A Guide to Investment Committees #3 – Transcript

Brendon Vade
Well, good morning, and welcome to episode three of this podcast where we’re exploring all things investment committees. Today I’m joined by Greg Barter, who is a Principal Advisor at Allied wealth, and the chair of his investment committee. So welcome, Greg.

Greg Barter
Thank you. I’m very pleased to be here.

Brendon Vade
Thanks. Thanks for joining us, it’s, it’s gonna be a good chat and looking forward to it as a mine. Very good. So I think it’d be great just to start at the top, Greg, if you could, and just give us a little introduction about yourself how you came to be where you are today.

Greg Barter
Okay. Thank you. So allied wealth is a is a new business, it’s been around for three years. And principally, I joined about a bit over a year ago, along with another colleague, so a relatively small practice. But very early on, we we decided that one of our our positions was going to be to that of independence. And then we thought about how we want to run our investment piece. And it naturally occurred to us that we had to have our own IC to be in keeping with that view, I was asked to establish the IC, because of my history in other organizations, having been a member of an IC for pretty large organization. And so we went through the process of establishing the IC, a bit over a year ago, as well as setting up all the the proceeds, or processes, I should say. And the objectives of the IC at the time, which seemed, seems to be a pretty simple thing to do. But when you actually start to think about in detail, it’s, it’s one of those Pandora’s boxes where you, you think it’s reasonably simple having been a member of an IC before but you, it’s what the the unseen part is, the part of the iceberg underneath the underneath the water, as they say, where there’s a whole bunch of stuff behind what goes into an IC.

Brendon Vade
So just for example, how long did that? How long did you expect it might take? And how long did it actually take in practice?

Greg Barter
Well, we’re still going through elements. So we’ve got the route of entries, like everyone in the room talking to one another, and making noises like a working I see quite quickly. But that’s one of the points, which we might talk about afterwards, which is what we did wrong. But then the charter was reasonably quick. But then we kept pushing forward. And as many of the listeners may be in small businesses, you say, Okay, we’ll do that later. And you don’t actually get around to it. One, which is still pending as our conflicts of interest policy, which is important for us being independent. We’ve sort of, I think we agreed in the first meeting that this is what we’re going to do, but it hasn’t actually been formalized yet. So it’s one of those cases where you’re rushed to get the people in the room with the expertise, and with the good intentions. But then getting the detail to make sure it has a due process behind it might take too long.

Brendon Vade
Yeah. So for example, I imagine you’re very comfortable, you know, buying a guest I see member a coffee to come in and give their input, but you probably don’t want to fund the, you know, buying you guys, Ferrari or something like that. Yeah, somewhere in the middle is probably alright.

Greg Barter
And we’ve recently we asked independent person to come in and do an audit of our process recently. And they put out a whole bunch of things, which are totally embarrassing for us, but kind of we knew that we were sort of about to get to so yeah, so it’s, the process of establishment needs to be deliberate. But the actual function of the IC with a 90% of the good stuff that they do, you can get happening relatively quickly, as long as you’ve got everyone with similar interests, working towards what you want to do. Okay,

Brendon Vade
so let’s say to put some put a finer point on it. You all get around, you agree that this is what we want to do as a practice. Everyone’s in alignment. Great. You want to get up to that sort of 90% of the good stuff. What are we talking three months, six months?

Greg Barter
For us? It was for us? It was relatively quick. And that was the benefit in our state? Well, it’s Who do you want to be on your ice? Right? And what’s the composition the ice, so our decision was each of the principal or which of the owners of the business would be in the ice but we needed sufficient independent input to make sure that the it was reasonably rounded out. Because some of us have been around me been around long enough to know better. We sort of knew people in the industry who we wanted to approach. And thankfully, the two principal people who we approach were eager to join us But I can imagine if you’re a new business, and you’re wondering who you should approach, that would be a big deal. Yeah, actually choosing the people will have the same alignment as you. Thankfully, we already had that. So that’s that shortcut of that process quite quickly. So I think we were between sending an email out to having our first IC might about a month. Yeah. Okay. With no, with no sort of detail behind the IC, other than everyone else get together and work out how we’re going to do it. But as I said before, the thing we shortcutted was the external members who were inviting we had known to, in some cases, 1520 years, so it was easy to fit them in. If you’re thinking about it from a different point of view, where you’re trying to work out who you’d like to invite that, that’d be a lot different. And you’d need to go through a process where you, in essence, the the, the IC, in in its formation would would need to go through an I guess, an inquiry process to make sure the person who they were inviting in was going to be the right fit.

