Engine Room Podcast #6 – Brett Schatto – Transcript

Andrew Rocks
I’m Andrew Rocks and welcome to the Engine Room podcast. It’s a podcast where we lift the lid on practices to find out how they tick, why they tick, why they here today in being successful, and more importantly, why they will stand the test of time, over years. And like all things, they’re led by a group of motivated individuals. And today I’m privileged to have Brett Schatto from Pride Advice, flown all the way in for Adelaide to see me. Good morning, Brett, how are you?

Brett Schatto
Good. I Rocksy, thanks for having me. It’s a privilege.

Andrew Rocks
Privilege is all mine. And what I’d love to kick off with is just a little bit about how you’ve come to be running pride where you started and maybe sort of what you learned in your journey to get here.

Brett Schatto
look interesting. My story is probably not dissimilar to others. I didn’t start off in financial services. But I did prep start off investigating in financial service.

Andrew Rocks
Okay, now you’ve got everyone interested.

Brett Schatto
Yeah, I was a detective over in South Australia. And I got keen hit. One night trying to arrest somebody, a couple of mates were behind him. And I had my first seizure nine months after that assault. Oh, wow. So I went on a journey. And I had no formal qualifications. Having joined the police force effectively from school. And working in places like Serious Fraud and anti corruption branch. I thought that if I had any more seizures, then I would have to change careers. So I went to uni and did a commerce degree and graduated in corporate finance.

Andrew Rocks
Wow. And so the seizures have been something that had been part of your your life.

Brett Schatto
Thereafter, they have I’m on medication still twice a day. And I think my last seizure was seven or eight years ago at work. I hadn’t had a seizure for maybe a week. And so I sorry. I hadn’t had a seizure for seven or eight years. And so I decided to stop taking the medication and three days into that. I had my first seizure for for that seven or eight years. So I’m back on it now.

Andrew Rocks
Well, when look, I before this, a little bit of research, and it was only literally last week that it was it was the epilepsy Awareness Day. And I believe you’re a big supporter. So absolutely. So well done on that. But But So then you’ve moved into you finished up your career as a detective? Yes, you did your university career, we won’t even get into how you spent three years with a bunch of lefties in Adelaide. But a shout out to all the bunch of lefties in Adelaide, you’ve now become serious business professionals. And what was the next step was was financial planning a an obvious move?

Brett Schatto
Look, it wasn’t. And I suppose it’s probably not dissimilar to how young people are looking at financial planning today. At the time, I thought, well, I’ve got this university degree behind me and what else could I do besides being an investigator, and, look, I didn’t particularly want to do accounting, the professional year. But I really loved from a commerce degree that I did the corporate finance aspect, it was like a different language. And I really did love it. And I went to a careers not as a mature age. And financial planning sounded like it could be a career path. And it just so happened coincidentally that I was part of a team investigating a financial planner in Adelaide at the time. And although I didn’t like what had happened to the clients, I loved the idea of helping people with the money.

Andrew Rocks
You’re probably the first guest on any podcast that ensemble has put together where you’ve come into the industry as a function of being on the other side and investigating wrongdoing. So so thank you for sharing that story. It’s yeah, I hope you don’t have to do too many of those. But look, history repeats, we only recently had a Royal Commission, and you must have just been there going well, you know, it just goes round in a circle.

Brett Schatto
Absolutely. Look, a Royal Commission is different to no ordinary court, in terms of the process. But some look, it was fascinating to watch. And I think it needed to be had the pimple needed to be lanced. And I think moving forward, we’ve got some blue sky now. And hopefully we can become that proficient that we desperately need to become.

Andrew Rocks
So you jumped into financial planning. And did you this was in Adelaide? And did you start in your own practice day one, or what was sort of the events that shaped you? Yeah, look, I

Brett Schatto
just applied for a job as a paraplanner. no prior knowledge and got a phone call. I remember driving down one of the streets in Adelaide and getting a call saying the job is yours if you want it. It was a pickup about 50% of a pickup had some some young kids or young family. But it was something that I wanted to do. So I started off as a paraplanner for 12 months and move into advice after that. So it was a good grounding for me working for a small boutique firm in Adelaide. And yeah, I then joined the licensee that I’m still with today. And but that Adelaide office got shut down. So it was at that point that I moved out into my own business.

Andrew Rocks
Okay, and And what year was that?

Brett Schatto
That was my own business was 2003 the first of June 2003. So we’re 20

Andrew Rocks
Well done, congratulations. And when To build into your own practice 2003 from memory that was just after there was a royal commission before the last one, which was a I think it was a FAI. Rodney Adler Royal Commission and AFSL has just come in. So DFP and even I think they were teaching doing a financial plan in the syllabus.

Brett Schatto
Yeah, we had customer advice records instead of statements of advice. That’s

Andrew Rocks
right. That’s right. And so what are your journey with pride then? How did that look? And it’s been 20 years, has there been anything, you look back, and you say, Well, that was a turning point, positively or negatively.

Brett Schatto
The whole, the whole thing is a little bit of a blur. When I started out by myself, it was just me. And I had maybe $12,000 of recurring revenue. And I had the opportunity to take a redundancy package or take my clients. And I took my clients, I opened up the office and the the recurring revenue was enough to cover the rent back in 2003. So I had no salary, I had no idea how to run a business, I’d come out of the government organization and being an employee to suddenly being self employed. So it was it was a steep learning curve.

Andrew Rocks
And during that time, so obviously, you’ve got more than $12,000 recurring income now, of a cursory look at your website. But over those years, you’ve really seen the industry go from, as you said, customer advice records through to where it is today. What have been the what was what has been the challenging aspect of the work over the last 20 years.

