Why GAIA is a beacon of global fiduciary excellence

Financial historians will look back on 2018 as the year that trust in the Australian financial industry hit an all-time low. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has unearthed a catalogue of failings, conflicts of interest and unethical behaviour. For those who care about professional standards in finance, it’s hard not to feel a little depressed.

The good news is, however, that there is a growing contingent of financial planning business that are determined to do something about repairing the damage caused to the sector’s reputation.

It was in 2004 that a small group of evidence-based financial planning firms in Australia and New Zealand decided to set up a new association, called the Asset Class Investment Group. Ten years later, ACIG joined forces with a group of firms in the United States, and effectively became the Australasian chapter of a new organisation, called the Global Association of Independent Advisors.

GAIA now includes six firms in Australia and two in New Zealand.

I’ve been talking to principals of four of those firms — David Andrew from Capital Partners in Perth, Nigel Stewart from Stewart Partners in Sydney, Peter Mancell from Mancell Financial Group in Tasmania, and Jacob Wolt from Cambridge Partners in Christchurch.

I asked them about the history of GAIA, the values that its member firms share, and the part that GAIA is playing in raising professional standards in that part of the world.

Guys, how did all this start? What’s the background to ACIG and GAIA Australasia?

David Andrew:

Our home markets — both Australia and New Zealand — are dominated by major institutions, and it’s probably no different anywhere in the world. Those institutions have for ever been about their own products and conflicted advice and sales. So what we came together to do was to say, look, if we put the client at the centre of everything we do, and we actually made it about them, what could that look like? We’ve just been pushing each other for years to be better, and that’s why we exist.

The need for advice businesses to put the client’s interests first has come into sharp focus with the Royal Commission, hasn’t it?

Peter Mancell:

The Royal Commission pointed to some of the worst possible behaviours in the financial sector. Being a member of GAIA means that we’re not subject to any of those conflicts of interest. In fact, it’s absolutely outlawed. You can’t be a member of GAIA and have any form of conflict of interest. All of the member first act as true fiduciaries.

David Andrew:

What the Royal Commission has done is to peel back all the layers of conflict and bad behaviour of some of Australia’s largest and formerly revered organisations. Some of their behaviour has just been disgraceful. The contrast between institutional advice, which is conflicted, and client-focused advice that isn’t conflicted, has never been wider.

It was in 2014 that ACIG became part of a bigger organisation, the Global Association of investment Advisors. How did that come about?

Peter Mancell:

We’d heard about a group in the United States (the Zero Alpha Group) and we reached out to them. We also reached out to some firms in the United Kingdom and continental Europe, and today we have firms from all of those jurisdictions, and indeed our first member from South America as well.

So why did you decide to get together?

Nigel Stewart:

We felt we all had something in common. We were all evidence-based, and we all acted as the ever-vigilant custodians of our clients’ best interests. We felt that by getting together and sharing systems, processes and research, we could all assist each other around the world.

Tell me more about your commitment to evidence-based investing.

David Andrew:

The investment proposition matters to the extent that, when we build a financial plan for a client, they have an expectation, rightly, that any investment we put in front of them won’t let them down. They want to have the highest probability of achieving their goals. There are lots of different ways you can invest. At one end there’s speculation, which we believe is most of the industry. What we have a common belief around is a systematic approach, an evidence-based approach, that has been built on research by some of the best and brightest academics in the world. On the one hand you’ve got the choice of speculating, and on the other you’ve got this body of work that’s just been validated over and over and over again. Which would you choose? Really?

Jacob Wolt:

For firms joining GAIA, it’s a requisite that you achieve CEFEX — or Center for Fiduciary Excellence — accreditation or qualification. So CEFEX need to come and look at your business to make sure that you comply with global best standards.

How do your clients benefit from the fact that you’re GAIA members and have CEFEX accreditation?

Peter Mancell:

Whilst there another good firms that aren’t members of GAIA — there’s no doubt about that — the simple difference between GAIA firms and most financial advisers is that a GAIA firm will work for you. The advisers that work for the institutions are working for their shareholders. That’s the fundamental . difference. GAIA firms work solely for the benefit of their clients, and they have no conflicts of interest in their dealings with their clients.

Nigel Stewart:

What the client also receives is the collective wisdom of people in different jurisdictions around the world, and basically the client’s best interests are put first. That’s all shared amongst the members of GAIA, and it’s all made available to the client. You can think of it as the world-leading best practice.

