The official unveiling of Compound Investments at this year’s Financial Planning Association (FPA)annual convention will be one of the industry’s lesser guarded secrets.
For those who have yet to hear, Compound Investments is the new arm shooting out of the Count Financial Group (Count) and will sit alongside Count Wealth Accountants (CWA) in a bid to attract more accountants who are involved in financial planning.
The Compound story first came to light about 12 months ago when Money Management wrote that Count managing director Barry Lambert had begun moves to create a new dealer group bearing the Compound name.
The name had been long held by Lambert and Count but was not in active use and that original story was the first to reveal the new venture which was in the pipeline.
Since then Lambert has been happy to announce the upcoming roll out of the new group, but what is the big deal behind Compound and how will it differ from the current model already in existence with CWA?
Lambert says CWA seeks to bring new people into financial planning from accountancy backgrounds while Compound has been aimed at established financial planners. He also believes it will work because not only will it plug into the systems, branding and buying power of CWA but because Lambert sees a host of dissatisfied planners looking for a new home.
“Small scale dealer groups have limited resources and are sometimes dependent on what others can do for them. This is inefficient and there is no value in this for the planner or the client,” Lambert says.
“The value is in being a financial planner as anyone can get a dealer’s licence and have a go at building the systems. Those groups who buy other dealers normally do so for the advisory business and not the systems in place.”
At the same time Compound will not compete directly with accountants who are seeking a financial planning partner. According to Kylie Lambert the group has a large database of accountants and many are not ready to move into planning but are still hesitant to refer clients to other advisors.
“With Compound these accoutants will not need a planning arm but will refer to Compound instead, aware it has the full backing of Count but without any tax or accountancy involved so it is not a threaten to their business,” Kylie Lambert says.
To sweeten the deal Barry Lambert has extended the equity deal created earlier this year for CWA planners to also include those who join Compound. The system will be performance based with advisers being issued with options annually and given a five year window in which to exercise them, conditional of ongoing solid performances.
“The advisers will end up with the equity in Count and our aim is to provide a vehicle which will allow them to do that,” Barry Lambert says.
In allowing advisers to progressively purchase more of the group Lambert’s own 24 per cent holding will also be diluted, a situation he is not unhappy about, but rather part of his belief in the validity of the model. This is further compounded when Lambert says he will not sell or buy further holdings in the group either.
He says the system has worked well and staff, who can also participate, prefer the deal over pay rises, especially as they slowly gobble up the business at the rate of about one per cent per annum which they retain even after leaving the group.
“We favour the independene of accountants and financial planners but as a large dealer group we also have to bring scale to financial planners,” Barry Lambert says.
“We could buy businesses or grow organically off our own systems and will do so since many financial planners want services and independence after many other groups have sold out. In fact some dealer groups are just a collection of advisers.”
So far a number of groups have approached Count to have a look at the Compound model but Kylie Lambert remains clear on why they will join the new group.
“An ex-Count member with their own dealer’s licence has completed due diligence recently and says they felt the Count and Compound models were the best they had seen and that the going is hard for any planner who decides to get their own licence,” Kylie Lambert says.
“As such we expect to get them back and we expect other advisers to join so, as we are in discussions with three groups. But we will not chase numbers for Compound and even for Count we still reject people on a weekly basis. The focus is quality over size, but size is still good as well.”
