as a licensee you’re not looking at expanding that or taking on more groups?
Felicity Cooper: 08:05 Definitely not. So I’m a bit of a control freak. So for me the biggest risk to business that I see is that you take on advisors that either mean that you inherit risk with that. So they’ve brought on behaviors that had been accepted before that are no longer acceptable. And so that then comes into my book or that you can’t control that process anymore and you can’t watch over the whole thing to make sure that everybody, not just compliance, but everybody is getting that same kind of service level that I would expect our clients to get. So for me, it’s not a matter of farming out the license. It really is just this is our office and we do a good job for our clients and that’s enough.
Fraser Jack: 08:50 Fantastic. Now, I want to talk to about some of the awards that you both nominated for and have won in the past.
Felicity Cooper: 08:56 Yes.
Fraser Jack: 08:57 So you were here at the this conference last year, winning awards. Want to talk us about that?
Felicity Cooper: 09:02 So with the AFA last year, I did win the Excellence in Education award, which is something I’m really proud of because I think that part of our job as financial planners is also as educators. So we firstly owe our clients, I believe, a duty to be as educated as we possibly can be to make sure that we do give them the best strategies that are available that we keep up to date. The rules change all the time. Some of the worst advice that I’ve seen in our industry is actually done on just outdated rules and regulations. It’s not actually that there was a bad intent, but it’s come from somebody not keeping up to date. So yap, that was a great one for me.
Fraser Jack: 09:41 That was a great one. And this year?
Felicity Cooper: 09:43 So this year I am a finalist for the female excellence in advice.
Fraser Jack: 09:47 Talk us through that process that they went through to judge that. We don’t know who the winner is yet at the time of recording this. We probably will by the time of listing, that’s being tonight, is the big night.
Felicity Cooper: 09:57 And that’s tonight. Yes.
Fraser Jack: 09:58 So talk us through the process that they went through or you went through in looking at your business and going through.
Felicity Cooper: 10:05 It’s a great process, and I would actually say to anybody that’s thinking of putting their hand up for an award to do that and to self nominate if that’s what you need to do as well to be a part of that process because it gives you an opportunity actually to question your own best practices. So if you think as part of this I’m going to have to provide a copy of an SOA. Well, which of my SOA’s am I actually happy with a whole panel of people looking at? And then we have the discussion in our staff room about we should be able to do that with any SOA. You should be able to walk into the office and go, “We want to see a statement of advice that we’re going to judge for this national award and we should be able to go-”
Fraser Jack: 10:47 Take your pick.
Felicity Cooper: 10:47 “... Take your pick. Which one would you like?” So that’s been a process of probably the first year that we went into any award. It was like of these eight these are three that I’d love to send in because I think we did a really good job on this and we’ve worded it like this and it’s really conversational and it’s just so personal. And then there was that thought process of, “Hang on a sec, how come they’re not all like that to a point where we would be happy to give them to a panel of our peers for them to pull apart basically?”
So that has improved our advice significantly. The feedback that you get from your peers is great and those connections that you make is great. But the process is rigorous. So you do your questionnaire then they... So I’ve been now a judge as well. So this year I am a judge of the excellence in education award as a previous award winner. I’d never realized how rigorous the process is. So from a list of candidates it gets narrowed down to a list of phone interviews. There are score cards on those interviews. So it’s not just a, “Do I like the person.” It’s here’s 20 points and you can get from one to five for every single one of them. That then gets it down to a group of people that are then the semifinalists that go to Sydney for a very intensive process in front of a panel that grill you essentially for 40 minutes.
Fraser Jack: 12:16 Intensive and rewarding.
Felicity Cooper: 12:18 Intensive and rewarding. Yeah, I wouldn’t keep coming back and doing them if I didn’t think that they were rewarding. But like I say, it’s also the people that you meet as part of that process and the opportunity to look back and go, “Okay, what have I actually achieved in the last 12 months? What else is it that I should be doing?”
Fraser Jack: 12:36 It seemed to me like it’s almost a coaching exercise-
Felicity Cooper: 12:39 I feel it is.