Jacob Wolt:

The fact that we’re a GAIA member provides our clients with the comfort that it’s not just Cambridge Partners based in Christchurch who’s thinking about their situation. There’s a whole vast connectivity globally to enhance what we deliver to our clients.

Something that impresses, and perhaps surprises, me about GAIA, is how willing you all are to share sensitive information, including financials, with each other.

Peter Mancell:

Yes, the willingness to share among the group is really quite amazing, and we just continue to learn from each other. All of the firms’ principals have a commitment to never stopping pursuing better ways of doing things for clients, and the open sharing that happens in our meetings twice a year and our quarterly video conferences means that we’re learning from each other all the time.

What are the main things you discuss in these meetings?

Jacob Wolt:

The investment piece used to be very important, but I guess we’ve moved on from that. We’ve all got these very aligned investment philosophies, so we don’t need to have those conversations. It’s more about, how do we grow the business? What are the governance structures? What’s the organisational structure? Who should we appoint next? Another strand is the client experience. There’s a vast array of skill and knowledge and experience with different types of client from around the globe. So there are wonderful conversations about what member firms are doing, and we can take that back to enhance the experience for our clients.

Now that you’re working with firms from other countries — the US, Canada, the UK, Sweden, Switzerland and Chile — don’t you find that the challenges you’re facing are all very different?

David Andrew:

Not necessarily. You’d think we’d have quite disparate thinking, but we don’t. The clients’ needs don’t change across the different jurisdictions. Taxes do, and savings regulations do, but at the core of it you’ve just got humans with issues, and they need someone to talk to, and they want to have a life conversation. So when we come together, the commonality is extraordinary. We’re not arguing about the big issues. We’re talking about things at the margin. How can we make this better for people? How can we really make a difference in people’s lives?

How then would you summarise the benefits of GAIA membership from the advice firm's point of view?

Peter Mancell:

Firstly there’s the reassurance of knowing that what you’re doing does match up with world’s best practice. It’s wonderful to be in a room with firms, some of which are 30 or 40 years old, and seeing the way that they do things. And the second most important thing for us was that when we completed our CEFEX accreditation, we were able to get some pretty positive media and, the feedback from clients as a result of that media has just been wonderful.

David Andrew:

While the GAIA firms are financial advice firms and investment firms, the principals are also business owners. Anyone who is a business owner knows that that’s a complicated thing. I can tell you with certainty that there is not a problem that I will face as founder and CEO of my firm that I can’t solve by picking up the phone and talking to one of my peers around the world. That’s where sharing and collaboration just comes into its own, because I can start from scratch and try to find a solution from the beginning, or I can just ring a colleague in the US or the UK and say, what have you done on this? How can you help me? So it just gets me to the end point way faster.

Jacob Wolt:

I think as we evolve that other people in my business will also become involved in GAIA. For example, my general manager is running the business, so it makes sense for me to connect her with other CEOs and GMs within respective businesses, because they’re the implementers, they’re making the reality occur. So I think for us as a business the relationship with GAIA will just strengthen in the coming years.

Finally, as an association, where does GAIA go from here?

David Andrew:

My sense is that GAIA will evolve to become the standard. It will become the high watermark for the delivery of outstanding advice to families around the world. We can’t grow and grow and grow; that’s not our goal. Our goal is to work collaboratively to create excellence for the benefit of our clients and give other advisers a standard to aspire to.

You’ll find more information about GAIA on its website, and all the details you’ll need on CEFEX here.

There are currently 17 GAIA members around the world:

Europe

Bloomsbury Wealth, London, UK

BpH Wealth Management, Harpenden, UK

Lyra Financial Wealth, Sweden

Lyra Wealth, Geneva, Switzerland

Paradigm Norton, Bristol, UK

North America

Equius Partners, California, US

Plancorp, St Louis, Missouri & Tennessee, US

PWL Capital, Quebec & Ontario, Canada

South America

Capital Advisors, Santiago, Chile

Australasia

Alman Partners, Queensland, Australia

APW Partners, Victoria, Australia

Cambridge Partners, Christchurch, New Zealand

Capital Partners, Western Australia

Fowler’s Group, Queensland, Australia

Mancell Financial Group, Tasmania

Stewart Partners, New South Wales, Australia

Stewart Group, Hastings & Wellington, New Zealand