Brett Schatto
I think it’s a very interesting industry, which is now our profession. Now, the idea of superannuation and the idea that it’s, for a large period of my time, it’s been quite, I think, political. You’ve had your left, and you’ve had your right, you’ve had the the industry super funds, you’ve had the retail banks buying up businesses. So I’ve been there for that whole evolution and the compare the pair and it always seemed to be attacking the advisor. But they were, they were directly attacking the advisor to the rectly tackle, attack each other. So I think a lot of the stuff that’s come out from a financial planning point of view has been this, this competition for turf for territory. So it’s been, it’s been extraordinarily difficult to find clients and win them over. Once you get them, that’s fine. But to know, there’s some sort of stat that only two out of 10 people have sought advice. And so it’s the eight out of 10 that aren’t getting the advice, or they think the advice is too expensive. How do you get them even just one off to make sure that they’re, they’re setting themselves up for retirement? And look,

Andrew Rocks
the purpose of this, this podcast is that even if you’ve got a lot of advisors, if they don’t have an environment where they can just do the bit they’re good at which is just advising, and they’re dragged into other aspects of, of the machine. And then the net two out of 10 probably looks a little bit generous. Yes. So tell me this. When we chatted on the phone, you mentioned that you’ve got a lady who’s been with you for a dozen odd years Ganghwa and she runs operations. And and you guys work very much as a team, I’d love to hear sort of how you guys operate and where your your authority has changed. Because you’re sort of a job lock when it comes to running that part of the business.

Brett Schatto
Look, it’s really interesting financial planning doesn’t seem to have the, the the economies of scale benefit, the bigger you get, the more profitable you don’t get. You have people doing the same role take wearing different hats. And when you start off, and like most firms, you start off as a one or two person practice and you grow and evolve. And the more successful you are, the bigger the team gets. But you have to continually redefine who you are and the positions you’ve got, and your org chart. And I see it a bit like a sporting team and to know as the coach as the person in charge. Now it’s your job to make sure that the players are playing in the right positions to suit their skills to make sure the team has the best chance of winning. And by winning, I simply mean making sure that the clients are being looked after and getting value for money. So you can’t hold somebody in a role. You have to help them grow as you grow to make sure that they re skilling the whole time. And game was been with me for 13 years. So I only just last month, I had a look at the long service leave provision at Pride. And it’s a scary number. But I suppose the alternative wouldn’t be any good either. So I’m glad that we’ve got these people that are hanging around for a long time.

Andrew Rocks
Well, it’s a trade off between attrition and and long service leave. And I’d probably take the latter every day

Brett Schatto
as a corporate memory that these guys have. And the thing is they they they run the business on your behalf and they become shareholders and do things like that. But no, they’re just as passionate. And when you’ve got a great group of individuals playing together as a team, that’s when you make magic happen.

Andrew Rocks
You mentioned do things and you mentioned that these people run the business on your behalf. I’m sure that we’re going to get into that in how your business operates and also the become stakeholders in your business to two key pillars. Yes, in in scalable businesses. And can I ask for someone who started the business with the with $12,000 recurring earnings and would have had to fought tooth and nail for every dollar for First Five Years, How hard have you found letting go and, and giving people like Mr authority of head of operations or, or practice management?

Brett Schatto
Look, I think there’s a lot of good luck in running a business and I set out with no intention of growing to any particular size, I just thought if I could have a business where I become self employed, and I have a great life, and I can sell something at the end, that’d be great. So I think it has been a lot of good luck, that I’ve employed the right people, and that those people come along. And I think it has something to do with my personality where I am trusting perhaps with the police background, I shouldn’t be as trusting but but I’m a sucker I’m easily won over. And these people deserve to have the trust at the start. And when they when they continue on that path, and they become very, very reliable, then you can’t do anything but let go. But it is it is harder, the bigger you get, you’ve got to take some hats off and fit some other hats on a little bit more tightly. And if you don’t, that’s when the wheels fall off. So you need to do it out of necessity.

Andrew Rocks
That’s right. And I think the word accountability is one that that gets thrown around a lot. And I absolutely believe in accountability starts at the top. So knowing what to let go of knowing when to gallop delegate, and hopefully killer, correct? Correct. Now on that, who let’s let’s have a chat about this business, private advice as it sits in 2023. Maybe give me a bit of a feel for the scale of it. You know, where is it geographically? The types of clients that you guys like dealing with you? And and sort of any other aspect of how the business is run?

Brett Schatto
Yeah, look. So we’ve got an office, a large office in Adelaide, and we’ve got a smaller office here in Sydney. And so we we have one advice team, and they report to the head of advice. And that’s across both both regions. We have a head of operations, we have a head of paraplanning. So

Andrew Rocks
let’s go through some names. We’ve got again, was head of operations, the head of advice

Brett Schatto
that happens to be me at the moment, right, but I’ve got to wear that as a separate hat.

Andrew Rocks
And paraplanning yep, that’s Vicki. Okay, shout out, Vicki. It’s a it’s, it’s where he first started, as he mentioned, but he only lasted 12 months, so.

Brett Schatto
And we’ve got Dave as well, who’s a risk specialist across both states he’s having he’s in Sydney at the moment, right? Yeah.

Andrew Rocks
And, and what’s the scale of the business?

Brett Schatto
Look, we would turn over circa 5 million a year at the moment. So we want to get to 25 million over the next five years. Well, I’m

Andrew Rocks
writing a note here, and that’s going to be talking vision of the futures section is going to be quite big. And how many client facing advisors? Are you currently?

Brett Schatto
There are seven, across the two states. And we have a support team have 12 in Adelaide, and another four in Sydney.

Andrew Rocks
Okay, and roughly Do do do you break those sort of the delivery of advice into into pods or teams is there’s an advisor have a responsibility over a certain number of family units? Yeah,

Brett Schatto
look, this is this is probably the biggest debate question. I know that we try and answer when I get amongst my peers to know how many how many clients is the ideal amount, and I’ve seen it vary from from 60 clients to to 300 clients. And so it depends on how you’ve set your back office up and what you expect your advisors to do. So no, we have advisors aligned to clients, the client service officers are pulled, they’re not they’re not aligned specifically to an advisor, we did have that we moved away from that, we may go back to that. It just depends on what’s happening at the time. So at the moment, we’ve got a pool of support officers that support the collective advisors, but those advisors have a client base and they look after each

Andrew Rocks
and interesting because some some practices have pulled some said aligned. And some have indeed done exactly what you’ve done. What What was what motivated you to, to move from an aligned to a pool that one?