Brendon Vade
Yeah, sure. So you basically had the team more or less out of the box, you knew who you wanted to have involved that shortcuts, the process massively, yes. Anyone else who’s sort of needs to then go and form their own team? That’s its own sort of process that people are going to need to go through? And I guess that’s as long as a piece of string in some ways.

Greg Barter
Yeah, yeah. But I guess the point I’m trying to make here, probably labeling it too much is the selection of the external parties, they have to be in sync with the rest of the business. But they have to have enough authority to question if the business, if they’re going down the wrong line, if that makes sense. Yeah, the whole benefit of having independent members on the ISC is they stopped same thing within the organization, because you can you can, you can correct yourself down an avenue where, if you’re thinking the same as your business partners, you need that external reality check to make sure that you’re not going down the wrong line. Yeah. So that’s, I would encourage people who are thinking about setting up an IC to really make sure you, you choose people who are your mates, which is what we did. But in addition to that, people who you know, will question what you’re doing, in order to make to make that ice work effectively, which needs to be that need to be some sort of tension in sight in so much that each member has an equal say, in each member’s point of view needs to be heard. But ultimately, the the IC needs to come to an agreement as well. So you don’t want to have out and out conflict every time. But you need to have enough, just enough tension and just enough capacity for every member does have their peace and have their say that it’s a constructive environment, rather than just a rubber stamp.

Brendon Vade
Yeah, sure. Okay. So I think what he’s saying is, you really need to make sure that the team that you’ve gotten is going to keep everybody sharp enough to be effective, but not, not in all that conflict so that no decisions get made, you know, you can’t actually decide on any changes that need to be done to a portfolio to a manager, all that sort of stuff needs to have a degree of flow, so that something actually happens. But at the same time, if you, you can have it just go too much with the flow, otherwise, there’s no benefit. Currently, you don’t find that there’s actually anything that you wouldn’t otherwise be able to do from the desk by yourself. Correct. And, you know,

Greg Barter
surround people with, oh, you take it to extremes to prove the point, right? You go to one extreme and go, everyone agrees with you? Well, then why have an icy, it’s the shorts, rubber stamp, and sure that gives, it provides some, some validity to what you’re doing. But if everyone’s just agreeing, then that’s there’s there’s no value out there. You’re going the other extreme, if everyone’s disagreeing with each other, and, and fundamentally, you know, it’s you can’t arrive it respectfully arrive at agreement, even if you disagree, then you’re not getting anywhere either. So you need to have that. That’s what I’m saying that the tension, you need that if you think about those extremes, where ultimately everyone wants to agree, but ultimately, no one’s going to agree unless they really believe it. So somewhere in between, there’s got to be a position where there’s constructive disagreement, if that’s yes, terminology.

Brendon Vade
Yeah, absolutely. And so just sort of diving into that. Can you give us an example? Or are there any examples that come to mind of some of a topic that you’ve raised, or that’s been raised in the IC that you’ve had to deal with? That sort of fits this camp where, you know, maybe it’s something that you personally would not have seen happen as far as the decision of the committee goes, but you’ve decided that that’s us. Something that we’re going to do.

Greg Barter
Yeah, well, that’s a question without notice. Give me a moment to think about that. But I guess ultimately, I’m just I’m throwing my mind back to some of the more recent ICS where the way that the flow we go with with the externals we’ve chosen given each of them subject matter expertise that they provide information to. So we’ve got two externals now I say, one is the top down one, the way I think about it, the top down, the one is the bottom up. And so so the, at the outset, we have the top down view. And at the external, who is providing a view, who’s giving the view and halfway through it, the gentleman who, who provides a bottom up point of view, sort of jumped in and said, I fundamentally disagree with that.

Brendon Vade
All right, this is gonna be fun.

Greg Barter
Well, ultimately, it was it they agreed to disagree, but it was also what it did do is provide an avenue for which he could then go into more detail, it was a contentious issue, he went into more detail about what his point of view was. And then ultimately, she was saying, okay, maybe I misunderstood the premise. And so it gets it teased out more than just the Justice superficial point of view.

Brendon Vade
Sure. And is this or defined that most of this is around asset allocation? Or is it manager selection, all of the above

Greg Barter
the managers selection, were generally in a grants. So that doesn’t so far, hasn’t provided a lot of a lot of tension, the asset allocation, largely, we’ve been an agreement so far. So while I was a senator, I added about having that creative tension between us, we I don’t think we’ve we’ve really come to a point where there’s people sitting on each side of the room, like disagreeing, and pulling the pulling the knives out, too, and standing their ground. So I would expect it more about the feed that the viewed economic feed, which then informs the asset allocation, which then informs the manager selection, that’s where we, where we encourage the differing opinions. And so that’s so far, where we’ve found the the different points of view will come about, by the time we rationalize a different point of views. So we agreed as sort of common way forward by time that when that then feeds into the ES allocation manager selection that’s already given. Because I guess it’s from the community that we have a tactical asset allocation approach. So obviously, if we were agreeing on the bigger picture, then the the actual tactical changes are going to be it’s relatively easy to be aligned with that.

