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Getting onto the Green

How benchmarking can help your clients and your business

When professional golfers play a round, few consistently beat par. The same applies to professional fund managers, asset managers and stock brokers. While some inevitably beat their benchmarks in a given year, most struggle to deliver value over time for the risks that are being taken.

We know this because there are a number of long-term benchmarking studies that allow investors to distinguish between an efficient portfolio, where risk is rewarded, and an inefficient one where taking on extra risk does not deliver proportionally higher returns.

One example is ‘SPIVA’, the Standard & Poor’s Active Versus Index study (www.spdji.com/spiva). Delivered since 2002, and available for the US, Australian, Canadian, European, Indian, Japanese and Latin American markets, this free scorecard (available via email) shows that about 70% of traditionally active (or forecasting) managers detract value from the return to which the investor is entitled for the risk they are taking.

In Australia, for instance, 60% of active managers lagged their benchmarks over one year until June 30, 2016. This rose to 66% over three years and to 69% over five years. In the US, for the same period, the underperformance was 85% over one year, 81% over three, and 92% over five years. (1)

Investors themselves do even worse. Each year, the DALBAR Quantitative Analysis of Investor Behaviour (QAIB) measures the effects of investor decisions to buy, sell and switch into and out of mutual funds over short and long-term time frames (www.dalbar.com)/ The results consistently show that the average investor earns less – in many cases, much less – than mutual fund performance reports would suggest.

As an example, for the 20-years to 31 December 2016, the S&P 500 index produced a return of 7.68% pa. But the average investor achieved a return of just 4.79% pa – a ‘behaviour gap’ of 2.89% pa. In fixed interest, the index achieved a return of 5.34% pa in this period. Yet the average investor achieved a return of just 0.51%p a – a staggering behaviour gap of 4.83%pa. (2)

So, the evidence shows that the average fund manager, trying to outguess the market, detracts value and the average investor does even worse, primarily because they make emotional decisions, try to time the market or fail to diversify.

Of course, everyone thinks they know more than the market in aggregate, but the scale and competitive nature of markets (82.7 million trades worth nearly half a trillion dollars a day in 2016)(3), tells you that it beggars belief that someone sitting at home in front of the screen can do better than what the market delivers.

This why benchmarking tools are indispensable for advisers who want to demonstrate to existing and prospective clients that they are getting value for the risks they are taking.

The most common approach involves comparing historic returns against similar investments or similar risk. As an adviser, I used a process that assessed portfolio efficiency, construction, asset allocation and comparative performance. This helped expose areas where a portfolio may require attention.

This adds rigour to what is too often just guesswork. For instance, if you ask someone: “How is your portfolio performing?” the usual answer will be “pretty well”. This response is typically based on the observation that it’s increasing in value, without reference to the fact that the market has gone up anyway and the client is making significant contributions.

At this point, the adviser should push back and ask the client how it’s performing against an appropriate benchmark. The resulting blank look becomes the cue to introduce the golfing analogy. What sort of professional golfer couldn’t tell you whether they are getting birdies, pars or bogeys?

Portfolio benchmarking can answer the following questions:

  • How has your portfolio performed?
  • What returns have you achieved?
  • How concentrated is your portfolio?
  • How much risk have you taken?
  • Is this an efficient way of investing?
  • Is there a better way?

This tool showed me in my former business that many people form investment portfolios dependent on a combination of luck, guesswork and greater risks than they realised they were taking on.

In fact, out of 150 individual portfolios we analysed, the average annual return was more than six percentage points below the respective index benchmark. The results were even worse when portfolios, many of them self-managed super funds, were benchmarked against the returns of broad asset classes and sub-asset classes.

We adopted this benchmarking tool because we had become jaded by using conventional wisdom and forecasting investment approaches, where ‘active managers’ made great promises, only to provide excuses after the fact as to why it hadn’t worked out.

Of course, there will be portfolios that outperform the market. But we found in each case there was an easily explainable reason such as concentrated position in an individual stock that had performed strongly in the given period. The question we would ask is how do you pick those in advance? Is it luck or skill? How repeatable is this? The law of averages says someone must get lucky.

One individual thought an Australian share portfolio she had inherited had done “pretty well” because it had been worth $4.1 million five years before and was now worth $9.4 million. But our analysis showed that had she just got the return of the S&P ASX 200 over that period, the portfolio would have been worth $11.2 million. By weighting towards small and value stocks, the return would have been $11.7 million, an outperformance of $2.3 million and for less risk than she had taken.