Brett Schatto
Look, it was it was because if you if you have a either an advisor or support staff move on, you know, it just seems to be a little bit more tricky to try and replace that relationship. It was clunky. And and it’s not to say we won’t go back to that. But I suppose now as things change, no, we will change as well. But that just seems to be the sweet spot for us at this point in time of evolution.

Andrew Rocks
And look, the one of the other purposes of this podcast is to get the best quality talent to get the best practices in Australia. And it is a super tight talent market. Like yourself, I started 20 or 30 odd years ago and don’t look. Thank you. And it was easy. I think at sort of 25% youth unemployment and 11% unemployment across the board. Um, you just had to waive waiver wage check in front of someone and they do what you say but times have definitely changed and I can’t see it, you know, making much of a regression in the in the future in relation to your sort of governance. What’s the facade that you’re operating on?

Brett Schatto
Look, we’re part of our advice and have been for that entire 20 years. I think having a licensee it’s no you can argue that it’s a necessary evil. But if that’s all you see it as then it’s probably not the right licensee for you. It should be a real partnership, then it shouldn’t just simply be a cost in your expense line, there should be some benefit for that cost as well. And it’s not just the the opportunity to operate as a financial planner, but you should get some some real benefit and guidance from your licensee as well, which we do, I believe,

Andrew Rocks
and clearly, you’ve leant right into all of those resources. And you mentioned that necessary evil, but the ones that do it well give a lot more than the basics. And that’s testament. And as I looked at your website, earlier, you’ve won our I practice of the year for five years, and then you picked me up saying six, and I’m like, Well, you haven’t won with a designer for the last year, because they haven’t put it on yet.

Brett Schatto
We’re redoing it. We’re at the moment. gratulations by the way, it’s

Andrew Rocks
a really quality group of a group of businesses and and what why do you think you’ve been able to continue to hold that status?

Brett Schatto
Look, I I pondered this several years ago, when I was just trying to brainstorm one day about where where’s the business going. And then I don’t think we do anything differently. We just, we just do what we promised we’re going to do. So there’s nothing special in that. But if everybody is singing from the same hymn book, and no, my advisors have permission to do what’s in the client’s best interest, the support staff have permission, they don’t need to ask for that permission, they’ve got it. And so when everybody’s trying to swim in the same direction, it’s going to work. And so I think that’s the real key to empower your people to do the right thing. And so that comes through in the compliance audits, the fact that everybody is holding their breath to see what the results are going to be. Everybody loves getting the compliments from from clients. And when we’re doing things like moving onto which we haven’t done for a couple of years. But people are really looking forward to seeing the clients. They’re hoping over the phone a lot. So it’s a real, it’s a real family. It’s a real pride.

Andrew Rocks
There you go, real pride, and you slipped it in there, it was seamless, well played. What type of clients? Do you target? And are they different between your offices in Sydney and Adelaide,

Brett Schatto
I think there’s a natural high net wealth in Sydney. But not withstanding everybody, everybody has families, everybody has dreams and goals and kids they want to look after and their health, and they want to travel and do things. So I think goals are fairly similar. You don’t need to make something that’s relatively simple, overly complex. So by and large, they are they are similar clients other than perhaps the size of money they might have to invest or the amount of money that they’ve got tied up in their own home. We we look after people that the 30 year old looking for some insurances with very little in Super right through to the retirees or pre retirees that are coming to see us and whether they are self funded, whether they need some part Centrelink, whether they need a self managed Superfund, they’re the types of people that we look, after we’ve we’ve decided that we’re going to stick to financial planning.

Andrew Rocks
And within your practice, you’ve got a risk specialist in so does that mean if I’m an advisor, and I’ve got a family coming in, that I work with that risk specialist on those clients is that how’s that structured?

Brett Schatto
Yeah, 100%. So now we’ve rolled out some objectives and key results in the organization. And so each each advisor, every actual staff member has a quarterly objectives and key results that they need to achieve to try and make sure that we’re, we’re all lined up collectively. And so some of the referrals are internal referrals. So if, if Renea, or Tracy, see somebody in there’s an opportunity from a risk perspective, I would rather than refer that internally to Dave, rather than do it themselves, because they’re not specialists. And I think everything done right, you have to really specialize in and then there’s just, I think there’s been too much generalization in financial planning. And to be a true profession, you have to be really niche in what you do. But as part of a larger team, you can actually then make sure that you’re handing over that relationship for a particular piece of advice to another specialist.

Andrew Rocks
And as a function of your comment there, it’s very difficult to have a bunch of specialists when you’ve got a small team. And it’s a lot of a lot of people that might be listening today, and they might be in a smaller team, and there’s nothing wrong with that. But from what we’ve seen is is getting an element of specialization. I’m seeing financial planners refer within their practices you’ve just intimated I’m also seeing other financial planning businesses, whether they be in aged care or self managed Superfund or estate planning, referring to each other. And I think that’s an evolution. And if we sort of strip it back to the medical industry, I’m pretty sure that people don’t want their GP to do their heart surgery. Absolutely. So, you know, I think that that’s the evolution but without quality, sort of organization. shins without quarterly practices, it’s hard to have the confidence. Yep. To have those speciality,

Brett Schatto
definitely when you’re when you’re by yourself, it’s a lonely place. And I suppose you can rely on your licensee a little bit more. But if you’re going to have, you know, just be you as the advisor and try and run your own license as well, I mean, there are so many hats that you’re wearing, you’re going to do nothing will know in terms of juggling all of those balls, you’re going to drop them. So I think you know, early on, I mean, it’s great to sort of get a bit of a generalization about where your interests and your skill set might lie. But then focus on that. And don’t just grab everything or everyone, just because you can, because at some stage is going to come back and bite you on the bum.

Andrew Rocks
And how does the practice attract clients?