Fraser Jack: 12:40 ... a business coaching exercise that anyone can do for their business.
Felicity Cooper: 12:41 Yeah. One of our staff is also a finalist in the excellence in education award this year. So for us it’s a good chance for us to pick apart everything and say, “Are we doing this as well as we really think that we can be, and are we satisfied enough with the way that we’re doing it that we can stand up in front of peers and judges and say, “I think you’re going to find that this is good work.”
Fraser Jack: 13:07 Yeah. Fantastic. And then a part of that award last year was you did a road show around the country and presented.
Felicity Cooper: 13:14 Which was great.
Fraser Jack: 13:15 And one of those things on the road show that you stood up and said is that you put your hand up and was going to put your hand up to be, I think the guinea pig was the word you might have used or one of the first advisers to sit the first year exams when they come out.
Felicity Cooper: 13:29 That’s right. I did feel like a guinea pig and the experience... So I’m one of those, like I say, when I’ve decided I’m going to do something, I do it. So for me that was a bit of a leave yourself no room to back out of it. So if I went around the whole country and said to people, “That’s it, I’m going to go and do the first sitting,” then there’s no possible way I couldn’t do it, which was an interesting process. It’s a first time... And obviously having won the excellence in education I’ve my fair share of educations. I’ve sat enough exams that that part of it didn’t daunt me, but there was so much unknown I found in this one. I don’t know what they really going to be asking. I haven’t read... How do you read this much course material?
And I don’t know of an advisor who took six weeks off work and did nothing for six weeks but read the Corps Act or corps law. How do you prepare for something that you don’t really know what’s going to be in it. And it’s probably the first one of an exam where I’ve walked out, “ I think I did okay.” But I don’t even know what the pass mark is.
Fraser Jack: 14:38 Yes.
Felicity Cooper: 14:39 So I know I passed in the traditional sense, but did I get whatever their credit mark is going to be? Did I give short answers in the language and the style that they expected it to be in? And particularly in ethics. It’s a very different path of study, I guess, that most of us have done as advisors. It was really one when you walked out you went, “Pretty sure I did okay, but I don’t think I’d like to go and tell everybody that I passed until I actually get that result.” Sorry.
Fraser Jack: 15:11 And the result came through?
Felicity Cooper: 15:12 The result came through. So yes, passed. They actually put up the marks for a moment too, which was-
Fraser Jack: 15:12 Did they?
Felicity Cooper: 15:17 Yeah. Which was interesting.
Fraser Jack: 15:19 Was that a mistake or was that-
Felicity Cooper: 15:19 I think so because it got taken down about 15 minutes later.
Fraser Jack: 15:22 Right. Okay. So you were one of the few that saw your marks?
Felicity Cooper: 15:24 Yap.
Fraser Jack: 15:25 Fantastic. Okay. And so you obviously can’t talk about the detail-
Felicity Cooper: 15:28 Correct.
Fraser Jack: 15:28 ... of that exam, but what sort of tips would you give to advisors that are looking and now having to go through it?
Felicity Cooper: 15:36 So my first tip is actually just go and give it a crack. So-
Fraser Jack: 15:40 Without studying or?
Felicity Cooper: 15:43 Do a level of study that you’re okay with. So, like I say, I’ve had numerous conversations now with people that did that first exam that have gone everywhere from six weeks of intense study to me who went, actually, “I’m going in this to be okay to fail because I’m doing this as in guinea pig. I’m doing this as an experiment. I’m doing this with the idea that maybe if I’ve been in the industry for 20 years, I should know a lot of this stuff I have my own license. I’m an RM for that. I’ve had to do my studies for that. I’ve done my masters. I should actually be able to pass without too much else.”
So I read a few documents and a few RG’s, and that was it. So everyone’s going to go and have a different path to it. But I still think that the biggest fear people have is that of the unknown. And you don’t get rid of that until you actually go and sit the exam, and if you fail, go and do it again. It’s not a career limiting thing. You don’t have to have done it until the end of next year.
