Plan B to go global in equity partner search

FINANCIAL planning group Plan B is seeking an equity partner from the international money management arena in a bid to to capitalise on its recent growth and deal with the split from BankWest.

With $250 million in assets under management, the Perth-based financial planner is hoping to win over a new partner with its proprietary administrative platform, which allows a financial planner to gain products at wholesale rates and consolidate a client’s portfolio onto one statement, but adds another layer of fees.

It is all part of a high-growth strategy Plan B CEO Bryan Taylor remains committed to despite the restructuring driven by the exit of BankWest and the financial planning group’s decision to re-engineer the investment methodology it sold to clients for the past few years.

Mr Taylor said the firm had the systems in place, thanks to its four-year link to BankWest, to connect to a large organisation and could use those in any partnership opportunity that arose.

“Most companies are finding that the money is in the platform rather than buying and selling shares for people. We see the platform as achieving a client outcome,” he said.

“The market is changing and that opens up a world of buyers.

“The industry is coming to terms with the technology that’s coming around the idea of pooling investments.”

BankWest Consumer Solutions CEO Chris Whitehead said the bank was in the process of finalising who its platform provider will be.

With the departure of Plan B, the bank has had its financial planning staff made proper authority holders with Sealcorp’s Securitor. Sealcorp is also providing the bank’s platform in the interim.

Mr Whitehead said the bank was applying for its own financial planning licence but would still operate through someone else’s platform.

There are about six or seven major platform providers.

Mr Taylor said few financial advisers had an interest in set-ting up a platform.

“You have to have your compliance set up in a certain way. You have to train people,” he said.

“We salary people instead of paying them commissions. We have a high cost base but we have the runs on the board.”

Of course an issue that’s possibly higher on the agenda for Mr Taylor and Plan B director Craig Lubich is gathering the money they need to buy out BankWest’s 50 per cent holding in the financial planner.

The money has to be given to BankWest by July.

Mr Taylor said the amount to be paid to BankWest was beyond the financial where-withal of “two ordinary people”.

“We’ll be raising the money through some way shape or form. We’ve had a lot of offers for lending but that comes with strings attached that we don’t like,” he said.

An option is for one of the international money managers Plan B is looking to partner with buying the BankWest stake. However, Mr Taylor said that would be unlikely.

“There are few that will buy out a 50 per cent share without getting a management seat,” he said.

In a letter to Plan B customers Mr Taylor said “the amount of money required [to buy BankWest’s stake] will demand that we bring in an alliance party”. Mr Taylor said the firm had come out of BankWest with $250 million in assets under management and had two options – to grow organically or to get a partner.

“Over the next five years we’ll see operating profit go up four times [with organic growth]. Our revenue will go up 70 per cent. We’re at the right size where all future growth will pay,” he said.

“Our assets will only double over the next five years and we may only add 10 more advisers.”

Mr Taylor said a partner may be necessary to take the firm to the next stage of development.

“The way I see it we have two different set-ups we could be part of. The first is a national organisation that wants a presence in WA,” he said.

“I’m not talking about selling products to clients, more about the back office.

“The technology we have at Plan B is world class. The thing about it is the people who are making some of the decisions overseas say that the technology is the key point.

“We’d still run a business in WA but the prime reason for our business is to globalise that intellectual property.

“We’ve had interest out of the US, UK and Asia.”

Also in his letter to clients Mr Taylor outlined the planned change in investment methodology from its “straight-line” approach, which set it apart

from most traditional financial planners, to what he calls a “dynamic probabilistic” approach “that explicitly allows for volatility of returns such as those we are currently experiencing”.

Discussing this change of heart, Mr Taylor said the new method was based in innovative thinking to deal with problems associated with the straight-line model.

“The problem with that was that it was a straight line approach and as we can see with wars and the way the market is tracking, life doesn’t follow a straight line,” he said.

The company’s original LAM +1 to +7 offerings are still being run but Mr Taylor said probability modelling was being added to that. Under those offerings, Plan B determined what lifestyle a client wanted in retirement, then worked out the annual return he or she would need to pay for that and then recommended investment opt-ions tailored to meet those annual return targets.

He said Plan B would be the first financial adviser in Australia to apply probability modelling to its financial planning.

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