Brett Schatto
Look, we have a lot of social media campaigning, I think we got 1200 clients following some prospects following us on Facebook, we do the LinkedIn type stuff. A lot of it is just internal referrals. And we’ve got our network of professional refers. Every quarter, we’re doing stuff with those guys and part of our job. It’s not just to help pry, but it’s just to help lift the profession to make sure that people are seeing financial services and financial planning as a profession. And so if people can come along to these things, and just get an understanding of bit of an appreciation that it’s not just superannuation, it’s it’s lots of other things, then they walk away, and it starts with them. And then they will make sure that when they’re hearing somebody talk about financial planning, they’ll have a bit of an idea about what it is that financial planners do.

Andrew Rocks
And I think you mentioned earlier, the advisors need to have the confidence that what they say they’re going to do gets done. And they need to have the time to work with the clients, either directly or in a relationship. So with that as a backdrop, how does how does pride build an engine room to deliver advice, documents, reviews, etc? What’s What’s the secret?

Brett Schatto
Yeah, a few years ago, we decided that the way that we would would charge we would unbundle I know there was a conversation around do we do people charge a percentage based you do charge a flat fee, but But what I found was people that charge a flat fee, there is a somewhat of a correlation between the amount of money somebody invests and how much that lumps that flat fee might be a detective coming out, and you can change from year to year. And so I for me, it just it didn’t sit easy. For those that doesn’t, that’s absolutely fine. But we decided that we would actually strip it right back down to the basics and know, to actually have a file open, like a lawyer does know there’s a there’s a cost to that there’s a compliance cost and a burden. So and so there has to be a fee to that. And then then it’s up to the combination of the advisor and the client saying what they do and don’t want in terms of the scoping. We then created modules. So what’s the core service, and then there’s modules that we put on top of it. And if there was a particular module that we thought that the client should, we should discuss with the client, what would be an example of a module, portfolio management. So what I wanted to do is I wanted to have it in such a way that the regulator could come to us and whether someone was a fee paying client for us, it didn’t matter whether we looked after their money. So if they want to keep their industry Superfund, but they want to have a an annual catch up with the advisor, then we’ve got a charging mechanism that actually covers that. So for me, that was, that was a professional way of doing stuff. So it’s not about rolling people’s money over into a superfund or a platform that we can get out of our advisor service fee from it, you can just be a check that’s written out on the basis, the client knows exactly what it is that they’re getting and what they’re paying for. And they can turn it off at any time. If they want portfolio management, then we can we can do that. But it’s going to be given back to the client to say would you like us to look after your money or not? And here’s the reasons why we think it is in your best interests, whether there’s family aggregation, fee savings, things like that professionally managed, or whether the client wants to stick with their their employer fund, absolutely fine with us.

Andrew Rocks
And having a modularized service offering, which is also accompanied by a by a cost allows you to be quite granular, in the costing of the delivery of the advice. Yeah, what steps have you taken, and as your team taken with with gannawarra, adding it up to ensure that that you can make the advices as palatable as possible and as and as suppose, delivered at a price point that not only rewards the stakeholders in your team, but also the client.

Brett Schatto
So people that want to have an ongoing relationship with an advisor that they can have goals. Now, if that goal is a goal around a portfolio management, well, then that’s a specific goal. But we one of the other modules is strategic goals. So you know, what else is that you’re wanting to achieve with your financial life? You know, is it being able to afford to travel every year and things like that. So by everybody understanding the modules that an individual client is on, it gives us the opportunity to to make sure that we’re touching those right points that we from a back office point of view in our CRM explain that we can make sure that we can see that we’re delivering on those specific modules that the client is paying for. So we can be productive around those things. And it’s also a good conversation because you know, at the annual review, if it’s if it’s not a twice a year, if it’s an annual review, then you can, you can talk to the client about what you delivered in that in terms of a specific module for that prior 12 months, and then that client has the opportunity to turn it on or off. And I find no, for example, Centrelink somebody turns age, pension age, or they’re about to, you call them in, we do offer a Centrelink service. And so if they would like to pay for us to do that, the concierge and be the conduit between them, and Centrelink, we will do that. But it comes with an extra fee. If they want to do it themselves. They save that money. I don’t think you can go much more fair and transparent than that.

Andrew Rocks
And is there any so you mentioned a piece of technology that you use x plan? Is there any other pieces of technology in your tech stack, that allow you to facilitate this, this ambitious, and obviously delivered aspect of a modular service offering right down to just the pricing and the collecting of the money?

Brett Schatto
Look, most of it’s, it’s through compound through explained through our licensee. So you know, when you’re when you’re charging out, you’ve got to invoice and it’s got to get paid to the licensee. So from that point of view, there’s nothing that we don’t deliver that gets paid directly to us. There used to be but not anymore.

Andrew Rocks
And with with your actual advice process and the clients, you said you’re pure play financial planning, when when the goals and whatnot, get to a stage where they might need some other professionals. Have you you got a bunch of partners in the individual states? Or how does how do you manage those relationships?

Brett Schatto
Absolutely. Look, we’ve we’ve had four or five iterations now of our annual review, we have an agenda. And that agenda has been built layer upon layer, year upon year of learnings. And so now we’ve got this, this document now that we use as part of the annual review process, and so anything that’s identified that we don’t do, we will capture that as part of the review. And then we will make referral recommendations to these people and talk talk to them about the importance of getting this stuff done. And then that will become part of our follow up email after the appointment just to remind them to contact these people. And for the for the reasons that we’ve discussed during the review,

Andrew Rocks
and a lot of this sort of operational stuff done by the client service team, is that right?

Brett Schatto
It is so the adviser captures the stuff during the review process. And then we then put it into the machine and make sure that it gets delivered in a timely manner and is followed up through tasks.

Andrew Rocks
And you mentioned earlier that you you take on a broad range of clients. Do you operate your own investments you do NDA SMEs? Or how do you deliver that side of it?