This case is a warning to investors about the risks of being taken in by managers who promise great returns based on their ability to pick stocks, time markets and make accurate forecasts. But it is also a warning to advisers about removing the “I reckon” from client conversations and instead show them that you can measure return, risk, risk-adjusted return, and explain what drives sustainable returns over the long term.

There is a significant trend towards evidence based, non-forecasting investments for good reasons.  Of course, indexing is a step up from traditionally active management, but you can go one better by adopting an approach that builds low-cost diversified portfolios around the long-term drivers of return.

We need to tell investors that there is no financial Santa Claus or Easter Bunny, but there is a way to structure portfolios around the dimensions of higher expected returns, without needed to outguess the market. And advisers must have a tool to be able to demonstrate this.

If golfers can measure their performance, hole by hole, why shouldn’t investors be able to do the same? Fore! 


“To invest successfully over a lifetime does not require a stratospheric IQ,unusual business insight, or inside information.

What’s needed is a sound intellectual framework for making decisions,

and the ability to keep emotions from corroding that framework.”

Preface by Warren Buffet in the “Intelligent Investor”, by Benjamin Graham


  1. SPIVA 30 June 2016 analysis spdji.com/spiva
  2. Dalbar December 31 2016 QAIB Analysis dalbar.com
  3. In AUD. Year-end Bloomberg close FX rates used to convert original USD data to AUD. Source: World Federation of Exchanges members, affiliates, correspondents and non-members. Trade data from the global electronic order book. Daily averages were computed using year-to-date totals as of 31 December 2016, divided by 250 as an approximate number of annual trading days.

This New Year, engage a tech expert, and kiss some stress goodbye

The launch of the Financial Planning Association’s excellent fintech white paper at this year’s FPA Congress brought to the fore the need for advice business owners to understand the role of technology.

Working with businesses as they prepare themselves for growth, it becomes apparent that while many owners are aware of, and even informed about, the benefits of technology, most lack the time or expertise to capitalise. This is especially so for a typical advice business with a small team of, say, three to five, that outsources legal or accounting matters because its people don’t have specialist skills in these areas. Yet another reason I see the rise of the professionally managed advice business (http://globaladviseralpha.com/practice-management/the-rise-of-the-professionally-managed-financial-advice-business/)

As with every major evolution in business, technology brings huge benefits but also substantial risks to focus, time and money.

It’s naïve to adopt a totally passive position on technology. Those who remain inert will be unable to deliver efficiently the service tomorrow’s customer will demand. They will lack the ability to scale to achieve profit and will ultimately fail.

Similarly, those who embrace every new piece of technology without careful consideration of how it serves the needs of their business, its alignment with their customer proposition, integration needs, and the capabilities of their team, risk burdening themselves with the very inefficiency they seek to avoid.

How to extract maximum value from existing technology is also an issue. As with many tools, most businesses aren’t aware how to get more from what they already have. Discussion of technology centres on the latest advice tools, extending occasionally to customer relationship management and workflow. These are all areas with great potential, but what about the more mundane tools, like email, document storage and websites? These also require careful consideration.

Those who know me know well that I am not a technology expert, far from it. But I do know it’s important to focus on one’s strengths, and to understand when it’s time to seek assistance from external experts. Among the hundreds of advisers and advice firms I talk to every year, I am seeing an inordinate amount of time being spent and wasted spinning wheels on technology matters. In many cases, no experts are involved; it’s the blind leading the blind.

As stated, for business owners it is common practice to work with experts for accounting, tax and legal advice, yet we fail to seek the same level of professional input when it comes to technology. Many of those operating under a licensee defer to that entity without consideration of their specific circumstances, while others do nothing at all.

It’s not from a lack of options. There are now ways to access practical and affordable expertise under subscription arrangements that blend general information with custom solutions. These arrangements create a virtual chief technology officer (CTO) capability that previously would’ve required hiring an expensive full-time resource. They also eliminate the need for initial capital expense and typically support the implementation of the advice given.

It’s important to remember that technology is the enabler of your business vision and client value proposition and not a replacement for them. Always ensure that anyone you engage for technology guidance seeks to understand what you’re looking to achieve and doesn’t simply propose easy answers for new tools because they seem good or have broad acceptance in the market. As with a good adviser, there should be a separation of professional advice from product sales.

You should expect the same level of discovery and strategy detail as you would provide a client seeking comprehensive financial advice. And you should require that your chosen provider puts your interests first.