Brendon Vade
Yeah. And until me, from a client perspective, or for the advisors, perhaps, who aren’t on the on the icy, how do you find? How do you find having an IC helps the rest of the business? So let’s just say, from what you’ve told me, you managed to strike a balance, you’ve got to you’ve got a good team, you’re happy with how those discussions go. There’s a bit of Argy bargy, not too much not. But that’s that, that finds a rhythm run. Okay, so just fast forwarding into, say, Me, maybe the ordinary flow of the ice as being a nested part of your business. I’m curious to know, how does, how do you find that component interfaces with the other advisors who aren’t on there? How, what does that look like? And how does that work? And

Greg Barter
well, from starting from a client’s point of view, so a lot of my clients came from a larger institution. And so when they, we struck a deal with them, and they had a lot of clients come across. So we did an analysis about early on what the clients actually want. And so we wanted to replicate a process where they the look and feel is the benefits they retain, but then then they also gain the benefits of a more small business. Right,

Brendon Vade
hang on, that’s a million dollar question. What did they want?

Greg Barter
Well, we might have gotten wrong, but they wanted reasonable fees. That’s, that’s a given. We thought they wanted independence. And so but not everybody does that. That was a that was one of our key deliverables. But the other part is they wanted due process when it came Have two investments. So that meant that they didn’t want to come across a guy who was trying to catch the falling knife, which is the old analogy of being able to pick the best stock for a month. They wanted to have, they want to do have the due process that they saw in whatever investment committee could provide.

Brendon Vade
Yeah. So that the security of the larger outfit with all the research and team that surrounds make sure correctly, you

Greg Barter
don’t have Yeah, they didn’t want one bloke just picking stocks, who might be bringing on might be useless. Right. So. So the trade off is, you could have that brand guy can pick all the stocks by himself. Yeah, but reality is that there’s very few of those. Yeah, if any. So what is, as most of the research people do, clients are more worried about losing money than gaining money. So it’s, they want to make sure that the the investment process is is thorough, reasonably conservative, and has a logical process, right. So the Investment Committee provides that it’s kind of like a reference to a higher power in the sense of, you’re talking to a client, we believe, blah, blah, blah. So if you’re, if you’re using statements like that, it you’re instantly gives the client the feeling that there’s been a process behind what we believe as opposed to, I believe interest rates are gonna go up next week or not. So they’ve, it’s a feeling that clients the security the clients get, right. And while a small business can provide that security, but if you provide, if you also explain to clients that the whole custodial process where it doesn’t matter how big the business is, it’s all about the decisions that they’re making. So we wanted to bring the, the comfort of due process to the to the investment process. And in the case of where my clients were coming from, we wanted to make it replicate similar to what they were already used to tactical asset allocation within a strategic asset allocation. But But for us, we also wanted to control that process. Yeah. So again, so that the choice for us to insource versus outsource the investment quinnie, please. We felt more control. And, and, and more ownership of the process. And so therefore, when we’re explaining to the clients, it seems more genuine, right? So we were sitting in the we were sitting in the committee making these decisions. And so therefore, right or wrong, we’re going to stick by them. But also, we can quite readily give clients the rationale behind it. So clients will forgive you, if you’re wrong for the right reason, if that makes sense. Yeah. And so when you think about investment, Kuhnian, maybe the listeners might want to think about themselves. You’re an advisor, you’re sitting in a organization, and you’re trying to explain the the investment piece to a client. If you have ownership of that investment piece with via the Investment Committee, which will have influence over, it’s much more compelling to the clients than if it was we read this. The IFF. Yeah. Yeah. Like, we get a memo from the some external investment committee, Oh, that explains what we’re doing. And then I’m, I’ve been I’m expecting, I’m supposed to explain to the clients, and I don’t like I stay with the my lines, and I would do. So you want to feel like there’s due process behind it. But the advisor is intimately involved with it, I guess that’s our view,

Brendon Vade
you want the Nexus, right? You don’t want this to be something that’s been picked up off the shelf that is too removed from the client and the advisors in the business correct. So

Greg Barter
that, I guess you you’re managing, and this is kind of an informal audience, when we’re managing the fact that you need to have model portfolio in our view, we need to have model portfolios in order to manage the client base effectively. But you, you need to make the client feel that their portfolio is the only one right so that while they’re you’re choosing a model portfolio for them, which is informed by the Investment Committee, you you, the client wants to know that that model portfolio has been tailored to their personal needs. And that if something came up from their side, that you’re not going to just say you still get this same model portfolio, if that makes sense.

