Getting over yourself: why joining a dealer needn’t be painful

Like most self-licensed advisers Charlie Karalouka was forced to rethink his business model as the reality of FSR hit home. After much soul-searching Karalouka turned in his licence and found a dealer to cure his compliance headache without the nasty side-effect of institutional control.

In mid-2004, Queensland-based sole practitioner Charlie Karalouka, 34, wound up his financial planning licence after four years and signed with Melbourne-based dealer group Financial Partnership. Karalouka’s decision was made after a long and thorough review of his business in light of the Financial Services Reform Act. It was a difficult decision he says, but necessary because it would’ve been “too expensive, too tedious and too time-consuming” to carry on under his own licence. According to Karalouka’s calculations, the cost of running an Australian Financial Services Licence is at least $80,000 a year with no guarantee everything would be done with “110 per cent excellence”. “Back when I had my own licence, our old compliance manager was ex-ASIC and her knowledge of the law was amazing,” he says. “I just couldn’t see myself running a licence, and making sure research and compliance plus the collection of fees and administration was all correct for less than $80,000.” From a shortlist of six, Karalouka signed with IOOF-backed dealer Financial Partnership. At first Financial Partnership’s association with IOOF concerned Karalouka who started life as a financial adviser with Westpac for over a decade followed by a short stint at the National. He was keen to join a smaller dealer with no institutional ties. “IOOF’s involvement swayed me towards other dealers, but I did a spreadsheet model of costs and looked closely at services such as IT, IT support and compliance, and I was impressed by Financial Partnership,” he says. “The dealer principals, including managing director Stuart Abley, were young, that is, below 40, and they had a lot of experience running a successful dealer. They didn’t want to grow the group too fast or get too big, but wanted to have a small business culture. It’s like I still have my own licence.” At the time Karalouka joined Financial Partnership in 2004, he also outsourced plan writing and paraplanning to third-party specialists SRW Professional. Previously under his own licence, Karalouka hired an in-house paraplanner and used IWL’s Visiplan software, but struck an arrangement with SRW principal Sharon Walsh for the provision of initial Statements of Advice (SOA). Karalouka’s practice Investment Central, which is located in Stonescorner, Queensland, primarily uses the Macquarie Wrap and its low cost mini-wrap Accumulator for personal super and investments, but supports the IOOF IDPS for corporate and employer super. Originally Financial Partnership badged a customised version of the IOOF master trust, but also offers a broad range of investment platforms and products. Macquarie may not be the cheapest platform on the market, Karalouka says, but it has the best range of investments and the service is “fantastic”. “The reason I stick with Macquarie is not because they are the cheapest but because they are the most professional. They have a level of understanding second to none and make very few administration errors.” Name: Charlie Karalouka Business name and location: Investment Central, Queensland Dealer name: Financial Partnership Number and designation of staff: 1 planner, 2 support staff Relevant Qualifications: CFP FPA member: Yes Number of clients: 100 Funds under advice: Approximately $30 million Method of fee collection: Combination of fee-for-service and commission Investment platforms: Macquarie Wrap, Macquarie Accumulator and IOOF IDPS. Investment research: Lonsec, van Eyk, Aegis, CommSec, Macquarie and Citigroup Wealth Advisers Front-end software: Proplanner for risk and database