Whilst far from perfect, Australia is still a leading market in many ways, despite the upcoming royal commission and the many reported advice scandals. That said, in this ever-growing global community we are part of, we must continue to look beyond our shores and take on information and leads from other markets. My experience is that whilst less complex, the US is well ahead of us in technology within advice businesses, and in separating advice tools from business tools.

I highly commend the FPA for making a start on identifying tech players within the advice industry. Practically, getting the full picture is like an enormous jigsaw puzzle for most. There must be a vision to start, and the pieces all need to fit together.

Perhaps a new year’s resolution for you is to consider outsourcing this complex and potentially time-consuming area of technology within the business; find yourself an external CTO and stick to what you do best.


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‘Ctrl-Alt-Del’ – Your CRM system is more vital than you think

Is your business putting its best foot forward with your prospects and clients?

Ask yourself these questions: Do clients see that your entire team really knows them and is across their latest thoughts, issues and concerns? Or do they receive multiple duplicate emails from you? Do they need to explain the same point or situation each time they interact with someone different at your office?

In the service industry, nothing is more important than trust and relationships, and clients expectations continue to rise. They want to know that you know them, and be confident that you are across all the interactions that your business has with them. This is a fundamental step to becoming a true client-centric business and increasing your client satisfaction levels.

But how many places are you storing client information across your business? Outlook, marketing systems, Excel, advice tools may all hold various types of client information. One business I met with recently had 17 sources of truth – 17! Searching for scattered data and rekeying of client data is incredibly inefficient and significantly reduces your team’s productivity (just ask them how they feel about it!). They need to access multiple applications and rekey client data just to prepare for a meeting. It’s highly inefficient for them, and presents a poor experience for your clients.

You need to be collecting all your client touchpoints in one central source, one source of truth. In the “old days” this meant tracking information such as calls, meeting notes, in a centralised database. In today’s digital world it includes tracking clicks on newsletters, blogs, websites and client portals, and capturing data from all sources that make up the client experience – tracking the entire client journey and all interactions. Only by capturing these activities and integrating these systems with your CRM will you benefit from a single source of truth and consolidated insight into your client relationships. But how do you do that?

“You need one source of truth”.


Start by identifying all the key client interactions that you need to capture. Work with your team to create a list of all prospect and client touchpoints, through each channel – from phone to email, website to blogs. Take the time to walk through your entire client experience, end to end. Adopt a client lens and ensure it’s truly comprehensive.

Here’s the key. The tool(s) you use for running advice, have a different purpose to the tools you need for running your business. Old model CRMs in our industry typically started out as advice tools and calculators, and have expanded out over the years based on what advisers have been demanding. But the purposes of the tools, the ecosystems, and their environments are totally different. Real businesses have realised this and will select best of breed business tools and advice tools that talk to each other. If businesses want to grow, they will need to separate the technology needs of running the business from those of producing client advice.

“If businesses want to grow, they need to separate the technology needs of running the business from those of producing client advice”.


Select the system you will use to aggregate all of the data. Which CRM system are you going to use? Does your current system have the capabilities you need? Options include global players such as Microsoft Dynamics or Salesforce, or customised and tailored solutions for wealth management businesses that are built on these platforms, such as PractiFI on the Salesforce platform. Don’t forget to think beyond their raw capabilities – how intuitive is the interface for your staff? How malleable is the platform to be able to mold to meet your changing needs? Does it have APIs to move (push and pull) data to the advice tools that you use? Can it ‘plug and play’ as new advice tools and calculators are released and adopted by the industry and your team?

Make sure your entire team is represented in the selection process. For success in decision and roll out, you need input and buy-in from all areas of your organisation as they need to own this decision. They are the ones who will ultimately be using it. Where appropriate, and in particular where it’s not your (or anyone on your team’s) area of expertise, use an appropriate skilled external consultant to help steer and guide you through the selection process. If you’re a growing business or have aspirations to grow, don’t be short-sighted – think about how your business may evolve over the next few years. Ensure you are selecting a system that can grow to meet your ever-expanding needs. Having to subsequently shift CRMs can be disruptive, so don’t think of this as a short-term solution.