Brendon Vade
Yeah, sure. You got a company director of an ASX listed company, he’s got a whole stack of, you know, whatever shares as part of that, you want to be able to tailor the Aussie equity component to you know, not double up too much or whatever.

Greg Barter
Correct. So the client wants to feel that they have due process behind the, their portfolio and that, you know, there’s there’s people more than one person thinking about it, but they also want to feel like their portfolio is built just for them. If That makes sense.

Brendon Vade
Yeah, yeah, of course. So I guess to sort of tie a bow around that. It’s your sense that the IOC is really a confidence piece in some ways to the to the rest of the business that supports the conversations with clients, that gives clients the reassurance that this isn’t just one person, you know, forming their own opinions and running off that it’s, it’s something that’s has got the ability to catch really bad calls and big mistakes, and make sure that Sure, it might not be, you know, you might not be timing markets, like a magician. Yeah. But it is, it’s still something that’s going to help serve them well. Long term.

Greg Barter
Yeah, that’s right. And, and that that’s sort of touching on the the importance of the the independent members of the investment committee cannot be part of the business, they’ve got to have, they’ve got to be brought in to provide cross pollenization as much as possible. Because you don’t want the business to be in Silla, you need to, you need to be able to include and the clients want to feel that you’re getting a broader view of the of the markets, as opposed to just one business’s point of view. So we’re, as I said, our Investment Committee has been running for a year now. We’ve, we’ve we’ve got to think about how we make sure we don’t become too. Same thing, I guess, if that’s not a word, but But you probably think principal, same thing, the good thing, anything, that’s what I’m, that’s where I’m going with, so you need to make sure you’re still you’re always evolving. And you’re always coming back to that creative tension in the Investment Committee where you want to make sure that there’s new points of view and in differing points of view than the existing members in there. So we’ve got to think about how we do that. And that might be just inviting, say, non voting external members to come on board to give their point of view, and then that create that gives us more material to fight over. But that’s that’s something which was now looking forward to having it being an investment committee, which has been around for for a year. How do we keep the the ideas fresh? And, and that not being closed minded about how we’re thinking about things?

Brendon Vade
Yeah, so sure. And so just to give us a bit of color, now that you’re a year in? How much time and effort do you think this sort of requires to run? Well, you know, how often do you guys meet? What sort of what sort of preparation goes into? Presumably the minutes and or agenda of the committee meeting? How much sort of follow up work is that after how much can you push that to the outsourced guys, so you can get back to everything else you need to do? Yeah, time and effort? How does that?

Greg Barter
Yeah. So as you well know, advisors time as always, is, is going to be stretched, but it the commitment is, is reasonable. I’m talking from a reasonably small business, from their point of view. So I, as the as a chair of the committee, I prepare the the agenda beforehand, I and I make sure everyone knows what they need to produce for, for the committee. Produce, make sure I do the follow up afterwards and produce the minutes and the rest of it. That time commitment isn’t huge. So the we meet on a quarterly basis. So ahead of that, ahead of the quarterly meeting, might be a day for me to get all the coordination stuff together. And I might have a day afterwards. The externals bring one guy at the top down staff, he does a there’s a commitment on his side. And he will bring basically the tech classification view. And he also was the brains behind the composition of the model portfolios. Then you’ve got you the other side is a fund manager, direct equities guy. And for him, that commitment isn’t huge, because he’s doing it already. So all he’s doing is Rhinology already has is his fashioning for our committee. We want the clients to be pretty close to the committee outcomes and and have it timely as well. So one of the key deliverables after the quarterly meeting is we’ll send a newsletter out to clients with, you know, with, I guess, without not too much technical detail, but at least a feeling for what the committee’s points of view are and what changes they can expect. All right, so that goes to the whole client base. Yeah, the client base right that we try and out our deliveries. That is like within within three weeks of the committee setting. And the way that we synchronize things that we try and get most of our client meetings, following the committee, so you’re talking, they’ve got the, they’ve got the newsletter already. And so we’re talking about what the committee view is. So that’s how we drag the committee, I guess, credibility into the meetings. And when we’re talking about the investment piece, right. So they’ve read the well, you know, as clients, as clients want to do, they can read it. So one in 10, will probably read it, but the other, the other nine will probably have a, like a first drive. Yeah. But then you’re reminding him again, so I guess it’s, it’s that reinforcement. And so that’s why the how the committee is central to that client engagement point of view. Yeah. So that, that goes out. That’s the newsletter. And then we had the client meetings. And so you can see the cycle goes on and on. So I don’t it my point of view, it’s not too onerous. But I think it would become, we had the advantage of being a relatively small business, there’s only three principal advisors, agility that comes with that we take advantage of, the larger the organization, the slower the wheels may turn,

