Join Judy Baker as she discusses the PHAROS Paraplanning solution for Madison Financial Group Advisors.

podcast image transcript image 

Paraplanning: Our Outsourcing Solution

Judy:   Good morning to you all and thanks for taking the time out to listen to this presentation today. For those of you who were at the conference you will have seen this presentation then.

What happened with paraplanning is that in January 2015 Mark Perry and I went over to the offices of JC Asia in Manilla and carried out some due diligence on their paraplanning and administration service. During that due diligence we covered off  things like security, staffing, operations and training. It was important that we understood the security of their data, their privacy of the data and also had a look at the security of their physical office space and facilities.

It was important to understand that any information that comes from our network that comes through to JC Asia is fully secured by not only their data but also by their personnel. In saying that their personnel don’t have any ability to download any information onto CD’s, USB’s or anything like that and they also don’t have the ability to print. If they want to do any of those things they have to clear that through Rischella who is the main manager. The other thing about security to is that we also discussed the issue of using Dropbox to transfer documents to JC Asia. From a compliance point of view Dropbox was considered not the right format to do that. What we do now is use xPlan, we send all documents through xPlan and they pick those up by using their login.

As far as staffing goes they have a team of 11 administrators and paraplanners. Out of that probably only 3 of them are in the paraplanning team but the rest do a lot of the administrative functions. They are all RG 146 trained and all have tertiary qualifications. Obviously they are not all qualified in financial planning necessarily but they have the initiative and training to have completed degrees in the past. That’s pretty much a prerequisite for their staffing.

We had a look at their operations to ensure that they had adequate technology, how they operated that technology and what sort of disaster recovery plans they have. Because they have both a Manilla office and a Bangkok office they have the ideal disaster recovery plan in that they can access all of their systems in both offices so if Bangkok were out then Manilla would be able to take over and vice versa.
We also had a look at their pricing and had some discussions around the pricing for both admin and paraplanning and came to an agreement on that price list. That’s been pretty much set in place since March this year, that was the last time there was a rise. All the pricing is done by module so it depends on what particular modules you use as to how much you get charged. I’ll go through the SLA pricing examples in a minute but the pricing for say an admin if you sent them a data collection form and wanted that put into xPlan then that costs about $20. You consider the time you take to enter a data collection form from a new client into xPlan $20 is pretty keen pricing.

We also had a look at their internal processes and how they pass the work around, who manages each person etc. We also provided them some training on the latest SLA template in xPlan. As I think about this I’m only talking about xPlan and that’s because because JC Asia do not have any Coin expertise. Given that is now our Madison view to only support xPlan from probably some time next year that suits the purposes of outsourcing.

To go through the team the Managing Director is Jason Caputri and he’s actually based in Melbourne and has his own financial planning business there. He felt there was a better way of doing admin and making it more simplified, efficient and probably more cost effective. He runs his paraplanning business using all of the outsourced back office, himself and others as financial planners. Richella Daly is also a director who started with Simon in his business in Melbourne and worked with him in his business there. She then moved out to manage Manila and Bangkok offices in 2011. The business started off in Bangkok but they found that it was very hard given the employment situation there to find enough people to staff the team so they moved over to Manilla.

They still run the Bangkok office and Nick Morton who is the manager of advice and who operates out of Bangkok but the rest of the team are in Manila. Richella is also responsible for training the team in Manila. Nick is a qualified financial planner who lives in Bangkok and spent 12 years in different boutique practices in Australia and a couple of large Singaporean firms. He provides the advisory and technical input into their SLA process and ensures that the clients have their tailored solutions suitable for their individual requirements.

For some of the services they offer as I said there’s adminstration as well as statement of advice preparation and paraplanning. In the pre-advice field they have things like Letter of Authority and Servicing Rights. Once you get that signed by the client you can send that off to JC Asia, they will process that with their relevant provider and ensure that’s been lodged. From that Letter of Authority you can also have them prepare a comparison table. The comparison table is actually just a table that compares all of the fund managers products, pricing, asset allocation etc. They prepare that so you can make the decision as to what  that from fund looks like. If you’re considering switching to another fund you can start off with a comparison of its features, benefits and it’s pricing.
You can also lodge insurance pre-assessments with them. They will go out to a number of providers with the information and provide you a report on who will provide cover for that situation and the likely costs for that as well as who won’t and why they won’t. They can also provide both insurer quotes plus quotes through xPlan. Some quotes through xPlan are unable to be validated so therefore they go to the insurers site. If not they have a connect through xPlan straight back to the insurer’s website and they are able to validate that the premium is correct and up to date.

