“There are very few people in the world who understand financial advisors and great advice as well as Barry and David. Their lifetimes of learning are now documented to help others provide the care to the folks who need it most. This is a must read for those who simply want to improve their care to clients.”

Q & A with David Haintz: What growing advice firms need to do

David Haintz was a leading player behind the success of Shadforth Financial Group — one of Australia’s biggest financial advisory firms. He now works as a consultant to growing advice businesses around the world, and has recently co-authored a book with Barry LaValley, The Life First Advisor: How the new financial coach connects ‘money’ with ‘meaning’.

In this interview, David explains to the financial journalist and investment blogger Robin Powell how Shadforth grew so quickly, why the financial advice profession is at a crossroads, and what firms need to do ensure they grow.

For those, outside Australia, who aren’t aware of Shadforth, briefly tell us the story.

The Shadforth story is an interesting one, and I think quite unique. I’d been advising for many years, having established my own small firm in 1989. Fast-forwarding to 2008, we merged 13 firms simultaneously to create the Shadforth Financial Group.

On day one we had about Aus $80 million in revenue, and around $25 million of EBIT. The reason we merged was that most of my partners were older (I was 42), and they were looking for some form of liquidity. We had very common values, being client-centric and fee-based. We didn’t really have a firm goal, but we listed the firm on the Australian stock exchange in 2011, and ultimately we were taken over by a larger listed company in August 2014.

You personally were instrumental in developing an evidence-based investment philosophy at Shadforth. Tell me about that.

Although we had common values when we merged, we had very different models in relation to pricing, administration and investment. Around $1 billion of our $8 billion in assets under management were in some form of evidence-based solution. We had a saying around the boardroom table, a sporting analogy, about playing the ball, not the man. In other words, we wanted to take emotion out of any debate. We didn’t want to hear “ I reckon” or “I think”; we wanted to see hard evidence. So, to cut a long story short, we adopted evidence-based investing as our core approach, and that gave us efficiency and capacity release to focus on what was just as, if not more, important to our clients, namely helping them to achieve their goals and aspirations.

What have you done since leaving Shadforth?

I was in a very fortunate situation at the age of 48 that I didn’t think I would be in. It enabled me to start with a blank canvas. My wife suggested I spend some more time at home with her and with the kids. I did that for six months or so until she suggested I ought to be doing something more than being at home! I wanted to do something that was global, having worked for so long as an adviser in Melbourne, and I wanted to do business-to-business rather than business-to-client. So I founded Global Adviser Alpha. The alpha part is a play on words. As I’m sure most readers will know, alpha is an industry world for outperformance. GAA is about teaching advisers about real, sustainable alpha, rather than the stock picking, crystal ball gazing variety. I’m essentially trying to help advice firms to add value and, I hope, to become world-class.

How did you meet Barry LaValley? And did the book come about?

I was working as a principal at Shadforth from 2008 to 2014. Barry at the time was doing some consulting work in Australia for Dimensional Fund Advisors. He had a different angle, essentially a psychological one, and we ran some seminars for our clients based on his previous book, So You Think You’re Ready to Retire? And those went really well. At the same time, Barry was doing some work with our advisers — helping them to become more friendly, to understand how people think and how they make decisions. So Barry and I got talking, and we saw a huge gap in the market, for advisers to be focussing on the really important things. And that led to the book.

What are you hoping to achieve with Life-First Adviser?

In a nutshell, we’re hoping that we can make a real difference to advisers around the world. What I see, having been an adviser for two decades, and now advising advisers, is that the vast majority of advisers globally are focussing on what Barry and I refer to as below the line — the money and the product and the investment. What they really need to do is focus above the line — on moving from money to meaning, and from product to people. Only around 15% of Australians take advice, and between 5 and 10% take any form of on-going advice. People need to get good advice. Our aim is to help more advisers have a better value proposition, so that, in turn, more people take advice.

You talk in the book about the importance of having a client-centric approach. What exactly do you mean?

In one sense it’s fairly self-explanatory. But when you drill down, it’s more complicated. The epiphany is one thing, but the build can take some time. Client-centricity is about right brain, not left brain — talking on the emotional side, not the money side. As an example, when clients walk into reception in a financial advisory firm, they don’t want to see investment magazines. They’d rather see magazines about travel or wine, for example. Another example would be adviser websites. Typically I see websites articulating a value proposition around what firms do and how they do it, as opposed to why they do it. It’s all about helping people to make smart decisions with their money, in order to achieve their goals and dreams. It’s about sitting on the same side of the table as the client and working in their best interests. Client-centricity is about building your business, from end to end, on what clients really value.

You’re a big advocate of cash flow modelling. Why is that?

My experience, firstly, is that very few people are aware of what their goals are and, even if they are, they aren’t in a position to articulate those goals. Secondly, even if they know what their goals are, not many people know whether they’re on track to achieve them. When I first heard Paul Etheridge talk in 1995 in Australia, it was an epiphany for me. Very few people will come in and ask you for cash flow modelling; they’ll ask you for what they think they need. But as Henry Ford of Ford Motor Company fame said, “If I’d asked people what they wanted they would have asked for faster horses.” Cashflow modelling is totally engaging. It helps the client understand whether or not they’re on track to achieve their goals. In the worst case, it’s an early warning sign. In the best case, they may be able to increase their expenditure. I can only pass on that my experience in doing it, from 1995 onwards, was that cashflow modelling was the greatest single value-add that we provided for our clients.

In the book you make a distinction between lifestyle practices and growth businesses. Why is that distinction important?

In my view, anyone who’s running an advice firm has to have a life plan before they have a business plan, so they’re clear about what it is they're trying to achieve with their lives. There’s nothing right or wrong about one or the other. Some people choose to have a lifestyle practice so they can work two or three days a week and spend more time with the kids or on whatever is important them. On the other hand, some people choose to become more efficient and more profitable and grow their business. Either way, it’s not for me or Barry to judge what’s right or wrong, but it’s important to decide which category you’re in.

In there’s one thing that ambitious firms could be doing now to accelerate their growth, what would it be?

I sometimes use the analogy of rebuilding a plane whilst you’re flying it. All of the businesses we talk to have real clients, paying real fees and requiring real services. So we can’t simply down tools and rebuild our business tomorrow. But if there’s one thing I think advice firms should do to get the greatest capacity release and the greatest value add, that would be to build the right value proposition. They need to be focussing above the line, on the people aspects, and not below the line on the product and the money. Our CEO at Shadforth had a great way of explaining our value proposition. In his view, this is what people are looking for: “To know me, know my family, understand me, help me, simplify me, declutter me, and remove my anxiety.” Focussing above the line on those sorts of things provides the capacity release for firms to be able to grow at the rate they’d like to be growing at.

But of course you also need to communicate your value proposition to prospective clients. What’s your advice on that front?

That’s right. Once you’ve built the value proposition, you can then start to turn your mind to articulating it. The most successful firms globally that I’ve seen are using video. For me, video is the brochure of today and the future. But it’s not just about articulating your proposition; you also have to demonstrate it in the best way possible. I’ve already mentioned the need to avoid having investment magazines in reception. In fact, you need to remove all investing paraphernalia from there altogether. Perhaps you could put up some of Carl Richards’ sketches on the walls. So, it’s about thinking of every little facet of your business, and ensuring that every facet demonstrates your value proposition.

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