Brendon Vade
you’ve still got reporting and everything, right? Like, you know, you’re gonna have a look at what those model portfolios have done for the quarter. Right? So someone’s got to pull that together. So that’s

Greg Barter
Eddie Ventura. I would I haven’t asked him personally, but I’ve seen some emails come through late night, but he’s got a full time job. As I’m going to guess that his commitment before the committee is probably two days, right. Doing the doing the, I guess, the review and benchmarking of the how the models are going. But because he’s is his normal job is complementary to what he’s doing. So again, kind of like you, all he’s doing is translating what he’s doing day to day into an and repurposing for what we need for the committee. So I guess we were lucky, we went back to the we got the people together, we, we, we maybe we landed our feet by by choosing the right people. Not by accident, by accident, by design, I guess is the best way of putting it. Yeah. So the ultimately, the question is, was how much time is involved? And my point of view is, it’s it’s modest compared to the benefits you get coming out at the other side of the Committee of you having ownership of the process as an advisor, but the the also the client feeling that they’ve got a portfolio which is, is designed just for them, as opposed to, you know, whatever, you can get off the shelf from any sort of industry fund.

Brendon Vade
Yeah, sure. Yeah, that’s excellent. No, thanks for thanks for sharing that. Greg. I’m curious to know as well, from an from an investment perspective, and this is going to be very, very hard to try and put your finger on that. Do you have a sense that, you know, if you if you were to sort of stare down into your own, into your own heart and soul as much as you can? Do you think that the investment portfolios are doing better as a result of having an IC as opposed to what you might do internally in a business? And is there any examples that you could maybe draw upon to, to give us a flavor of why you think that’s the case? You know, without, you know, saying, I really thought that I really thought 2020 was going to go down? Yeah. What it did?

Greg Barter
That is actually a really good question. Are the clients getting? What are the clients want? That’s you break it down to two things? And if it’s better returns, is having your own ice you’re going to produce if it was just better returns? Is the ice you’re going to produce that compared to anything else off the shelf? The answer for that bit is probably not, we feel like we’re doing better. And we feel like we have control which was I guess, one of the integral parts of of us wanting independence. And the comparatively to the returns of other options is probably there’s plenty of people out there can provide you with returns, I think the the unseen benefit is what I was sort of alluding to, or said outright before is the control and that the ownership and the clients getting that transferred ownership to them. So you can you can go to Australian super and get that Balanced Fund and you get a good outcome right? And their returns are pretty good. But our our closer you feel alignment with that portfolio because it’s off the shelf for our show. So the clients that are coming for so one of the other fundamentals we thought clients wanted was that boutique feel right? So when we was we were saying what are we what are the principles one was independence. I’m boutique experience, and then having a due process in the Investment Committee, so that for that boutique experience, that investment committee is required, if you think that’s if that’s one of the building blocks of your business, which is for hours, you need it. Right. So we could be wrong. But we’ve got enough clients. I think that’s right. So that’s what we want. Right? So do you get a better outcome by having an investment committee? It depends. Is it quantitative or qualitative? The quantitative part is getting if I’m being really honest, and I’d stand, like 100 paces back and put my ego in a box, you’re getting the same thing, you can probably get the same thing from Australian super Balanced Fund, right. So but the qualitative part is where it’s where it’s where, where the rubber hits the road, where we’re controlling the process. And, and as a byproduct of that the client feel that feeds into the boutique feel of the organization.

Brendon Vade
Yeah, sure. And you get the opportunity, presumably, to add that level of customization that goes on where required, right?

Greg Barter
Correct. And I guess this is a simple example. We reintroduce hybrids to the clients portfolios, recently of it, I mean, in other organizations, where I’ve come from, it was too large to have hybrids in the portfolio, because, you know, they couldn’t acquire them. There’s just not enough out there to move the market. But it’s a nice little addition to the portfolios right now, where as incomes growing, and you can add this in and, and I mean, yourself, and the listeners might have enough experience to know that often, when a client meeting you’re talking about one thing they can take away and remember. And so the addition of hydrogen in the portfolio, where it can explain what a hybrid is, and how it works. And all you’re getting 7% income year with that, isn’t that great? They’re not gonna remember anything else. And it might be the least important part of the portfolio, but they walk away going, I understand how this works. And are they doing this for us? So I guess, an under thought, and it’s not witchcraft, or anything like that, but it’s more about that goes back to the question you asked me for his other clients getting a better, better outcome, they want to feel like their portfolio is is personally managed for them. And in our point of view, that there has to be done with an IC. Because if you’re outsourcing it, you can probably get the same outcome as from an investment return point of view. But do you get that same feeling for the client? If you if you’re after a boutique approach? are you achieving that if you’re if it’s outsourced? So that’s that’s kind of how we landed where we did?