Brett Schatto
Yeah, we’ve got an SMA. We don’t have any, any margin or any clip put in that SMA. So if people want us to run their money, we’re happy to run anything on one of our platforms that are provided to us by the licensee or via the SMA. And that SMA comes with a certain pricing discount. So if the client doesn’t want to be part of that anymore, then they they’ve got to move out of that SMA but we have the Investment Committee that sits down weekly and makes calls and now we send monthly updates, video updates to all of our clients that are in that to talk about what’s happening in the markets and some explanation about what we think the future might look like for them as

Andrew Rocks
well. In which platforms do you do battery hub 24,

Brett Schatto
we use a lot of happy 24 We look we there’s probably not a platform that we don’t use depends on horses for courses, no, there is no default platform that we will use that it really is built from the bottom up. And so whatever the clients looking for, if it’s an individual versus a couple, whether there’s a combination of super and pension, whether there’s kids involved with you, whether you take advantage of family aggregation, all of those things come into play.

Andrew Rocks
And we spoke about earlier about COVID and how, you know, running a business in two states sort of really opened your eyes up to the fact that if someone’s on a screen, they’re on a screen, yeah. What learnings Have you taken out of that experience that you’ve put into place?

Brett Schatto
It look, I think COVID was fascinating for for a lot of employer and employees No, pre COVID I don’t think I was the sort of CEO that didn’t trust my staff. But but it was through necessity that people had to work from home. And, you know, my team is just amazing, as I’m sure everybody thinks their teams are and they they really did knuckle down, they did the job. And it just showed us that we could actually not necessarily be in the same room at the same time and still get the job done. I think from a cultural point of view, it can be a little bit difficult, particularly when you’re onboarding new staff. But when you’ve got that existing team and bond, the fact that you can have that flexibility. What it taught me was that whereas previously offshoring may not have been an option with the price pressures of providing advice in Australia and those eight out of 10 That wouldn’t seek advice purely because of the price. It did force us to look Add offshoring and whether somebody wants to work from home to suburbs away from the office or whether they want to work overseas. And you can reduce your cost to serve to the client, it was something that we needed to actually consider and that we took, we embraced.

Andrew Rocks
And later on, I might talk about how you’ve integrated those people into a team. Because getting people to discretionary effort is not just associated the people in front of you. Yeah. In relation to your business, you have a board? And do you have a board? And if so, sort of what’s the ownership structure of your firm?

Brett Schatto
Look, in 2015, I was only a young man, I was still a young man. But and, but there was an opportunity, I’m supposed to

Andrew Rocks
do that. But you’ve got to leave a gap for sorry.

Brett Schatto
There was an there was something there was a niche that I just couldn’t scratch. And I think it was evolving from that sole, sole proprietor into a to a team. But it was where to from here. It wasn’t that I had a particular vision or goal. But I decided at that point, I spoke with Paul Barrett, I knew Paul from from his day to day and said, and he was starting up something called AES at NGA. And so that really interested me not as a succession. Although I suppose by default that it did provide me with one, but it gave me the opportunity to really start to formalize my thinking and my growth trajectory. And so it was something that I a path that I wanted to take. And so I do have a board now I’m part of a sudden Gi, I have a board that over the oversees what pride does, I’m the CEO, but I present to the board my vision and strategy and the five year plan. And they sign off on that. So I’ve really enjoyed those quarterly catch ups, setting annual budgets and just tracking the budget and seeing where we’re going. So I found that really, really good.

Andrew Rocks
And having that thrust upon us as the leader of your business. How was that informed how you manage the people within your business,

Brett Schatto
it was a completely different hat. At the time, you can say that you’re a business owner, but you’re not really you’re just the senior advisor, and you happen to have some people that you pay, and you’ll get together and have drinks on a Friday, and someone leaves or you this just forced you to grow up, get a seat at the table and professionalize. So I think it’s been better. It’s a much richer environment, people know what they’re doing. There’s, there’s, there’s proper roles and responsibilities. As delegations, we do, we’re forced to catch up and talk about what the plans are for next year, and then deliver to those things. So having quarterly board meetings and to see how you’ve tracked Compared to Budget, it really keeps you on your toes. And with that professionalism, you start to realize that there’s no more than 24 hours in the day. And so you need to yourself start to really hone in and focus on what your best value is going to bring to the business. But whether staying an advisor seeing new people going and doing the shopping to replace the milk and a coffee or no do you actually get on and run a business rather than being working in

Andrew Rocks
having quarterly boards? You’re only 90 days away from a self check.

Brett Schatto
Absolutely. And you’re looking at you’re looking at it every week, and you’re having chickens every month. So everybody’s having chickens to see how are we tracking so you can sort of, you can get some some pretty good analytics about where you are trending, what’s causing it while you’re off target and try and try and rectify it in time or go back to the board and say we got the the budget wrong.

Andrew Rocks
I suppose we can also dispel a few myths. I mean, before this conversation, you’re inquiring about ensemble and the types of people that are listening and is it a young sort of cohort? And I said, Well, kind of but not it’s now really big. When you were an AZ and J or you worked with them? You were the owner. Doesn’t sound like there’s a succession plan here. It’s eight years on, you’re still here. So clearly you didn’t do it as a way of exiting. Absolutely. Yes. And I think the the myth is that quite often, businesses such as as it NGA, or other owning groups, come in and buy the business and then kind of try and change the business. But what’s been your experience? Yeah, look,

Brett Schatto
I think for me, to not know that, that line of work, you can be quite amateurish in the way that you perceive things. And if you think that’s what’s going to happen, then your perception becomes your reality. I put myself out there and no, I was I was fiercely independent, as independent as you can be when you’re part of a licensee. I know there’s problems with that particular word but but they don’t get in the way and know whether whether I was going to partner with a large group, like I needed NGO, whether I was just going to simply go it alone, at some point I had to formalize and I had to get a board and I had to do the things I was going to do because if for nothing else, through inorganic growth, I’d have to go and get lending from banks and they were going to see the stuff that I need to do now. So either way it had to be done. If If I was going to grow, and because I was on a journey that was in growth, I thought, why not partner with somebody that can help me grow and be four or five times bigger than I could have done by myself,

Andrew Rocks
you’re better off having your debt partner, as your business partner than your sorry, your equity partner, as your business partner than your debt partner. They both have very different motivations. So shout out to all the great lenders in financial services, you know, you you really help. What I might do is just shifted up now to two people. And you’ve given us an idea of how you run your business, you’ve given us the history, what, and even the word pride, I love that word. And I suppose what everything is associated with it. Why do people join you? And why do they stay? you’ve referenced earlier that people stay a long time. Yeah. But maybe just go through start with why someone would join you.