Fraser Jack: 16:46 It’s only career limiting if you don’t do it in time.
Felicity Cooper: 16:48 If you don’t do it in time. And you only have limited opportunity and time to do it in. We were hoping that there would be an extension of that timeframe. It hasn’t happened and you can hope for it all you want, but at the time you’ve got a play on the field that you’ve got. So at the moment they say you have to have passed by the end of next year.
Now it took us six weeks to get our results back. So if you’re sitting in December, your licensee doesn’t know you’ve passed at the end of December. So you haven’t met your cutoff. So you have to have actually done it on the current schedule by September. You can’t sit two in a row. So you can’t sit a June and then a September because you don’t meet the time limitations. So you’re always missing one of the rounds. So if you want to give yourself the chance to be able to fail one you actually then have to sit in March. So the timeframe is not, “I think I’ll do it in June and if I fail I’ll go and do in September.” No. If you fail it in June you are not going to have passed by the 31st of December.
Fraser Jack: 17:55 Well, yeah. So March is the day.
Felicity Cooper: 17:58 March. The sooner you do it, the sooner you get out of the fear in your head and the sooner you know what it is that you’re dealing with, and if you find that means that you have to go and do more study at least you know what it is that you’re studying and you’ll be a little bit more comfortable and confident in those surroundings if it’s the first time that you’ve done an exam like that for a while. I’d be signing up for the first one that you can.
Fraser Jack: 18:21 And how long did it take you?
Felicity Cooper: 18:22 The exam?
Fraser Jack: 18:24 Mm-hmm.
Felicity Cooper: 18:24 So you have your three hours, 15. I went into it... Because I was very worried that I wouldn’t get it done because again I didn’t know what to expect, so I ran through the entire thing with a, “This is my gut feel first response,” in an hour and a half and then spent the whole next hour and a half going back and checking them. You do have the law there, so you have the reference material there and I just spent it going back, looking up the sections going, “Yap, got the right section number.” Or, “Yes I was right with that. Next.” So as I spent the whole time, “Why not? Why leave half an hour early to get to the pub or something when... What’s half an hour? Just double check your questions.”
Fraser Jack: 19:05 Yep. Fair enough. Fair enough. So how do you see all this panning out post that a few years down the track? Where are we going to be at? There’s the qualifications and so that’s through. How do you see the professional looking?
Felicity Cooper: 19:17 So I think once people are through it, it’ll be great. Now, I understand though... And I’ve got people particularly in stockbroking who haven’t had to do financial planning, any financial planning work before and they’ve been stopped working longer than I’ve been in the profession. So for a lot of people that’s very daunting to say, “Actually you’ve got to do go and do a whole graduate diploma as a minimum to continue doing your craft, to continue doing what you’re doing.” And I hope that those people do it because I think that there’s so much value that that experience adds to our industry.
And in the end, I think a client shouldn’t have to look at an advisor and wonder, “Are you qualified to give me this advice?” Regardless of age, to think that somebody that’s done a six week course can be giving people advice on their whole life savings isn’t right for client, I don’t think. The rules are complex. So you can’t learn it all in six weeks. You don’t have enough experience after six weeks. I think this is a good thing, but I just think people have to start early so that they can do it in little incremental steps rather than getting 12 months out and going, “Now I’ve got to do eight subjects. How am I going through that?” Whereas if yo just one subject at a time, start now, if you end up that you’ve done more study than you had to because they’ve given extra credits for something, oh, well, you brought yourself back up to speed. On with it you go.
Fraser Jack: 20:54 Now, I was going to mention to you as well when we talked about licensing, and I forgot to have mentioned at the time, but the cost of licensing has gone up a lot, PI, the cost of what’s involved now. We’ve got to have the co-monitoring expenses on top of all these other things that we’ve got.
Felicity Cooper: 21:13 And possibly another set of insurance on top of that.