Brendon Vade
Yeah, sure. I mean, you could take Yeah, I guess there’s two extremes you could take to that you can take a very cynical one and say, Oh, well, if it’s just all about the numbers, it’s the same, then why bother? But as we know, you know, as practitioners, the reality is that, you know, we’re not, we’re not that cold and calculated rational beings that we’d like to think that we are, were heavily influenced by the behavioral side. And, like you say, if someone gets the sense that there’s a connection to what the portfolio is, how it’s built in their own situation, then that’s, that drives far more productive behavioral or qualitative outcomes that are probably equally as hard to measure. But your sense is that that’s paying paying off really well for your business.

Greg Barter
Yeah, if not, the the, the qualitative side of the client feeling of boutique approach, right? So the qualitative side, you can you can just get vanguard Balanced fund or I’ve said, and that’s a that’s a good outcome wasn’t cheap, but it’s a client feel connected with that. And like I’m this is not to suggest that anyone who chooses that approach is wrong, but this is this was a fabric of how we build our business. And so that’s why it naturally fell to us. So that’s the way to go.

Brendon Vade
Yeah, sure. I mean, client there there are a range of different clients out there I got these preferences, so you got to make sure it fits for your business I guess. So that look, it sounds like things are are up and running and humming and, and going reasonably well for the for the most part. Is there any sort of major errors that you feel that was made in the establishment of your or maybe not so much the establishment but just through your journey of being of cheering and ice? Is there anything crap I would have gone back? Yeah, I mean, differently if I could, oh,

Greg Barter
well, sadly, sadly, there are many.

Brendon Vade
That just means you’re honest. Like you

Greg Barter
see behind the curtain of the Wizard of Oz, too much. But one fundamental analyst if this the the I guess the outcome of this podcast is for people to be able to work out if they want to set up an IC and then out Do it. The we spoke before about how rapidly we got it together because we knew the people we wanted to choose. That was also the weakness, because in our, you know, haste to get something set up. And all the goodwill, I guess the good intentions of everyone who was joining the committee, we didn’t think too hard about, you know, our how are we going to how the out of the external party is gonna get paid? Or are they? What do they get out of this contribution. And so we sort of had a handshake agreement to start with. And, and in one case, the individual had just taken up a role that in a large fund manager, he was under probation. And so he kind of said, I can’t actually ask my bosses if I can do this yet, because, you know, I need to get past probate. And we got to be realistic. So we will sit, we actually had to sit there for I think it was about six months, eight months, with not even knowing what this individual who was doing some of the core work for us, was able to, you know, reveal himself. Yeah, sure. So that was there was a tense time it turned out, okay, because, ultimately, he approached the business. And they said, Yes, you can do this, have these external? But then what came with that is, we had an agreement as far as, how’s everyone gonna get? Particularly the external guys? What’s, how are we going to keep the keep them engaged? Other than it’s good to work with some nice people. Yeah, but also make it clear that as arm’s length, because, again, we have this independence piece we’re working with. In some cases, we’re still working through that. Because one of the so the guy who couldn’t reveal himself straight away, we’ve arranged an equity stake for him, which had worked for him. But we’re still coming to terms with the guy. So goodwill is there. If I went back again, and thought through this deliberately and advise my former self, yeah, I would say be really clear about the engagement, early on, and particularly the external so we had the advantage of knowing that guys were already friends with Yeah, happy to jump on board with us that want to be there eager to be involved. You got to temper that a little bit with okay. But, you know, things aren’t always rosy, sometimes they’re gonna get tense. So, how are we gonna? Yeah, we’re gonna set this up. And so

Brendon Vade
but that’s hard, though, to write because you don’t know, particularly when you’re setting out. It’s hard. I imagined that most people setting up their ICs. You know, they haven’t, they haven’t done it before. They didn’t know precisely about what that engagements going to look like, how much of it’s going to be done in house? Who’s going to be preparing that reporting? Do we just want their ideas? You know, that’s hard to establish from the outset when you haven’t done it before. So you should probably cut yourself some slack. Yeah,

Greg Barter
I guess maybe it’s a way a different way of looking at it is, by all means go with good intentions. But eventually, you’ve got to have commercial discussions with everybody. Some expectations are set properly. And then if you just keep rolling on without it, then if there’s a problem, it might be growing and you don’t even know about it. Yeah. So we we set up the charter early on, but the charter didn’t talk about term in the Investment Committee. And it didn’t talk about remuneration, remuneration within the Investment Committee. And whether or not it needed to be set and equitable between the external parties. But you want it to be right. So that’s a point you’re gonna eventually have to reach after the, the, I guess the happiness of joining the committee of everyone getting going and the excitement of it all being new. Once you start to get into the routine of it, you go, well, we need to have pretty clear indications of what expectations are for everyone. So yeah, we didn’t do that so well at the beginning, and we’re sort of getting there Now eventually gonna have to have that discussion.