Brett Schatto
Because I think culture is really, really important.

Andrew Rocks
And what’s your culture? Look,

Brett Schatto
it’s being very professional, and having a lot of fun. Things are definitely taken seriously when it comes to clients. But no, we have we that from from a hierarchy point of view, I think it’s pretty flat line, we’re all approachable. Now, I can make teas and coffees for clients as they come in. So you know, there’s, there’s a lot of or not, there’s a lot of autonomy, but coming together, but I think it’s just it’s it’s more the fact that everybody’s empowered to make decisions. And so

Andrew Rocks
and when you say everyone’s in power, do you have a Do you have sort of people have obviously got the job description to have like delegate authority where they’re unable to make decisions without cascading to yourself? Or how do you run up levers? Especially because you’re in two states?

Brett Schatto
Yeah, look absolutely the, it’s something you should be reviewing on an annual basis. In any case, and when you’ve got a growth trajectory, when he when you’re growing so rapidly, and expanding, and geographically as well, you have to be reviewing those things constantly. You can’t just have the same set of rules and, and four years down the track and three times the size, and it’s not going to work. So having that that view that whatever you’re doing today could change in 12 months time. When you sit down as a team, you’re not a dictatorship, you’re not telling people how to do stuff, you’re actually inviting him there as a seat at the table. We’re all night to the roundtable. What did we do well, this year, what did we do? Well, what do we need to plan for? How do we need to change the way that we do things, and having everybody that is passionate, and an expert in their own job roles, they see things that you don’t normally see, if you think of your business as a house, you know, if you’re the CEO, you’re walking through the front door, you think, Oh, this looks all good. But if people are operating in different rooms, they get a different perspective of what’s in the house and what’s missing. And so I think it’s a really valuable thing to bring your team along the journey to help them shape what you do, how you do it, and why you do

Andrew Rocks
it. Look, I understand bringing your team along for the journey is awesome. But it’s pride, a place where your team can get a share of the action. Absolutely. Tell me more about that.

Brett Schatto
So look, in terms of the rise of Nga structure, we’ve been waiting on an employee share plan to come to fruition, which it now has, we’ve had to have the the the staff join us from an equity participation point of view. And I think what I haven’t quite nailed down is how long should they stay before they get given the opportunity. And not everybody will I had a I had a young lady Katy, with me when I first started up. And she never wanted to be a shareholder. She didn’t want to be a business owner, she just loved being an advisor. And unfortunately, she passed away at 34 of breast cancer. But that was that was her lot. And she said bread, I’m just happy working with you, not for you with you. And it was it was a great relationship. So there are going to be people that do and seek equity. And if it’s for the right reasons, then absolutely the problem you’ve got is if you allow people to buy in the wrong fit for the business culturally, because unwinding that can be quite difficult. So with that slow and steady but there is no keeping all the cards close to your chest, you want to bring people along the journey.

Andrew Rocks
And historically, whenever equity is spoken about or ownership typically it’s always been the advisors are in line for equity. It’s been a real sort of carrot to retain and attract advisors, but it’s rewarding other people in other roles in your organization something you’ve either done or was on the on the horizon

Brett Schatto
that they absolutely this and that’s the thing about a financial planning business, the financial planners No, they’re obviously key to the to the to the relationships, but it’s amazing how much the clients engage and interact with the support staff. And they are the real keys to a financial planning business for me. If you are the sole proprietor and assist you and a receptionist, I get all of that. But when you start growing, you need to build those relationships and it’s one to many so that one that one client has many real relationships and those relationships are quite key. And so when they’ve got that ownership, that that pride that ownership in the business, they’re more inclined to make sure that they’re doing the right thing. But they’ve got to show it first. And you’ve got to, you have to behave like a business owner before you become one.

Andrew Rocks
You mentioned earlier about COVID. You mean, and we’ve discussed that you’ve got multiple sites? I mean, is there any piece of technology that you use? Whether it be an MS teams or something like that, where people can talk together electronically?

Brett Schatto
Look, we use them. So a lot. Yep. So we use Zoom. And it’s really interesting. Even even in Adelaide, now you can have three or four staff working from home on any given day. So you’re not always going to have everybody in the office at the same time. So whether it’s Adelaide whether it’s Sydney, there’s, that’s not really an impediment anymore. We’re so used to having those meetings online that even clients now doing that. So having zoom rooms, in the office, making it look a little bit more cool, is a good thing.

Andrew Rocks
roll off the tongue. It’s a pity that Skype didn’t somehow figure out the name itself differently.

Brett Schatto
Yeah. Yeah. I think I did use Skype a little while ago. But yeah, just I think everybody’s a zoom expert. Now though.

Andrew Rocks
They’re a bit like stonewashed denim, they’re a bit of a really dumb guy. I love the shareholders of Skype. How do you with with the with your team? And you mentioned, you’ve got the dual role of head of advice? What’s the meeting rhythm? So if I’m working in your business, what do I expect to I get to I get weekly meetings? Do I get quarterly meetings, you mentioned that you at the top have structure as a function of, of the board. But But how do you then create a sustainable ongoing rhythm in the business,

