Michael Harrison

Highly-respected business strategist and former Synchron Independent Chair, Michael Harrison, passed away in Melbourne on Sunday morning, 21 May 2023, after a long illness. He was 78.

Mr Harrison worked closely with Synchron from 2007, when he was appointed Synchron’s business strategy and marketing consultant. He then served as Chair from April 2011 until the sale of the group to WT Financial last year.

Long-time colleague and friend, Don Trapnell, said Mr Harrison made an enormous contribution to Synchron, and in many ways helped reinvent the business.

‘With his help, we transformed Synchron into one of the largest non-institutionally owned licensees in the country and a preferred dealer group for both younger advisers and our traditional network of older advisers,’ he said.

‘He was one of the main instigators of our ground-breaking NextGen bootcamp for young advisers and industry participants, and he went with me to the UK in 2015, to uncover the real story in relation to life insurance commissions in that part of the world.’

Mr Trapnell said he believes the findings he and Mr Harrison brought back from the UK informed debate on the issue of risk remuneration in Australia and helped shape the future.

Mr Harrison was also instrumental in Synchron’s legal battle against the State Revenue Office (SRO) of Victoria over the imposition of payroll tax on the earnings of financial advice practices that did not employ two or more people.

‘It was Michael who successfully led that fight, saving not only Synchron, but potentially all licensees across the industry, from a hefty payroll tax bill that could have had a profound negative impact on their businesses,’ he said.

‘He was not just committed to Synchron’s success, but to the ongoing success of financial advisers, particularly risk-focussed advisers. He deeply understood the financial services landscape and the drivers of change. I greatly respected his business acumen and will profoundly miss his friendship.’

In the early 80s, Mr Harrison established Australia’s first private bank. He also served three terms as Deputy Lord Mayor of Adelaide and, over the course of his long career, sat on government and private company boards, including the Australian Formula One Grand Prix.

Mr Harrison consulted to numerous clients including Citibank, the STAR Alliance Network, the Australian Competition and Consumer Commission (ACCC) and Zurich Financial Services, where, in 1997, he was charged with the responsibility of reinventing Zurichʼs Australian life insurance business.

He was also the author of three books, a Fellow of the Australian Institute of Management, and a Life Member of the Million Dollar Round Table.

Mr Harrison is survived by his wife, Pam, and five children, and will be farewelled at a private family funeral, as per his final wishes.

Mr Trapnell has prepared a video tribute to Mr Harrison which can be viewed via the following link:

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Michael Harrison

In its quest to further leverage technology for the benefit of its advisers, Synchron has unveiled a second smart phone app.

Called the Synchron Prof Development app, it follows on the heels of the Synchron Conference app launched last year.

Similar to the Conference app, the PD day app allows advisers to view and register for PD events, see the agenda, see who amongst their peers is attending, scan attendance details, give feedback on speakers and complete polls during the event. It also automatically allocates continuing education credits to advisers who attend.

Synchron Chair, Michael Harrison, said the launch of a second app demonstrates Synchron’s ongoing commitment to using technology to continue delivering value to its network of advisers.

“Any technology we develop or embrace must pass the Synchron smart test,” he said. “This means it must increase business efficiency, solve a business problem or in some other way improve life for advisers and/or their clients. We are big fans of technology but this is the lens through which we look at it.”

The Synchron Prof Development app passes the smart test because it helps advisers prepare for PD days ahead of time, makes giving feedback an easy process and automates the collation of education points.

The app can be downloaded from the Apple App Store or Google Play.

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Michael Harrison

Synchron’s drive to best leverage innovative technology has seen it launch its inaugural event app for advisers.

The event app operates as an informational and functional tool which enables advisers to view and register for events, scan attendance details, rate content, communicate via social media and more. Plus, it automatically registers CPD points based on attendee data entered.

Independent Chairman of Synchron, Michael Harrison said this is the first step into a new world of innovation to ensure we continually deliver value to our network.

“We are excited about delivering an app that provides advisers with the tools they need to manage their upcoming events. And we look forward to including further enhancements down the track such as implementing augmented reality, presentation videos and more.

He said when Synchron looks at any tech capability, it asks how this technology can improve life for advisers and or clients.

“It is this dual quest to help advisers and clients thrive that pushes us forward and already has us exploring further apps to assist with business processes for advisers and money management topics for their clients.”

In this year’s Federal Budget the Government announced its commitment to establish Australia as a leading global financial technology (FinTech) hub, positioning our FinTech industry as a world leader.

This objective will build on the progress achieved across the industry to date and encourages individuals and businesses to innovate through greater collaboration, further develop required talent and skills, improve access to capital and support entrepreneurship.

This innovation is something that Harrison believes is integral to the future of the advice industry.

“With innovative technology such as artificial intelligence, medical tools, 3D printing and more disrupting most industries, it is inevitable that Fintech will alter the advice industry at a fundamental level. Advice businesses that adapt and employ this innovation within their businesses will be the ones to thrive moving forward.”