Brendon Vade
Well, I’m imagining one of the guys I can’t remember which one you said he’s already got his full time job pulling reports together at 11pm at night getting ready for running for the IOC. He’s gonna be wondering, hang on a minute. Am I doing

Greg Barter
this for other than nice, warm feeling? Yeah, exactly. And reality is you want to you want to be respectful for people’s time as well. Yeah. And the last thing you want is a someone who feels obligated to do something that they want them to actually be. Yeah, absolutely. So that’s the part that engagement bit we probably could have thought harder about it at the outset. I view that we got there in the end, but I think it’s a byproduct of us rapidly getting it together and getting it right Rolling. In that age old analogy, we were then trying to fix a bicycle once, already rolling, as opposed to getting everything set up from the outset, it’s not an insurmountable problem. But I guess that’s one of the things I would suggest for people to think about. Before they go down that track, it’s probably a lesser problem. If you’re out there interviewing and deliberately choosing, I see members, if you’re on the as, which is more likely is probably going to be some way like, what we were choosing people were already knew. Because you already know that credibility is already known. So you want to deal with people, you know, just be conscious that you’ve got to deal with this at some point

Brendon Vade
here show. And just to just for the benefit of our listeners, you know, what? Could you give a sense of the range of, you know, what is commercial for in your experience for? I didn’t have to talk to your own generation agreements.

Greg Barter
I still don’t know. 100%? No, but it’s whatever. I this is gonna be a cop out. But it’s, it needs to be enough to have the the external parties parties feel valued in what they’re doing. Yeah. And, and if it’s a small business like ours, you’re you’re offering something more than money. You’re offering people an opportunity to be involved in something. So you put an ad, you put a figure on that. So I’m going to be very, and say it really wide, right.

Brendon Vade
Yeah, it really well?

Greg Barter
Well, it depends, because in one case it was they’re willing to help on the basis that ultimately, they will benefit from us using more of their fund. Right. So that’s one aspect. The other one is it’s it’s no, there’s no money involved. It’s an equity stake. And so that we worked out roughly what you would pay someone for that for the work that they were doing. So we went on a basis of how much would it cost to set up all their models and all the rest of it, which is first piece of work, and then the ongoing piece of work? How much does it cost to lease in the first two years for the management on it, and that starting up at 12 o’clock, put this stuff together? And then we gave equivalent value in inequity. Yeah, okay. I can’t, I can’t trade it nothing, worth nothing really, other than the hope it’s gonna be worth something in the future. Where our interests are aligned on that one, because, as business owners, we hope is gonna be worth something in the future, too. So, the renumeration depends on what the person wants. But I guess being vague, it’s got to be enough to keep them interested is the key part. So so that, I think it’s going to depend on the individual.

Brendon Vade
Okay. Yeah, I’m just gonna go and throw some wrenches anyway, because you’ve dodged it too much. But I’m going to say from what you told me just then, that it would be unwise to expect you’re going to spend anything less than a few 1000 bucks for an annual retainer at a very, very minimum to get some level of it. But it may not be more than say $30,000. Then, depending on who you get.

Greg Barter
I’d say that would be that depends on the commitment. It really depends on the commitment, you’re asking for the external. Oh, yeah. And I’m gonna say for an individual 50 grand in whatever terms that comes out, as is what you’d expect to pay the externals for that quarterly that quarterly review commitment.

Brendon Vade
And that’s, that’s monitoring and that that’s coming prepared with a list of stuff. That’s an outsourcing of a whole bunch of the work that needs to get done. There’s not someone rocking up with their ideas and sort of scratching the chin for an hour. You know, that’s the actual sort of meat and bones of the Investment Committee.