Brett Schatto
so on Monday morning, have management meetings, so the heads off and myself, we’ll get together and we’ll talk about the week that was in the week that is coming, what needs to be done, whether there’s people that are going to be sick or away whether things have popped up, whether we’ve had any many particular emergencies that have cropped up. And on a Friday, the advisors will get together with the heads off and talk about the workflow, what’s happened, how many new people we’re seeing how many plans are being implemented, how many are in the pipeline, any any feedback to for any of the team members, so the heads off can take that away those learnings or accolades, just to Pat people on the back or say, Look, we think we can improve this particular process. So there is there is a it’s a fairly inflexible, flexible structure. So whether it happens on a Friday at 130, or whether we roll it across to the next week, because we we had to catch up prior, what I do like is, I like to be able to say to a client that the advisors will get together, and they will talk about your situation. And I’ve got a son that’s got to a thing called primary sclerosing cholangitis. And a client said to me, once it’s a liver disease, and he hasn’t needed the liver transplant yet, but he’s got a liver specialist. And a few years ago, he was unwell and had to get taken to hospital, ICU. And his specialist was overseas at a conference. And the client said to me, Oh, God, that would be frustrating as a parent to have your specialist not there. And I said, No, not not not at all. The world’s not going to come to Adelaide, I would rather my my son, specialist, fly to Canada, be there with the leading liver specialist around the world and bring that expertise back to Adelaide. And so now having the advisors get together to talk about a client situation, I know, it’s not just a story, it know, you got all of these minds talking about different ideas or different strategies that you take into account. And so there’s a real benefit there is that there’s a rule with that rule prior to the team that you’re going to have a collection of people working on your situation.

Andrew Rocks
And look, I imagine having the modular structure means that people know what they have to do. But they also know that they don’t have to do which is quite powerful.

Brett Schatto
And so that’s where the we do have a we do have a shared Excel spreadsheet where we put the referrals into that. But we also then we’ll talk about it in on that Friday meeting about anyone that has referrals for another in House advisor, or even external, we’ve had, we’ve had some external referrals coming to us for aged care that we’ve got Renee, who specializes in that in Adelaide and K in Sydney. But we’ve got other advisors that are referring into us, which is fantastic.

Andrew Rocks
From other practices. Yeah, I do see a proliferation of that. And that just goes to the point of putting the client at the center Absolutely. Doesn’t necessarily mean the center of just your practice. It’s the center of of, I suppose meaningful advice. And and, you know, that’s the professionalism aspect of the industry. How do people so do you do have much organic growth? So do people start in your practice? As you didn’t they start as associates they move to paraplanning advice. Is that a is it a well worn path? That’s the first part of the question. And how is that going to reconcile with your ambition of five axing from here?

Brett Schatto
Look, it’s a really good question. Um, a few years ago, we had a young lady Talia that wanted to do her professional year. And we were just not in a position to put her through that at the time. Fantastic young lady. And she went with my blessing and went to another financial planning firm. She’s done a py and she’s off. We are in a position now where we would put people through a py and we’ve got some some people that are doing their studies at the moment, not ready to do the py yet, but as soon as they are, they will go through. So I think we’ve got an obligation to the profession to make sure that we’re replacing the older advisors that just through natural attrition every every organization has it mean the police department I see a lot of coppers over and Adelaide and the amount of police leaving versus the ones that are joining it’s, it’s quite dire. So we’ve got the same in financial services, we’ve had pretty much a halving of financial planners, it’s where is this next generation of relevant providers going to come from and if, unless you’re gonna go and poach somebody else’s note, you should be putting young people through this. It’s a real profession, and it’s an exciting time. And now Now, evolution.

Andrew Rocks
And I think, what’s more than just other advisor listening to this and that that’s a yet another example of, of, of the lunacy of where we found ourselves as an industry with with with increased demand. How do you have fun? I like to ask this, you know, at some end, look, how do you have fun given that you’re in two geographical locations? Do you guys physically get together? Or actually, you’re in three? Because you’ve got people overseas? Yes, people in Sydney Adelaide. What does funnel look like?

Brett Schatto
Look, it’s it’s amazing how you can create fun in a lockdown with Zoom, and then some of the games, the Zoom games, bingos and things like that, or circulating questions and guessing who whose answer belongs to the question and those sorts of things. Geographically in Adelaide, we head to the fringe events recently. So we will get together and we’ve got something in the diary to do every quarter. And so we’re we’re always going out having fun, and we make sure that we celebrate the mid year, we make sure we celebrate the end of year, partners are included. And so we do go out and we do a lot of stuff together. We don’t have anybody that stands in the corner says No thanks, I don’t want to come, everybody wants to come along. Because if they don’t come we talk about.

Andrew Rocks
So if you’re not listening, we’re talking about you as we speak. In relation to the business, I want to move to a vision for the future. Now it’s not every day that someone comes in here and says that they want to get five times the size that they are, what steps and what vision Have you got? To do that? That’s the first question. And then how the hell are you going to build an operations team behind you, that’s not going to go inside.

Brett Schatto
This is where you need to partner with somebody. And so the fact that we’ve got a licensee I don’t have to do that myself. And the fact that we’ve got an equity partner that can stump up capital and debt gives us that infrastructure triangle, there it is, you’ve got to, you’ve got to line these ducks up to make sure that you can achieve these things. And even if we don’t achieve it, you’ve got to aim for something. We say to the client, so unless you’ve got an endgame, and I never had one. So to have something now knows it’s, it’s a bit daunting to put those sorts of numbers on on a presentation, but that they’re there. And whether we achieve it or not, we we won’t die wandering and so but you’ve got to actually get your infrastructure right first. And as you grow and evolve, then you can change that. But if it becomes your habit, your annual habit where you’re rechecking what you’re doing, and and how do you improve, and how do you restructure it? Now, there’s no reason you can’t get that big.

Andrew Rocks
And just to confirm, you’re no longer client facing at all, you basically, you’ve embraced the leadership as a true profession.