In the advice space they obviously have the full advice SLA regeneration plus modelling and using the Madison templates. Once we change our templates we will then train them up on the new one and they will only use that template for any paraplanning requests that come through. I guess the addition of modelling has been rather good for a number of people using the services at the moment because they can either do modelling via charts or modelling via tables for cash flows of for asset values. There’s a number of options you’ve got for the modelling.

Bethany:         Sorry Judy, we’ve got a question here from Sarah Burns of Tribe. She wants to know what is the cost for the insurance pre-assessments?

Judy:   Insurance pre-assessments if I can tell you I can take that on notice Sarah but from memory it’s about $37. That again for all the work they put into is is a fairly efficient way of doing things. But I will definitely let you know the pricing for that.

Back office functions, obviously they will all take super applications, follow up that they’ve been placed and any rollovers. If you’re rolling over form and to, they follow up the from fund and the to fund and let you know when all of the implementation has been completed. They can also do FDS statements, insurance application follow ups and commission reporting if you require such things.  I guess that’s a snapshot of some of the things they do, if you have any other queries about things you would like to see is available on their menu then don’t hesitate to give me an email or a call.

Pricing as I said is calculated by module rather than the complexity of the advice.

Bethany:         Sorry Judy, we just have another question for you. This one’s from Wayne, he wants to know if they can have access to Wealth Portal.

Judy:   No, they can’t. If you’re sending through a paraplanning request you would need to print the statement off or any information off wealth portal and that goes in as part of the paraplanning request form. We can’t afford from a privacy aspect to have them sign into Wealth Portal where they have access to everybody’s portfolios.

Taking a look at two examples we’ve got the risk SLA with product replacement so you’re just recommending one risk product for one client and you’re replacing some existing insurance. The breakdown of that is that it costs $121.24, purely a risk SLA using only one product recommendation. For a replacement table the cost of the replacement table is $13.20. If you ended up having to do an SLA for one product but you were actually replacing two products then you would add another $13.20 on for the second replacement table. Simply for the risk SoA and one replacement table plus the Madison’s time at both ends of the process assessing the request to make sure all of the information is correct and then doing a quick assessment of the SLA when it comes back to us. All in all for that one risk SLA the total cost could be $131.60.

If we look at a more complex SLA which has got 2-3 strategies, let’s just take an example. You want to commence a TPR pension and recommend the salary sacrificing  to support that and also recommending that the client put in place binding death noms. That’s what we call a 2-3 strategy package and for one of those the base SLA is $183.70. If then you’ve got a replacement table because you’re going from one product to another and the TPR then the replacement table would cost $13.20. Again 15% loading so the total cost would be $226.50.

As you can see if builds up in layers and on top of that you’ve got modelling of that which is not in these examples. Generally modelling costs between $20-50 per model that you want done. Again very efficient pricing for the time that it takes to go through that process.  We have a pricelist that has all the modules and pricing and we can have a look at pricing for anything else if you want me to check on it.

Bethany:         Sorry Judy, does that pricing list include GST?

Judy:   Yes, it does.

Just a little about the outsourcing process obviously the advisor completes the client meeting and in that meeting or the second meeting fills out the data collection form and the letter of authority on the relevant investments. That then gets uploaded to xPlan in your client file notes. We use heading type ‘compliance’ and the subject ‘paraplanning’ or ‘paraplanning request’.  Once you’ve uploaded the relevant information into xPlan I send a message off to JC Asia. First step would be to process the letter of authority and do the super comparisons or pre-assessments or pre-advice roles. They would then enter the data collection for into xPlan, assuming it’s a new client of course, lodge the letter of authority and complete the super comparison and pre assessments and then upload those into xPlan.

