TO GROW

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Cover story

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Volume 03 Issue 01 | 2016

FREEDOM

TO GROW

Leonard Gennusa and Alisa Honeyman

Fitzpatricks Private Wealth

In an interview with Financial Standard, financial advisers

Leonard Gennusa and Alisa Honeyman from Fitzpatricks Private

Wealth explain how managed accounts play the dual role of

helping them look after their clients more effectively and grow

their client base with minimum fuss.

THE JOURNAL FOR MANAGED ACCOUNT PROFESSIONALS•

FS Managed Accounts


www.fsmanagedaccounts.com.au

Volume 03 Issue 01 | 2016

Cover story 19

Photography by Hayden Brotchie

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Volume 03 Issue 01 | 2016

Past performance is not a guarantee to future performance. But

for Leonard Gennusa’s clients, there’s a lot of comfort to be had

when your financial adviser tells you that your investment portfolio

has returned 15% at a time when the Australian share index returned

2.5%. That performance can be attributed to many factors but for

one, using a managed accounts model meant Leonard was able to act

immediately on investment decisions his team had to make to deliver

that return.

“I was looking for an investment solution that was more efficient

and more nimble,” said Gennusa.

“Before I used managed accounts, I would have had to generate 60

documents for each individual client to exit a position – but that authorisation

can take anywhere between a day to three months to get,

and by then, it’s too late to adjust their portfolios,” he said.

By contrast, under a managed account solution, he can immediately

implement changes necessary to stay true to the client’s investment

objectives.

“Getting around the compliance burden is truly empowering to

the investment team,” he added.

For example, last year they needed to reduce their positions in

mining stocks across all portfolios. Without managed accounts, they

wouldn’t have been able to do so in the small window of time they had.

“We were able to save our clients from significant capital losses

when those mining stocks plummeted,” he said.

“Of course we can’t always guarantee the best outcomes but in situations

like this, we were able to manoeuvre around market changes

a lot quicker.”

That said, Gennusa follows a risk-targeted approach to investment,

meaning clients won’t necessarily capture all the returns when

markets are running hot but it also means their portfolios won’t suffer

as much when the markets are falling.

“Sentiment can swing on a dime and our focus is preserving capital

… the impact of a negative 5% is far more difficult for a client to

digest than a positive 5%,” he said.

Another reason he uses them is for the tax customisation benefits,

which is another powerful way to preserve client wealth.

“Within a managed account environment, you can preserve individual

stocks or transfer holdings so that you only crystallise a tax

event, as and when you need to,” he said.

This is particularly powerful for his clients who may opt to wait it

out if it means additional savings for them.

Gennusa is also under a special situation where 40 of his 65 clients

work at a major consultancy firm. These clients are privy to highly

confidential information that preclude them from investing in certain

shares.

This would have involved a blanket ban on all shares had Gennusa

used managed funds but through managed accounts, he could block

or remove shares, paving the way for him to cater to this particular

client base.

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The quote

You’re there through all the stages

of their lives and supporting them in

their decision-making process.


22 Cover story

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Volume 03 Issue 01 | 2016

All about project management

Gennusa wears multiple hats. Financial coach, confidante, counsellor

and some times, concierge. One of the most unusual requests he’s

received was the time a client asked him to pick up a stone parrot

from airport customs.

That was certainly not on his official job description but “as you

put your arms around your client’s affairs, you become a member of

their ‘trusted team’ or a part of their family,” he said.

“I’ve been invited to house warmings, been asked many times to

become executor of their will (he politely declined) and one client

even asked me to house-sit for him (the client has several properties

around the world.”

Put another way, there are several roles that financial advisers have

to fill beyond the ‘Statement of Advice’. From cashflow and debt

management to insurance and estate planning, investment advice is

just one slice of the advice pie.

“Clients are always looking for a recalibration of their affairs and

having their financial affairs maximised so I have to keep a handle

on all the moving parts,” he said.

Gennusa looks after 65 clients with investable assets of around

a million dollars to $30 million dollars. He plans to add another

10 clients in the next couple of years offering them the same hightouch

service he gives to his existing clientele.

He said managed accounts allow him to deliver “institutional

grade” services at a time when investment technologies are

fast-evolving.

“With managed accounts, it’s a much more rewarding advice process

- looking after their financial affairs,” he said, adding that it

enables him to forge deeper relationships with his clients.

“I don’t think I’d be the adviser I am today without managed

accounts.”

Getting portfolio construction right

Senior adviser Alisa Honeyman is an early adopter of managed accounts.

Even before she joined Fitzpatricks Private Wealth, she was

already using them for her clients. With over 20 years of industry

experience, she has seen how managed accounts have evolved, particularly

since the Global Financial Crisis (GFC).

