At 29, John Kiley decided it was time to strike out on his own.
Armed with a proper authority from Garvan Financial Planning, Kiley left his job as a salaried employee of MLC/NAB dealer group, AdvantEdge, in Sydney to set up a Canberra-based practice in November 2000.
In less than two years, Kiley has built funds under management to $12 million and looks on target to bring in around $300,000 in revenue this year.
How did he do it? After spending time looking for a suitable financial planning practice to purchase, Kiley found a very old MLC life agent’s business in Canberra. He forked out $140,000 for the business (representing 3.1 times recurring income), which he funded with a business loan.
“The beauty of it was the business was already there. The agent, David Nowlan, had been on sick leave for six months so most of the clients hadn’t been spoken to in quite a while — so it was just a matter of sending letters out to all the clients co-signed by David saying that I was taking over. Then we just sat back and waited for the phone to ring.”
Kiley inherited a full spectrum of clients, but he’s targeting clients in the 30 to 40 year-old wealth creation/negative gearing phase.
“Canberra is still 40 to 50 per cent public service, so there’s not a huge scope for superannuation but you still come across clients you can help with their super, so we’re still targeting them.”
But if it all sounds like a walk in the park, think again.
Kiley says his greatest challenge was the integration of procedures and systems to enable the business to run smoothly.
“Computers continually gave us a hard time — constantly not working or crashing,” he says, “but we’ve just moved to XP for all machines and that’s been a godsend — the laptop was probably going to be thrown out the window until I put XP on.”
And he’s made the brave move to a paperless office.
“We’re using a program called Office Organiser. Everything that doesn’t have an original signature on it gets thrown in the secure bin after being scanned. That makes the job a lot easier — when a client rings up, you just go ‘click, click, click’ and you can see the whole file on the screen.”
Kiley uses Goldmine for his database and has moved 60 to 70 per cent of his business to MLC’s 360 financial planning process.
“We’ve taken the best bits of 360 and the best bits of our own process and merged the two together, so there’s a stringent system in place for all parts of the process from pre-appointment to review.”
As well as sorting out systems, Kiley found the cost of starting up and operating his practice a significant challenge.
Although the $140,000 purchase cost of the business was easily the biggest expense, Kiley also had to spend between $10,000 and $15,000 to buy furniture, telephone systems, a new computer, and rent in advance. On top of the initial purchase and start-up costs, Kiley is faced with annual ongoing costs of between $100,000 and $120,000 — despite sharing an office with two other self-employed planners.
The dealer group takes a 20 per cent cut of the action and then there’s the cost of salaries, super, professional indemnity insurance, car, petrol and parking. “You have your good and bad months,” he says.
Kiley plans to grow the business and is currently negotiating to buy part of another old life book.
“There’s another bloke here in Canberra who’s looking to sell a portion of his clients, so I’m going to purchase those from him. A lot of the clients are in BT and Colonial, which are now off most dealer group approved lists, so there’s a good story to go back and see those clients. There’s probably between $6 million and $12 million under management coming into the business there and around six to 12 months worth of work just in that.”
While getting his own dealer group licence in the future is an option, at the moment he does not think that the time and effort required would justify the gain.
“The beauty of Garvan is that they do everything for you. I don’t have to worry about the costs of compliance and research. Two things stop me getting my own dealer’s licence at the moment — one is the stories in the marketplace of the difficulty of the smaller dealer groups getting professional indemnity insurance and the other one is obviously the time and cost factor of compliance and research.”
To help keep his business on track, Kiley uses a business coach.
Once a month he sits down with the coach to talk about goals on an ongoing basis. In the long-term, he wants to pay off all business and personal loans by 2010 and be scaling back his hours by 2015.
“One of the major incentives for opening my own business came from my personal financial goals — I want to build an ongoing asset for myself that will allow me to retire between the ages of 45 and 50.”
In the medium to short-term, Kiley wants to grow his A-Class clients into an ongoing revenue stream to the business, so that the business is self-funding. “It’s actually doing that now,” he says. “We’re covering all costs very nicely.”
Until recently, there have been only two people working in the business — Kiley and his wife, Amanda. But with potential growth in client numbers and funds under management, he is planning to take on new staff next January and is thinking about the possibilities of an office junior role, as well as a paraplanning position.
“My brother is doing his DFP, so he’s possibly going to do some paraplanning for me down the track.”
His advice to planners thinking about striking out on their own is to make sure they are ready to take that step.
“If you are happy with the irregularity of the cash flow, then by all means go and do it,” he says. “But if you are a salaried financial planner because you like that regular income and you’re not too fussed about building your own business, then stay there.
“There are huge benefits to working for yourself and the rewards are certainly much larger. But it’s obviously a bit of a risk and there’ll be some nervous times in the first three to six months, but if you can get over that six month hurdle, it certainly does get a lot easier,” Kiley adds.