Brett Schatto
Yes, it’s interesting. I went to us a conference last year, and I think the average number of clients per advisor was 88, around Australia on average. And now it’s what came first the chicken or the egg? No, I looked after 90, and I was running pride. And that’s not to say I just saw people once a year I was I was at hands on. Advisor, I’m still getting referrals now. So the fact that you’re doing something, right, you don’t have to over over complicate things. You know, it can be a trick to sort of say, well, I want to charge x. So therefore I need to do four things a year just justify the fees. That’s not what Fassi is all about. So when you’re doing stuff for a client, you should be set there so that you don’t have to be catching up every month and reporting it. If they want to. That’s fine, but it is a value for money. So I had 90 clients, but it was getting to a point for me last year where it was just it was too much. I couldn’t provide my clients that active service, 24 hour turnaround because at a moment’s notice, I could be in Sydney or I could be doing something else. And so at a cost of the business. I brought another advisor on Astrid she’s brilliant. So I tried to find somebody that would align with my client base. I think if you’re running a business well, I think you get her a tribe of clients that are similar but because they get attracted to you as the advisor in your personality, so I was able to find somebody that was similar to me and the way that she she presented. And so as a result, it makes it easier for clients to resonate with her. And which has allowed me to sort of step away to grow prod.

Andrew Rocks
And it leads me to my question around, what do you see is the vision for the future of, of practice management or running practices in financial services in Australia,

Brett Schatto
this is the exciting thing about being in this profession, and no financial services need, the accountants have been around forever, lawyers have been around forever, mortgage brokers are doing their stuff. But financial planning is that newest profession. And when we’re as the planner was everything, I think, in order to limit the number of clients that you’re seeing from 88, to 200, you need to be able to rely on support staff to do their part. And if you’re charging out an advisor, hourly rate to do CSO type work or reception type work or check the mail, how was that in the clients best interest, you need to grow to be able to do a proper cost to serve to bring that price down to make sure clients are getting value for money. And you can only do that by growing.

Andrew Rocks
And I suppose that’s to your point, as far as you know, your your vision of, of how you’re gonna grow in the future, you were you’re looking to attract like minded individuals who potentially share the same vision for the client experience, but have the self awareness that they’re not at scale at the moment. And they will be looking to move into your operational rhythm and system. Is that correct? Yeah,

Brett Schatto
absolutely. It doesn’t work. You can’t, you can’t run four different styles of back office, you have to have the one and know whether whether we were Henry Ford comment, whether we would merge into the way that they operate, or whether they are merging the way we operate, that stuff needs to be flushed out before you do the deal. So now that stuff’s a given. But I think for people that are just one or two person practices I’ve suffered in my life, I’ve been beaten up, I’ve had epilepsy, I’ve had a son of I’ve lost a son, I’ve lost a business partner. And these things happen we do pro bono work for one of the local hospitals for for cancer patients. How is it in your clients best interest if you’re the only advisor in that business, and something happens to you? So you know, to be a professional, you got to behave professionally. And that means de risking the things that could impact your clients, should something happen to you. And you can only do that by getting bigger.

Andrew Rocks
Well, that’s that’s a, you know, a really heartfelt and real life roar example. And for anyone’s listening who is going on this journey, that’s that’s got to be your purpose. A critical comment that you made there is that, that you owe it to your clients and your team that you need to be able to be replaceable, as well. as vulnerable as it sounds, the best quality leaders work out early on how to become irrelevant, and then start that March.

Brett Schatto
Yeah. And it’s really it’s interesting with financial services because you have to be licensed. So it’s one thing to say I’d say, Okay, I’ve got to deal with the the advisor in the next suburb note, we’ve got this quick quid pro quo that were each other’s succession that if I couldn’t work for three months, I know that that advisor is going to pick up and look after my clients,

Andrew Rocks
like a locum in medicine. Yeah,

Brett Schatto
but But what about licensing? Now, if you’re a different license, so you’re going to charge your client or you’re going to is that new advisor who’s licensed differently going to charge an SOA fee? How’s that in the client’s best interest, so it’s quite unique. So if you’re going to do this stuff, and stay single, that’s fine. But find somebody inside your license that could pick up and take off where you’ve left left off as well. But if you’re not up or running under a car model, how do you do that as well? So now you’ve got to think of the intricacies of how do you actually give this advice in an effective and efficient manner to your client that’s cost effective.

Andrew Rocks
there be some licensees listening? And what I’d urge is that that’s a really profound comment. If we’re all, you know, licensees are all competing to work with the best practices, but potentially having a solution for that comment around almost a locum within that licensee who was available, might be under that I’ve never heard of it might actually be a real point of difference. I don’t

Brett Schatto
know how you do it. But maybe you could go to the regulator and then have some sort of sandboxing, where you’re saying this is what this is the risk we’re trying to solve for clients. I can’t see the regulator not wanting to to try that out. But I think it’s something if we’re going to stay with smaller practices around Australia, or then we need to solve for those risks, and how is it that we as a profession do that?

Andrew Rocks
What a great comment, I mean, that’s just opened a Pandora’s box. And, and absolutely, it’s, it’s, it’s really working for the client, and as you’ve said, going to the regulator, and saying, here’s the problem, we need your permission for a solution is probably the most logical thing that I’ve heard in a long time,

Brett Schatto
because we can’t be duly licensed either. So know that the licensing regime itself sort of as an impediment to making sure we’re looking after our clients on an ongoing basis, but in

Andrew Rocks
their defense, they’re managing the risk of which is which is spiraling. So it’s hard For them to be as flexible as what we want them to be as well.

Brett Schatto
Yeah. And so I suppose though, hopefully we get to that point, we’re a bit like the doctors and the lawyers and the accountants now there’s a, there’s an element of self regulation in that, no, we need to, we need to earn that trust. But we’re in that period that where were we moving from point A to point B? And so what do we do? In the meantime, if we can identify these risks? How do we solve for them?

Andrew Rocks
And you mentioned then earning trust. And I suppose I’d like to end with the comment of Thank you very much for your time part of increasing the professionalism, of financial advice. And actually, the evolution of practice management is all about building a trusted environment for people to not just earn the trust of their colleagues, but also to earn the trust of our other stakeholder, which is the general public. Absolutely. And if we do that, then our legacy in 2023 in 10 years time will be will be entirely valuable for the next generation. Bret, I’d love to thank you for your time and your candor. And I look forward to chatting again. For those of you guys. Lots of information about pride can be put on our attachments, and I look forward to catching you very soon. Cheers Brett.

Brett Schatto
Thanks, Rocksy.