Fraser Jack: 21:16 Yes. So one of the things that I think about all the time is that this industry has been good for new parents, moms and dads that have a young families and may want to work part time. And one of the fears I have is in as we go through this next process is there’ll be a lot of part-time roles, financial advice roles, that will disappear. Do you see that? Do you think it-
Felicity Cooper: 21:45 I think that’s probably a fair assumption. So I think you’ll find the rise of part time in your support staff will go up particularly if you’re self licensed. You have such high fixed costs. So I know of firms that have had their PI insurance go from 20 grand to 75 grand in one year without real change of staff numbers or revenue. It’s just there’s people that have left the industry in the insurance part of it. And so you don’t have very much choice about who you actually insure with, which means it’s not competitive, which means prices go up.
So the fixed cost of having an advisor on a desk when you take into account an X plan license, a PI insurance, your ACIC fees, the CPD platform, everything else that you’re adding onto it is definitely going up substantially. And it depends then on if that part-time worker I can be efficient enough to still be able to service the same number of clients at a revenue point where it makes sense for that person to have a seat. And if they can do that then it doesn’t mean that we can’t have part-time people.
And if we look at a lot of studies that have been done often part time, people are more efficient with their hours than full-time people. So I think it’s still just an economics question. Are you servicing enough? Are you looking after enough clients to justify the cost of that and for it to be profitable? Is the firms pricing structure right to be able to do that? Is the back end efficient enough that you’re keeping the costs down in the areas that you can, or whether you’re full-time or part-time? If you can’t do that, it doesn’t make business sense.
Fraser Jack: 23:31 Yeah, correct. Now, if you’re at a barbecue chatting to some friends and meeting some people and they come up to you and say what tips do you give them about finding a financial advisor, what are your tips?
Felicity Cooper: 23:42 So it’s interesting because I do get asked that a lot actually. So I say first thing, do your research. So go and hop on the MoneySmart site and check an adviser out. Are they licensed? I mean, I come from the Gold Coast. Unfortunately there’s a few running around that call themselves financial planners that aren’t actually financial planners. And so they fall outside the ACIC realms. I think of anybody being able to do anything about that. So firstly check that they’re licensed, who are they licensed through, is that okay with me, how experienced are they, what study have they done. And then I tell them it’s like dating.
So in the end we are a profession with a personal relationship like a doctor. And so you can go to a very good doctor and sit there at the end of it and go, “I didn’t gel. They didn’t explain it to me in a way that I wanted it explained. I questioned it and they looked down their nose at me as if to go, “How dare you question my prognosis of your problems?” Or there’s one that you walk into and go, “I just felt really at ease with that person. They answered my questions and then they said if I want to bring my husband in, “Bring them in and I’ll walk through it as well.”
I think we’re exactly the same. Go like a dating service. Just because you go and see somebody for an initial appointment doesn’t mean you have to deal with them. Go and have a few meetings. Find out who you feel like you can trust. They have to trust us with their deepest, darkest secrets and fears sometimes and their goals and aspirations without fear of judgment of those, because it’s such a personal thing. So I think go and talk to a few and trust your gut. Most people have a pretty good gut feel.
Fraser Jack: 25:23 Yeah, it’s interesting when I ask people this question. We all tend to go, “The relationship’s got to work. It’s going to be longterm,” and increasingly we hear, not stories, I [inaudible 00:25:40] hear things around more of the transactional advice stuff coming out, particularly from the regulators I find. A lot of the stuff is around that short term transactional stuff, comparing advisors against advisors, et cetera, around short term but not really getting into the relationship piece of the ongoing... Yeah, so that’s interesting.
Thank you so much for coming on the show. Really appreciate your time. I know you’ve got-
Felicity Cooper: 26:01 Thank you.
Fraser Jack: 26:03 ... a lot of things to do here. So I really appreciate. Thank you.
Felicity Cooper: 26:06 Thank you for having me.
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Disclaimer: This document is a transcription obtained through a third party. There is no claim to accuracy on the content provided in this document, and divergence from the audio file are to be expected. As a transcription, this is not a legal document in itself, and should not be considered binding to advice intelligence, but merely a convenience for reference.