Greg Barter
Well, they’re definitely the committee in their time outside the four committee meetings a year. Yeah. Well, yeah, so 50 grand in however dollar terms, it’s gonna be I’d say, that’s probably the the entry point. If you so that’s, that’s in the end, that’s the argument for externalizing, right? Because you can get the same outcome, definitely for a much more reasonable outlay for the business. So if you’re wanting to set up an investment 20, but you don’t have the means within the business to do so. straightaway, then costs might be the deciding point of how you go with it. Again, in our our point of view, is we were driven by the choices based on our business philosophy. So that’s the way we had to go regardless. So we did, we did look in and Muse at the externalizing Investment Committee, and looking enviously at the lower cost of we’re committed to the business, but decided But the aspect of control was more in keeping with our business philosophy.

Brendon Vade
Very good. To sort of wrap things up a little bit, or is there any advice or encouragement that you’d give to an advisory business of maybe similar size to you? They’re thinking about leveraging an ICS, setting it up going down the path? You know, we’ve talked about some of your journey. Is there anything that we would stick out to you? That you think, yeah, they should absolutely do this? Or is there any particular kinds of businesses where you think actually, maybe, maybe this might not be necessarily the right fit? What would be your broad advice as much as you can give it?

Greg Barter
It’s a difficult question. So you can hear me pausing. I think the issue is Don’t reinvent the wheel. So you think about investment treaty charters, you can spend hours trying to write those things. But thankfully, she one of the members was, wasn’t another investment committee. And thankfully, he may or may not have a have a, like a template version we could use. Yeah. So there’s stuff you want to watch, you want to make yours, and so is particularly yours. But there’s other other bunch of stuff, you can just just template, right. So as much as possible, use the work of others to, to make build those foundation blocks, I think you absolutely need the Investment Committee, because one of the reasons again, which has sort of died away, because we’re going down the MDA line, we were going to we were moving towards an SMA for our clients. And so we needed an investment committee and need you needed to get all these things endorsed by the by the, by the platforms, or whoever’s gonna run the SMA. So if you’re going down that line, and you’re trying to work out what you actually need, the good place to start is go to your platform and say, hey, if we were to set up an SMA, what do you require from a governance point of view? Yeah, they will come out with a list of stuff. And that’s what we, that’s what we were using early on. So they wanted to see Investment Committee minutes, they want to see a charter, they want to see a whole bunch of stuff, because they were required to do their due diligence on the investment committee before they were allowed to set up an SMA. Right. And so that kind of gave us a shortcut checklist of what we actually needed to be, you know, a Fed income investment committee, as opposed to a bunch of people to sing around every quarter and talking about stuff. So yeah, I guess it goes back to the theme of us external guidelines and parties, as much as he can to guide you to get all that font foundation stuff set up and start with the platform. Yeah. Again, get the right people together, as we were lucky to do. And then don’t be afraid to change it as it go. Because our view changed from SMA to MDA. But but you’d be adaptive as you go. But don’t I guess? Have you have strong ideas about how you want to do things, but be always be open to change? Flexible? Yeah, be flexible, particularly. I mean, anyone in the small businesses will have to be flexible. But that’s, I guess, my advice to someone who is thinking about going down that line?

Brendon Vade
Excellent. Greg, any final thoughts?

Greg Barter
No, I think it’s, if I was to say a final thought, I think the the connection between the investment piece however it comes the advisor and the client is enhanced, if you if you’re intimately involved with the Investment Committee. So ultimately, the benefit for the business is you you control the process, benefit to the client is is that by controlling the process, the adviser feels more in control. So they’re going to be more passionate about how they describe things to clients. Yes. And so if your one of your pieces is to make the your offering is a boutique offering, then the more the adviser feels connected with and passionate about the investment piece, more that’s going to flow through the clients and clients are going to like that. So that’s where I guess that’s what we’re I think about it the most. But the thing which I’m gonna go back to, again, which you quite rightly point out, does it get a if you’re just about the numbers does give you a better outcome for a return point of view? Probably not. But you’ve got to value that other piece, the connection to the to the process and the advisor at client connection to the to the boutique portfolio, and that’s, that’s a benefit you get for him.

Brendon Vade
Excellent. Well, Greg, thank you so much for coming and sharing your thoughts. I really appreciate it. And I’m sure our listeners will be much more informed but starting with the plot Holmes That’s great advice. You know, that’s, that’s a really good spot to start, rather than reinventing the wheel. Greg, thanks very much for joining us.

Greg Barter
My pleasure. Thank you for listening to my, my musings, and I. And the other thing, which I really want to reinforce it depends on whatever you want. Right? So we’re doing it our way. And then this is this is what the advice business is about. There’s plenty of ways to come up with same yield for what you want to provide to clients. So this is what worked for us. So I’m not being prescriptive. This is what how you’ve got to do it. But hopefully, our experience can help people think about how they want to do it for themselves.

Brendon Vade
Excellent. Thank you. Thank you.