Once you’ve got those as an advisor you’re probably in a position to complete the paraplanning request form, which is the Maison one. You’ll find that on Kmetrics. Again you upload that into that same file note that you’ve uploaded all of the relevant forms so far. Then I would go through the process of having a look at the paraplanning request just to run my eye over it to make sure that it makes sense and we’ve got the strategies in the format that they need to be in and that there’s nothing missing in the documentation.

I advise JC Asia via what we call Glip. Glip is to replace sending emails back and forward, it’s communications software and I send through to them to say for advisor Wayne Leer, client Jim Bourke, all documents have been uploaded. They then just go into xPlan and find them under that paraplanning file note. They then confirm that they’ve got all the necessary information or advise if anything is missing and then prepare the SLA. Once they’ve completed the SLA they then upload that into xPlan under the same file note and then advise me via Glip that’s it’s been uploaded. I then again do some review on that SLA at this end prior to advising you that the SLA and the additional information booklet have been uploaded into xPlan. That’s pretty much the process but it’s all run through xPlan and the files notes section is where all the documents are uploaded.

If someone was using this service and they don’t have xPlan what I do then is set a client up as an advisor in xPlan and their client as a client in xPlan and then upload the documents through there so that they can see them at the JC Asia end and avoid sending them on email or Dropbox. I guess for those that have xPlan you may have already done the data collection input, that’s ok. Fro those that haven’t done inputting, that would probably just mean that there would be an extra $20 cost for entering that data form into xPlan.

Bethany:         Sorry to interrupt, just a couple of questions. Wayne would like to know how long this process will take from beginning to end and if you’ll be providing a copy of these slides through the Knowledge Collective website.

Judy:   In answer to the question our SLA is usually 7-10 working days and it’s usually quicker than that. Sometimes we have quite a list of requests in so it can obviously take longer. Usually they take 5 days to come back from JC Asia and then you’ve got to add the time on each end for me to have a look at the request and the SLA. Yes, all of the slides Bethany will be uploading to the Knowledge Collective website.

Bethany:         Another one from Wayne, what’s the process of paying for the service?

Judy:   We get an invoice from JC Asia. I then reconcile that and prepare monthly invoices to each advisor who’s used the service during that month and they then go into Justin in finance and he then runs them through the commission system, so they’re debited to your commission.

Bethany:         Another question from Lillian. Will JC Asia have access to all the clients file notes or will we provide them access to individual file notes applicable?

Judy:   They actually have access to all your file notes but they can’t be spending their time going through file notes to ascertain what’s relevant and what’s not. It’s your job when you upload your request into the file notes for compliance and paraplanning that you update all your  relevant file notes, forms, spreadsheets, whatever. Whatever is relevant to that request.

As I said what you need to provide for paraplanning purposes is a paraplanning request form and that is in Kmetrics. You will need to supply the data collection form and file notes of any client meetings you’ve had around the particular advice you’re providing. Also any product research you’ve done that forms the basis of your advice if you like and any alternative strategies that you’ve considered. Sometimes people prefer to put what they’re recommending for portfolios into a spreadsheet. You can use spreadsheets that are relevant because you can just mark off in the paraplanning form ‘see spreadsheet’ if that’s the way you want to do it. Any quotes for insurance you must include those and any other relevant documents referred to in the paraplanning request form or that you consider relevant to your advice.

This is a process though that can hold things up. I guess when we talk about time frames we talk about  time frame from me receiving all the correct information because it can’t go off to them with part of the information. They can’t start until they’ve got all the information and the time starts ticking the minute that that’s all been supplied.

Bethany:         Another question here from Dermot Mckeon. Can the notes do voice recordings and do they offer the service to type them up?

Judy:   That’s only a new service provided by them and I do believe they do them but the last I heard I think Paul uses someone else and I understand that she’s a bit more efficient than perhaps they were at JC Asia. It’s something they’ll do but it wasn’t something they had on their set menu of functions. I can follow that up with them though. It was a matter of sending through a recording from your dictaphone or whatever and they would type it up from there. But we can follow that up and I guess the more that people ask for that service then JC Asia will make sure that they provide the service for us.

