On the horizonTim Townsend is a people person at heart, and using managed accounts he has more time to do what he loves most - engaging with clients. But that doesn't mean just any solution will do. Eliza Bavin writes. It might be hard for some people to reason how one goes from being the son of a lighthouse keeper to managing $360 million while running their own financial advice practice. But that's exactly what TownsendCobain founder Tim Townsend has done. And while it may seem like a strange path - always trying to spot the next big thing on the horizon is a theme that has played out throughout his life. People say I manage money, but I don't; I manage people.
Fundamentally, I am a glorified rollercoaster attendant... The really hard bit is making sure they remain seated for the duration of the ride, and that takes an awful lot of work before the bad times come. "I'm originally a 10 pound tourist," Townsend quips."I arrived in Australia in 1966 with my parents and three siblings. My father quickly became a lighthouse keeper and I grep up on Booby Island, just off the coast of Queensland. "The island is the same size as Alcatraz, the only difference, apart from the fact that it didn't have a jail, was the fact that there is nothing on the horizon all around." Townsend was sent to boarding school when he was 10 years old, as with only three families living on Booby Island there wasn't much of a school to attend. "People like to say that's why I talk so much now - I'm making up for lost time," he says. Townsend's path to founding his own practice was a process of self-discovery. In the early 1990s he became the financial adviser for Outlook Credit Union where he spent around eight years building up the wealth management business. While there Townsend was an early adopter of Asgard and was one of the first to outsource administration. When it was time to move on, as that time eventually comes for most people, he took on the role as chief executive of wealth for Perpetual private clients. "I found it really interesting to step back from my own little environment that I built to actually being part of a larger corporate machine, and all the pros and cons that come with that," he says. For Townsend, he found that a large corporate environment doesn't always bring out the best in everyone. "Someone paid me a great compliment many years ago. They said, 'You're one of the most self-employed employed people I know'. I've always been a big believer in acting like you own whatever it is you are doing," Townsend says. "And what I found in corporate land is sometimes it can generate people who don't act in that way. They don't act for the house; they act for themselves above all else." Townsend says when a big company comes together to work for a common goal, that's when the exciting stuff happens. "Once you get [a large organisation] pointing in the right direction, it's almost like you're on a big ship and you can feel the engine rumbling. That can be incredibly powerful for delivering for a lot of people," he says. Keeping people at the heart of his work is something that's incredibly important to Townsend, and part of the reason why he ended up making a change in his career path. In 2000 Townsend joined Investor Group, which became WHK, and began the process of acquiring financial planning businesses. "My role as head of wealth was to standardise how we were operating off all these disparate businesses that have been bought," Townsend says. "We were converting 16 different licenses into two. There was a lot of change management where I needed to bring people to a common way of thinking." Townsend says this was no easy feat, even joking that if he needs to go through another round of cultural change management it may just kill him. "It's some of the most demanding work you can do. But incredibly, what was different about that was that all of these practices were invited into the group, both accounting and financial planning, almost with a promise that they didn't have to change, and then I was sent out to change them," he says. "So, it demanded leadership over management. And it's really interesting, you meet a lot of people that can be good managers but aren't a good leader." After spending 10 years in a senior management position, Townsend realised it wasn't the right fit for him. "I didn't particularly enjoy it. It didn't give me the reward that I get from advising and working with people," he says. "I swear there was a number of people writing a book on my potential failure because if you've been stomping around telling everybody else what to do, and then you voluntarily go back into doing it [advising], it's a bit of a high-risk venture. But it worked well." This was when Townsend came together with Rob Cobain, his current business partner, who he has been working with now for close to 25 years. Townsend knew it was time to launch his own endeavour when an element of corporatisation started to make waves within the company. "The new senior management they were bringing in started to use the 'C' word a lot, but it was the wrong one," he says. "They started talking about 'customers' but we would talk about 'clients', and there is a vast difference between those two words." To Townsend, a customer implies a more transactional relationship, but a client you "marry", as he likes to say. "You live with the good, the bad and all the stuff in between. Very often people that have worked in hierarchy or management structures think about customers, because if you care too much it hurts when they go," he says. "But we wanted to care, and it's not just because we're nice people, it's because you get an amazing emotional reward from actually working with people you care about. But it does come with a burden and with the weight of responsibility on your shoulders. That's not something everybody wants to expose themselves to." And so Townsend and Cobain founded their own business. And when you think about implementing managed accounts into a business in which, as Townsend puts it, was aiming to be personal in a rapidly depersonalised world, one might think that would go against their ideals. But being a financial adviser is all about relationship building, and if there is a way to save time for the more personal elements of the job then that's a winner in Townsend's book. Townsend says he was monitoring the managed accounts space for around 10 years before jumping on board because he really wanted to ensure the technology was up to scratch. "We were watching with interest to see how that evolved. Some of the initial moves and people moving towards managed accounts was really just to hide a fee," he says. "What was actually going on was people were saying, 'Yeah, we can do that and we'll charge a funds management fee', and so they introduced a managed account with an increased fee back to the advisory practice. "So, we watched all those things happen, but we also saw the technology get to that reliable phase. We saw that the technology was capable of working. And then we sat down and started to ask ourselves how we build a managed account structure for a practice like ours." Townsend says it wasn't initially easy to introduce managed accounts as he has worked with some of his clients for up to 20 years. "It wasn't good enough to just go and change the fundamental