Visit to US advisers yields growth tips aplenty

A US trip to foster financial adviser growth has given Christchurch financial planner Hamish Kember plenty to think about.

Friday, September 8th 2023, 6:00AM 1 Comment

by Andrea Malcolm

Kember owns and runs Optima Wealth, a financial planning business with around 50 clients and $54 million in assets under management.

He is one of 10 independent advisers who travelled to California for a tour organised by Consilium and Dimensional Fund Advisors (DFA). The group visited nine DFA partnered financial advisory firms and the DFA headquarters in Santa Monica.

Having been a financial planner for more than 20 years, Kember started his own investment advice company five years ago. He outsources mortgage and insurance work to specialists.

He uses the Consilium platform for research, due diligence and financial planning tools catering to about 90% of his business. For satellite recommendations based on client preferences, he partners with Harbour Asset Management for NZX 50 and NZ bonds strategy, Russell Investments for broad-based global passive and Kernel for small and mid-cap opportunities.

On KiwiSaver, about 10% of his business but looking to grow through Consilium’s KiwiWrap, he works with Consilium NZ, Milford, and Booster.

Summing up his investment philosophy he says, “Globally diversify, keep costs low, and tilt portfolios to known drivers of returns such as small cap, value and profitability premiums. DFA are masters of extracting these factors over the long term.”

Optima Wealth charges a fee for service (a percentage of AUM) for transparency, accountability and to avoid conflicts of interest, says Kember. Product rebates, for example from Booster, go to the client.

US offers a view of the future

“For my clients, success equals the life they live and how they use their capital to enrich their lives.”

In comparison to the US, Kember says the New Zealand tax system is much more simplistic but that aside, “humans are humans, and we all have the same needs.

“Overall, the investment advice industry is pretty well served in New Zealand, but I think we’re 20 years behind on the maturity of our market. The US has moved to more adviser-led solutions rather than product distributors selling their products.

This gives the client more options.

“We also have a long way to go to develop the NZ market into a broad-based holistic financial planning landscape as they’re doing in the US.”

Kember says financial planning here is on the right path but needs to incorporate more client wellbeing, better cash flow planning tools, and an overall elevated level of service.

Find a niche and add value

A key insight from the US was that if you’re going to charge a fee, the days of asset allocation and stock picking only are long gone.

“Today it’s about the value-added services and ensuring your fee helps clients lead their best lives. Returns should be a given. Now let’s look at everything else about the client.”

Client education on investment behaviour is vital and helps Optima Wealth clients preempt tough years such as 2022.

Camaraderie with the nine US advisers and insights into how they run their businesses was a valuable outcome of the trip, says Kember. Although they used the same template, each had customised for their target markets and specialties, enabling them to work more deeply with clients.

One firm, with US$300m AUM, had advisers working remotely all over the US. Another specialised in smaller clients on a monthly subscription basis, debiting the fee to their bank account once a month, while another had carved a niche, advising women in life transition such as divorce or spousal death.

Catering to niche markets meant they could add value and target their marketing, says Kember. Finding client pain points and making a podcast with an occasional call to action is a marketing tip he is looking to implement.

Confidence to take the next step

Kember would like to see more entrepreneurs on the local scene, creating more independent financial enterprises.

“Cambridge Partners in Christchurch has done that very well, but we need a lot more up and down the country. New Zealanders would be better served with more competition.”

He says the overseas experience gave him a clear direction of where he needs to go.

“Once you get to a certain size in revenue, the business gets a life beyond the advisers. I’ve got quite a bit of growth to do before I need to make the next decision, but I learned a lot around business governance.”

He says US regulations appeared to be more stringent than New Zealand and while regulatory controls introduced here over the last four years were a hindrance to prepare for, they will help with good governance and processes.

“The trip gave me confidence to take my business to the next level. In the next two years at some point, I’ll have to hire another adviser and then look to quickly grow. I want to create a legacy for my clients.”

Tags: Advisers