Some of the tips and traps of the requests. One of the things I think I find as much as our compliance people find is that goals and objectives usually are too brief or they may have a leader objective but haven’t provided any advice for that need. It’s very important when you’re doing the data collection form to ensure that they are smart needs and objectives. There’s a user guide uploaded in Kmetrics  in the data form section that will explain what we mean by using those smart needs and objectives. They’ve got to be quantifiable, it’s not suffice to say ‘review super’. You need to question and educate the client so that you understand at the end of the day what they want out of their super and what they’re looking for in their super. It might be that they want something really simple and you explain that your options probably will be something like an industry fund or a retire flip. Educating them so that at the end of the day they choose what they believe is suitable for them and what their need is, it might just be cost driven. The goals and objectives are very important and I often find them too brief.

I think as far as superannuation details or investment details most people send in statements. It’s ok to send in a statement provided that it’s a current one. I get some that are the 30th June 2014 where anything could have changed in that time and we’re relying on an old statement that could be wrong. I still think the best practice is when you see the clients is to get them to sign a letter of authority so if you find after they’ve gone that you got some information off them. We’re then able to ring the provider and get any information we need without having to go back to client and say that’s statements a bit old can you go and get a new one as that delays the process. The basis of advice is on the paraplanning request form, just be sure that you have articulated that basis and why you have recommended that and ensuing that you go back to the needs and objectives to make sure that it reflects the client needs and then puts them in a better position.

Replacement product advice can only be as accurate as the information provided. As I’ve said old statements or statements that don’t have the actual product name or doesn’t list the underlying investments, I often get a statement that just has the balance on it but it doesn’t tell me what the tax components are, what the preservation and what the underlying investments are or if there’s any insurance. They’re all important things, if you’ve just got a balance how to do I know if it’s got some insurance they’re going to lose if they’re recommending switching and it’s been overlooked. Again I go back to letter of authority is the easiest way to ensure that all of that information is correct.

Bethany:         Sorry just another quick question from Wayne. Do we need to advise the clients that LOA is going overseas? Do we need the authority from the client for that?

Judy:   It’s already part of the privacy statement that’s in the data collection form they sign off on. The information we put on that is the names of the people JC Asia so that when they ring the company that the company is expecting them to ring just as they would be as a client services officer in your office. As far as the overseas aspect of it goes that’s covered off in the privacy statement.

As I said before the turnaround time is 5-7 business days and the clock only starts when the information is complete. A couple of testimonials from people who have used the service, Michael Crowe’s out in Croydon in Victoria and Michael and Karen Hendry for a long time were, and I think they would agree, they were fairly precious about their own SLA until they seen how much time it was taking them to complete and taking them away from the actual business that they’re in and that’s advising clients. They’ve now used the service for 12 months and are very happy with it and love the fact that they don’t have that huge burden.

Also Reece at Jeffrey Thomas securities has been outsourcing to us for over 12 months and has found that not only is it comforting to have it produced and ensure that it’s accurate. Also they have had quite a number of SLA’s to complete and had they been relying on their own office resources they would never have been able to do as many as they had to do. If you want to talk to anybody who’s using the service feel free to give me a call and I can always get you in touch with them so you can have some comfort in the fact of the service we’re providing.

Bethany:         I’ve got a couple more questions for you Judy from Dermot. He wants to know when insufficient evidence for supporting documents hasn’t been provided to complete the work is there a penalty charge? It seems that it would create double the work for Madison.

Judy:   There’s no penalty charge. I think as much as anything it’s about training people as to how to complete the forms and what we’re expecting and the more you use the service the more you’ll understand that. It’s pretty much a training exercise Derm so there won’t be an additional charge unless we get to a point where they’re doing the same things over and over again but at this point that’s not considered.

Bethany:         Matthew would like to know where the paraplanning forms are again.

Judy:   On Kmetrics under ‘Professional Standards Advice Documents – Paraplanning Services’ and there’s a paraplanning request form there. If you’re having any trouble give me a buzz.

Bethany:         Would it be possible to get a comparative price list as well?

Judy:   Yeah. I’ll have to speak to Mark about that and make sure it’s in a format that he wants to circulate. I’ll speak to Mark about that and let you know Bethany.