investment philosophy; so, one of the options with managed accounts is to go and buy it 'off the shelf', if you will. But I had brought these clients on with an investment belief that we actually live by," Townsend says. "We recognised we needed to find a way to build that out and continue to deliver that." As Townsend had already proven himself to be adept at outsourcing back in the 1990s, he and Cobain set out to do a beauty parade of sorts to look at all the different managed account platforms. Townsend says they looked at BT Panoroma, Netwealth, HUB24, and AMP North before landing on HUB24. "My background in running larger dealer groups was really helpful for me to understand the nature of a project like that," he says. "On the other side of things, we needed to start beefing up our investment solution. So, we did need additional expertise and focus from an investment point of view." Townsend worked closely with Watershed Group to capitalise on their enhanced investment capabilities while providing a managed account solution that stuck to the investment belief that would work best with his existing clients. With Watershed, TownsendCobain has set up two managed account solutions - one defensive and one growth, which now hold most his client's money. "Watershed are a growing presence in the industry now, not necessarily working on a bespoke basis as they do with us, but they have developed managed accounts that many people are using in their practices," Townsend says. "And they have done that off the back of working closely with us because we live belly to belly with the client. So, they get the landing now. If you're not meeting with clients, you don't understand the landing of this stuff. "I'm practically yelling at them every day saying, 'you need to make sure these other advisers are capable of educating the client today and making sure they are prepared for the bad times'." But it's worth the effort, Townsend says, even if just to ensure he can still deliver the personalised service he set out to. Before implementing managed accounts, Townsend says with every decision he made he would engage the client, explain why they were going to make the change and then convince them of it before implementing it. Which, with a client base of around 160, was a time-consuming exercise. "If you have a really good idea at a particular point in time, to get that implemented across a group of clients could take up to a year and by the time you get to some clients maybe six or nine months in, it might be too late and it's not actually worth making the change anymore," he says. "And that is not a good feeling when a critical time comes, like when the market is about to pop, and the media is screaming that we're all going to die. It's the world that we live in, and these events do happen. "Those are the times when we as advisers need to be there for the client. Those are the times we get to find out the good work that we've done previously." It's human nature to get scared when things seem to be going down - but that's why it's his job to ensure they stay on the ride. "People say I manage money, but I don't; I manage people. Fundamentally, I am a glorified rollercoaster attendant," he jokes. "The really hard bit is making sure they remain seated for the duration of the ride, and that takes an awful lot of work before the bad times come. Advisers who haven't done the work to prepare their clients are the ones hiding under their desk looking at their phone. It's like they're holding a hand grenade praying it won't go off. "Everything you say to a client after things go wrong sounds like a feeble excuse, but those exact same words before something bad happens sound educational. People are almost relieved when something bad happens if you've already prepared them for it." And this is why Townsend believes that while managed accounts are fantastic, you shouldn't just be buying an over-the-counter solution. Townsend compares selecting managed accounts to helping someone buy a car. Someone with a partner and two kids doesn't need a compact convertible - even if it does look swish. "Some advisory solutions now have distanced themselves from the investment solution by outsourcing the whole thing off the shelf," he says. "They may find themselves wanting when the bad times come, and they will come. They always come, whether it be tomorrow or next year. "So, you've got these people who are stewards to those who are fundamentally set up to fail, and there is a responsibility for us to put them in the best possible position to remain seated and not go online and convert from growth to cash when their portfolio is down." Despite working closely with Watershed, Townsend says he still retains the responsibility for the decision making, which he says has enhanced their investment solutions significantly. "They spend 90% of their time focused on investment solutions, and I spend 20% of my time on it, which has been really helpful," he says. Townsend says this set up has changed the way he was able to run his business. Instead of speaking with a client and then going away to make the change, he can now make the change and inform his clients about it. It's a time-saving exercise, but also one that alleviates guilt from prioritising one client over another. "When a change is required and you have to discuss it with every client, there is always that guilt of deciding who to call first," he says. "And if I'm being honest, the person who anyone calls first is going to be the biggest clients in the practice." Townsend says the issue with this is that when an event like COVID-19 happens, the markets are going wild, the government starts pumping out stimulus measures, and no one knows what's going to happen next, advisers can't make every phone call in a day. He says the feeling of guilt for those left in no-mans land at the end of the day would keep him awake at night. "But now, a large part of our clients' holdings - around $270 million - is now in a managed account. So that is $270 million that can be dealt with immediately," Townsend says. "That doesn't mean that we're right. At the end of the day, the key to being dynamic means you can be dynamically right or dynamically wrong, which does scare me a bit - but that's the job. "When making those decisions in a more informed manner, and we're able to implement those changes, we believe quite clearly that our clients are better for it." Townsend says this has even sparked a more engaged client base who have taken an active interest in where their assets sit within the two managed accounts portfolios. That is something he doesn't think will change, and in fact Townsend is excited about the future of advice and managed accounts. "In the 30 years I have been doing this, I don't think I have ever seen a time so dramatically set up for growth," he says. "Now is the time for the good practices to get their stuff in order, and they will. We have spent the time, effort, and money to get the base right which will sustain growth into the future because demand for what we do is growing. "Every day our population ages and gets wealthier, so the opportunity to deliver good quality advice has never been greater." fs
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On the horizon
PARTNER & PRIVATE WEALTH ADVISER
TOWNSEND COBAIN PTY LTD