Monitoring not only FinTech development but all innovation is a priority for Synchron as they aim to both understand their potential business impact and explore how to capitalise on ones that may be of value to advisers and clients.

“Currently there are five main innovation pieces we believe will make a material difference to the way advice businesses operate. These include voice technology, which will lead to the creation of voice controlled products, BlockChain an overseas development that prevents data hacks, 5G which will far surpass current NBN capabilities and finally, virtual and augmented reality which will not only enable clients to view a different world, but to place themselves within it,” said Harrison.

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John Prosser

Leading non-institutional licensee, Synchron, has scored a significant win for Australian financial services licensees on the issue of payroll tax.

Synchron Director, Don Trapnell said the State Revenue Office (SRO) Victoria had assessed that Synchron was liable to pay payroll tax in relation to the commissions and fees it collects on behalf of some of its advisers. “The SRO’s assessment was that authorised representatives who do not employ two or more people are considered employees or relevant contractors for payroll tax purposes,” Mr Trapnell said. “The implications for Synchron and for licensees across the industry were enormous.”

The assessment meant that potentially all licensees would be liable to pay around five per cent payroll tax on the gross revenue of these authorised representatives, backdated seven years. “It would have meant a huge tax bill for licensees and had the potential to send smaller licensees broke,” Mr Trapnell said. “In effect, the SRO was trying to apply payroll tax in relation to the smallest of small businesses – advisers who have just started out, or those who choose not to employ anyone.”

While some other licensees had decided it would be easier to settle, Synchron felt an obligation to contest the SRO assessment. “As a substantial licensee, we felt we had an obligation not just to ourselves but also to the industry not to blindly accept the assessment given to us,” he said.

Synchron argued that its legal obligation to collect fees and commissions on behalf of authorised representatives, coupled with the fact that Australian financial services licensees are also legally required to provide other functions such as compliance, education and training, meant these authorised representatives were not employees or relevant contractors for payroll tax purposes.

In February 2014, Synchron requested the matter be referred to the Supreme Court and supplied significant documentation arguing its case. The matter was set down for trial in February 2017, however on 1 June, Synchron’s lawyers forwarded a letter from the SRO Victoria stating:

‘The Commissioner has determined on the basis of the evidence presented by your client that your client is correct, to contend that the arrangements between your client and its authorised representatives are not relevant contracts for the purposes of section 32 1(B) of the Payroll Tax Act 2007.’

According to Synchron director John Prossor, “We believe that’s the correct and just outcome from this matter, firstly for Synchron and for its authorised representatives, but also for the industry at large.”

The situation arose following the Harmonisation of Payroll Tax in Australia which saw the removal of a NSW exemption for authorised representatives of Australian Financial Services Licensees. “When the exemption was removed, the prevailing view was that it would have little causal effect,” said Synchron Independent Chair, Michael Harrison. “In reality, as soon as it was removed, the SRO jumped on the issue.”

Mr Harrison said the situation is also an unintended consequence of the Corporations Act which Synchron lobbied to have changed in 2014. “We teamed up with law firm Lander & Rogers to push for amendments to the Corporations Act which would allow financial advisers to receive payments directly from product providers,” he said. “Payments for advisers must be paid by clients to licensees who hold the money in trust for their advisers. We have seen two examples in our industry of licensees who went broke and liquidators took money owed to their authorised representatives because the licensees had no facility to hold that money in trust. It is one of the reasons why we pay our advisers daily.”

In a case spanning five years and costing Synchron more than $500,000 in legal fees, Synchron campaigned heavily on the issue, approaching industry bodies and prominent politicians. “Despite earning the sympathy of some high profile Ministers, politicians were unwilling to take any action that would impede the collection of state payroll tax,” Mr Harrison said. “We were largely on our own.”

Mr Harrison said the SRO’s assessment also ran counter to the Australian Government’s desire for business modernisation. “In today’s world advisers don’t have the same need to employ physical staff,” he said. “They use software and virtual assistants such as paraplanners who work within other organisations to do many of the tasks required in a financial advice business. The way we do business has changed with the times, but with its focus on the number of employees within a financial advice business, the SRO did not recognise this; it did not recognise these businesses as small businesses in their own right.”

Synchron sent a video on the issue to its authorised representatives on 9 June, 2016. It can be viewed at the following link: http://www.youtube.com/watch?v=b6nPWdFwY5M

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Peloton Partners launched to add value in succession planning.

Three  experienced financial industry advisers have launched a new specialist consultancy group aimed at helping wealth management advisers extract full value from their businesses.

Peloton Partners has been established by its three key principals, Rob Jones, Michael Harrison, and David Murray, who between them have more than five decades of direct experience working with institutions at various levels as well as financial planning and accounting businesses both large and small.

“Currently, many wealth management firms are not extracting the maximum value from their businesses mainly due to the inefficiencies of the existing model,” said Mr Jones. “Additionally, many feel disappointed when selling or merging their businesses because they do not feel the true value of their business has been reflected in the sale price.”