Drive buy-in and adoption of your CRM system. Having your entire team represented in in the selection process can reduce any speed bumps in adoption. But even if you’re not so lucky, there are strategies that can help drive usage. Be clear and consistent in your messaging around one source of truth. That “if it’s not in the CRM, it doesn’t exist.” Pull up your CRM data in meetings, and have that drive the discussion about what is and what is not happening regarding sales, marketing, WIP pipeline, timelines, conversion ratios, client service activity, and the client experience. Your team will very quickly respond and start ensuring that anything they want others to see, needs to be in the CRM. Make sure the processes and integrations you’ve established actually make things easier for staff – the quickest way to adoption is creating a more efficient process. Don’t create additional steps for the sake of reporting – make sure your reporting comes automatically from the simple set of steps needed to track and manage the client relationship.

“If it’s not in the CRM, it doesn’t exist.”


There are numerous benefits to moving to a centralised and fully integrated CRM strategy, ranging from ‘industrialising’ your practice so it’s not so dependent on any particular individual, to increased productivity for your team – with the ability to manage many more client relationships, all at the same service level, with the same amount of resources you currently have. However, the most significant impact is the increase in your clients’ satisfaction with you and your team. One of the best drivers of growth for a firm is referrals from existing clients and increasing their satisfaction will result in meaningful increases in referrals and higher growth rates for your business.

Ctrl-Alt-Del. The future will not be an upgrade on the present, it will be looking at the future entirely differently.

“The future will not be an upgrade on the present, it will be looking at the future entirely differently”.

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Professional Planner Magazine Q&A – December 2016

  1. What are the important trends are you observing in advice business that are common around the world?


Advisers globally are operating in a rapidly changing environment. ‘Advice’ is currently seen as too expensive, too product-based, full of conflicts of interest, and catering mainly for retirees with large investment balances. The global financial advice industry is heading towards a seismic shift in form and operation towards client centricity. And we need it!

Globally, we’re now moving to a world of increasingly explicit and transparent fees. What worked in the past won’t work in the future. This model and proposition will eventually break the nexus between product and advice, as there will be no need for revenue to be generated by products sales for a business to be successful.

The global financial advice industry is undergoing a profound evolution from the perceived value of stock picking, market timing, forecasting and crystal ball gazing ‘below the line’; to a valuable and sustainable ‘above the line’ client goals and lifestyle focused coaching profession, where how advisers manage a client’s behaviours and mindset, and deliver real sustainable value, is more influential in helping clients achieve their goals than how you manage their money.

Advisers unwittingly get sucked into building a service proposition ‘below the line’ that focuses primarily on the products and investments they sell. They need to (again) be reminded, educated and empowered why clients want and need this ‘new’ proposition, and how to deliver it.

“Most people plan their vacations with better care than they plan their lives. An adviser’s role is to help successful people make smart decisions about their money, so in turn they can achieve what’s important about money to them. More often than not, this is much higher and deeper than the money aspect itself –                      it’s about helping them achieve what’s important to them about their lives”.

‘Above the line’ is why advice businesses do it. ‘Below the line’ is how advice businesses do it. Our lives are the sum of all our choices – life is a series of trade-offs. Our industry needs to focus where life meets finances. Don’t get me wrong, reliable, low cost evidence based portfolios are important, but goals based outcome are more important. In other words, as I have said for years, “…people don’t want guitar lessons, they want to play the guitar…. ; or, …”…they don’t just want the meat on the plate, when there is a whole dinner party going on…”.This is a cultural and mind shift change for the whole industry, not just advisers. I want to help the new breed make that transition.

‘Cost is only an issue in the absence of value’.

A 1% AUM fee for overseeing an investment portfolio has as much future as an old video rental store. Clients will and are gradually waking up to how much they are paying in fees, and will more and more start to question everything: service, charges, performance, value. Everything. Meanwhile, some other advisers out there, somewhere, will always offer to do what advisers do cheaper or better – or simply promise to deliver a better return than others. Successful advisers will deliver a compelling value proposition, time and time again, year after year, where clients say, “Wow! Why don’t all advisers do this?!” My experience is that most clients are value conscious, not cost conscious. The demonstration and articulation of value (both tangible and intangible), along with client centric, automated, workflow process efficiency is more important than ever.

So they are the macro global trends. Some other trends to touch on are:-

  • a shift away from aligned channels (ie. aligned to ‘product manufacturers’), to non-aligned independent advice businesses;
  • fintech is clearly having a greater impact in either disrupting and/or assisting advisers become more efficient; new portfolio structures such as managed accounts are enabling more efficiency ‘below the line’ to provide advisers with a capacity realise, and enabling more time to work on their businesses, and on client centric value propositions and outcomes;
  • the dramatic increase of low cost passive or evidence based portfolios by investors is undeniable

With all this change, advisers will need to change from running practices, to businesses. They will see they are not in the business of financial advice, but in the business of getting paid for financial advice. In fact, I think we will see a shift from financial advisers running businesses, to business people running financial advice businesses.