Just like Gennusa, Honeyman agrees that managed accounts allow

her to provide the best outcome for her clients by leaving the

investment-related decisions to the specialists while she looks after

delivering the overarching advice solution for them.

“I often get clients ringing up to talk about their personal and financial

affairs. For example, they may be going through a divorce

or a family member is suffering from a serious illness. You’re there

through all the stages of their lives and supporting them in their decision-making

process,” she said.

THE JOURNAL FOR MANAGED ACCOUNT PROFESSIONALS•

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The quote

With managed accounts, it’s a much

more rewarding advice process


24

Cover story

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Volume 03 Issue 01 | 2016

The quote

When “emotions get

involved”, managed

accounts are designed

to take those decisions

out of their hands,

ensuring that their

portfolios are in line

with their financial

objectives not with their

stock favourites.

That often means the investment discussion is not

top-of-mind but that doesn’t necessarily mean they

don’t expect their investments to be humming along

nicely in the background.

“With managed accounts, we can leave it to the professionals

to make the right investment strategy decisions

and, more importantly, look after the portfolio

construction,” she said.

“You can’t have the adviser sitting there watching the

markets. We are unable to provide that service because

we are assisting them [the clients] in other areas.”

Over the course of her working life, Alisa also knows

that sometimes, clients will insist on buying or selling

shares based on their emotional biases, which can be a

costly mistake.

When “emotions get involved”, managed accounts

are designed to take those decisions out of their hands,

ensuring that their portfolios are in line with their financial

objectives not with their stock favourites.

Scope for growth

Alisa said that the need for professional advice and managed

accounts can only grow in tandem with the huge

growth of self-managed super funds.

“There are a lot of self-managed super funds (SMS-

Fs) that are set up but the trustees haven’t really made

the investment choices yet.”

One of the key areas of concern in SMSF investing is

portfolio construction and Honeyman believes managed

accounts can help better address that.

The last 12 months has certainly been hectic. Based in

Canberra, majority of her clients are either government

officials with Defined Benefit schemes or small business

owners running their own SMSFs.

“A lot of them are awfully busy. They work long hours

and tend to be more conservative and careful on what

they invest in.” Put another way, Alisa said her clients

are professionals in their field who also need professionals

to support them with their financial affairs.

Do they see the benefit of managed accounts? “Yes,

they value it. They certainly see the benefits.”

“Rather than being involved in the investment piece,

we’ve got professionals managing that service … we are

sitting on the same side of the table as our clients.” fs

Fitzpatricks has been implementing managed portfolios since

2002 and is one of the longest continuously serving individually

managed account (IMA) operators in Australia. The

group also started offering separately managed accounts

(SMAs) this year.

Case Study: From stressed to best-dressed

A few years ago, John Smith * was

close to retirement and was not sure

if he would have enough income and

capital once he stopped working. He

had become very stressed because

of his significant health issues and

financial worries.

When he approached senior

adviser Alisa Honeyman from

Fitzpatricks Private Wealth, he

already had a self-managed super

fund (SMSF) running with another

advisory group.

With the advisory group, he was

being called upon to make regular

investment decisions. This just

added to his stress because he felt

exposed and out-of-depth. Given

his poor health, he was also worried

about what would happen to his

wife, who had no interest in being

involved in the management of their

financial affairs.

John approached Alisa seeking

help for better management and

control of his financial affairs.

Following a lengthy discussion,

it turned out that John was not

comfortable with the SMSF or the fact

that he has to make regular individual

decisions on his investments.

With this in mind, Alisa

recommended a new financial plan.

His SMSF will be wound up and

replaced with a Wrap Super account

and a managed discretionary account

(MDA) service offering. Besides

addressing John’s concerns, the

solution was also a much more costeffective

option for him.

He started initially with $300,000 in

the SMSF and received a lump sum

of $300,000 from his defined benefit

scheme. He was also entitled to an

indexed pension of $65,000pa.

Under the new plan, John retired

on a comfortable income and

was extremely happy with the

professional management of his

investments. He likes the fact that

under a managed account, he can

still invest in shares directly, and be

the beneficiary shareholder of the

portfolio, but not be involved in the

day-to-day decision process.

Even better, his health has

improved. Alisa said, “He initially

came to meetings very tense but is

now relaxed and comfortable with his

overall financial situation and that if

something happens to him, his wife

will be looked after!”

John has now built up his assets to

just over $1 million. As for retirement,

that has to wait a little while: he is back

doing some consulting work and has

never looked back.

*

Name and some details changed for

confidentiality reasons

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