“We work with our clients to ensure they have the right game plan and effective tools for change to maximise their value and performance as part of either a long-term growth plan or in readiness for the potential merger or sale of their business.”

Peloton Partners uses a proprietary tool,  ifocus^TM , to review the current state of each individual wealth management business and identify what needs to be done to unlock specific opportunities for expansion or create competitive buyer tension.

“We have been through the succession and sales process many times ourselves and appreciate the effort, risk, emotion and cost involved,” said Mr Harrison. “Using our extensive experience, we help clients achieve outstanding results by ensuring they fully understand their business and therefore, its true value.

“This process gives our clients the choice of selling their businesses on their terms and conditions or continuing on with a revamped, more efficient and valuable business model.”

Since Peloton Partners was launched, it has reviewed and advised wealth management businesses with a combined total of $1.42 billion of Funds Under Management, an average tenure of 13 years, total revenues of $16.87 million, and close to 6,000 clients.

Some of the key issues identified by Peloton Partners include;

• Normalised profits needing to be 20% higher in order for the business to be sustainable;
• Annualised revenue growth needing to be at least three times greater;
• Inefficient use of IT platforms to give clients secure, reliable access to markets;
• Majority of the debt relating to over-priced book acquisitions which have not been properly integrated;
• Revenue being reasonably well diversified but was not strategically targeted; and
• Average advice fees being 0.6% which is materially lower than the target benchmark of around 1% of funds managed or equivalent fixed fee
• Segmentation of clients based on total fees charged rather than profit derived.

According to Peloton Partners, the total ‘un-extracted’ or ‘latent’ bottom line value assessed within these businesses was $2.7 million in EBIT uplift, which equates to nearly 50% of the total aggregated EBIT these firms are currently producing.

“Our estimate was that the changes we recommended would take between six and 36 months to implement,” said Mr Murray. “Given the average business tenure of these clients is 13 years, ranging from a start-up through to 25 years in business, this is a relatively short period of time to substantially improve the bottom line and overall business.”

“The impact of ongoing increased cash earnings and capital value is significant and dwarfs the cost of implementing our recommended measures,” said Mr Jones. “We are confident the individual firms can achieve on average at least 80% plus of the value uplift ascribed to them after specific risk factors have been applied to the firm.”

The key message from Peloton Partners is that wealth management firms need to look inward before looking outward.

“Resetting of their existing business model and fully extracting value from it should be their only priority before embarking on new business opportunities,” said Mr Harrison. “The end result will be wealth management businesses that are ideally positioned to deliver tomorrow’s services at the right price to the right clients while also adapting to changing industry and market conditions where necessary.”

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Speaking at the Association of Financial Advisers (AFA) road show in Sydney last week, Mr Harrison said that any investment in technology must either improve the efficiency of the practice or generate more business or both and on those two counts, a number of tools currently available
stack up as “absolute winners”.

Tools that make Mr Harrison’s list include:

1. Dragon – speech recognition software available for PC, Mac, Blackberry or as an iPhone app. The suite of Dragon products is described by the manufacturer (Nuance) as being able to turn talk into text faster than most people can type. Dragon products also allow users to
   operate their computers by voice command. “There were teething problems with earlier editions,” Mr Harrison says, “but recent versions are really very good.”
2. Eco Smartpen – essentially an ordinary pen for note taking combined with an audio-recorder – meaning users can take notes and record conversations at the same time. Manufactured by Livescribe, the latest version has a USB port which can be used to transfer notes and
   audio to computer while recharging. “It’s brilliant,” says Mr Harrison, “because it will replay what was said at the point the note was made. It’s one of the best compliance tools around because it gives advisers the ability to attach an audio recording of a client interview to a
   PDF record of the notes taken during the interview and download them to the adviser’s computer.”
3. Call Recorder for Skype – many advisers, particularly those in regional areas, are already using Skype to take advantage of free audio and video calls to clients. Video conferencing is also possible with Skype. With the introduction of Call Recorder, Skype calls and conferences
   can be recorded and stored on the adviser’s computer. “And that,” says Mr Harrison, “Is another tick in the box – advisers can have a face-to-face record of client interviews for compliance purposes.”
4. Cloud computing – now available from many services, but according to Mr Harrison, Dropbox could be the pick of the bunch because it allows a number of devices to sync automatically. “Cloud computing is fast becoming the solution advisers can’t live without
   because it allows them to access and edit office files via an internet “cloud” any time, anywhere. Back in the office everything syncs with everything else – without anyone having to plug anything in or lift a finger.”

Mr Harrison said there are lots of technology solutions available in the marketplace today but before spending any money on any technology, advisers must ask themselves two questions.  “The questions are: ‘Will this make my business run more efficiently?’ or ‘Will this tool generate more business?’ If the answer to both these questions is ‘no’, then it’s not a business tool, it’s a toy.”

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