I see the keys to success in the industry going forward will be enhancement of the client experience, a focus around goals and objective based advice, and advisers being able to demonstrate and articulate their value. In a world increasingly driven by ‘compliance’, client centric soft skills will be the new hard skills.

Why I am doing this, is to make a difference to as many clients (and future clients) as possible, globally. The B2B model enables me the leverage to make a significant difference.


  1. How far advanced do you think Australian advisers are in terms or responding to these trends, compared to their overseas counterparts?


Having been in 17 countries in calendar 2016, there is no question that on the global scale, Australian advisers (in general), are seen as being ahead of the curve. That said, I think they are ahead compared to overseas counterparts, but not compared to where the general public would like us to be from a trust, confidence, and value proposition perspective.


  1. What can Australian advisers learn from advisers offshore?


Good businesses, are good businesses anywhere. There are some great advice businesses in Australia, and some great advice businesses overseas.

Great advice businesses are focused on great outcomes for all stakeholders – importantly clients, but also staff, and shareholders alike. For sustainability, they need to coexist.

In Australia, a typical adviser would look after circa 80 to 100 clients. An efficient advice business in Australia, would operate on circa $200,000 of revenue per FTE (or more).

We are seeing fintech assist practices to run as businesses, with new client centric CRM’s (in the US like Salesforce, or Australia like PractiFI) shaping the industry from outside in. New portfolio structures ‘below the line’ such as managed accounts are enabling efficiency, and the ‘highest and best use’ of adviser time.

The US would be the leading market in fintech. It’s not unusual to see US advice firms operating on circa $350,000 of revenue per FTE (or more), almost double their Australian counterparts. There are many reasons for this but fintech, new portfolio structures, and efficiency are at the centre of it. We are seeing examples of some US firms now able to leverage fintech and new portfolio structures and operate on up to 600 clients per adviser, a level most Australian advise businesses would think unachievable.


  1. What can Australian advisers teach their global counterparts about how to respond to these changes?


Australian advice businesses are generally ahead of the curve. As an early maturing market lead by compulsory superannuation, and accordingly, regulation, but now more and more by consumer demand, there are a number of areas global counterparts can learn from Australian advisers. This list would include comprehensive and holistic goal based advice, as opposed to simply managing investment portfolios; as well as of course having moved from commission based advice to fee based advice, but now with more and more disclosure and transparency around this, the focus on the value of the advice is an area Australian advisers continue to need to work on, but remain ahead of the curve.


  1. Why is a global overview of trends (and advisers’ responses) useful to Australian advisers?


If one is to simply stand still, you are really going backwards, as others advance. There is always someone doing something better than you, as small as it may be. The best advice businesses constantly and consistently work on their business, not just in it, and set regular time aside to do this. This may be as simple as a local face to face peer and study groups swapping notes and solving issues, or global conferences, and / or study tours. More and more we are all part of a global community, and as such need to reach out to both learn and assist peers in the process. There is a Japanese word ‘kaisen’ which means we don’t need to be THE best, we need to be OUR best. Reaching out globally is about self-improvement to be the best the you can be.



About David Haintz

David is now consulting after a 26 year private client advice career. He simultaneously merged his business with 12 other quality businesses in a scrip for scrip rollup to create Shadforth Financial Group in 2008; at the time $8b in FUM, $80m revenue and $25m EBIT business. This was across 5 primary locations at the time (Brisbane, Sydney, Melbourne, Hobart, Perth) but with some satellite offices as well. Shadforth listed on the ASX in June 2011; and were taken over by ASX listed IOOF for $670m in August 2014. At the time we were $13b FUM, $165m revenue, and $58m EBIT on a multiple of around 11.8x EBITDA.

He has being consulting ‘on the side’ for many years, but formalised it in early 2015. He has presented at international conventions such as the UK Institute of Financial Planning, and the South African Institute of Financial Planning, as well as presentations and consulting engagements in diverse locations such as Holland, India, Germany, the US and New Zealand.

He remains the only adviser in Australia to be awarded the two prominent awards – Australian Financial Planner of the Year (2005), and Australian Best Practice of the Year (2004).