This follows hot on the tail of Nick Samios’ blog on the ‘Business Spectator’ site where he comments on certain recent comments that were made at the Turnaround management Association launch of the Certified Turnaround Professional course, indicating that Banks are now seeking to avoid formal appointments where possible. This certainly indicates that there are finally some steps being made to be more pragmatic and realistic about how these situations are approached. Alas this is not always the case and there are certainly instances where the trusty ‘knee-jerk’ is made in the undying faith in the information known to the bank only to find that all that they have achieved is to actually worsen their position.

Unfortunately there is a clear indication that the desire to positively resolve situations increases correspondingly with the debts visibility on the Banks bottom line. At least it is a single step forward in the right direction and I take my hat off to those who are proactive in this area.

In terms of the US Banks steps, again I applaud the banks intent of endeavouring to ease a very stressful time for some of their customers. However it provides at timely reminder that people in financial difficulty should not consider temporary hiatuses as a solution. If they are having problems then confront them, and take control of them. Essentially by being proactive and doing something to resolve them. The longer the problem goes on the more it hurts and the harder it gets to fix.

May I also take the opportunity to wish everyone the compliments of the Festive Season and a Happy, Safe and Prosperous New Year.

With less reaction but with similar notification and reporting the Senate has also subsequently announced its own Senate Investigation into the insolvency profession and the dealings of the various parties involved with it.

We have recently managed to manoeuvre through the GFC quite well in comparison to other companies but as I have said in other articles our hurt may well be yet to come so it is a poignant time to consider how the system should operate.

Let us hope that what goes on does not only look at what has gone on but also focuses on how this industry should be directed in the future and let’s hope that it’s the creditors that are at the forefront with the focus on substance over form.

Interestingly, the increasing of interest rates will almost certainly be the true test of economic resilience.

The impact of the global financial crisis was only mildly felt in Australia. The RBA’s systematic approach of cutting interest rates was largely responsible for keeping the country afloat, with Australian businesses remaining fairly steady.

Rates will need to rise in 2010 in order to prevent increased inflation. Therefore Australian businesses will need to ensure that they are prepared for the aftermath of these rate hikes.

Due to this, many businesses that are highly geared will be exposed to greater risk associated with the interest burden that they will be required to carry into the near future.

Furthermore with the increased interest burden there will be a reduction of available funds in the market, so Australian businesses can expect some curbing of general expenditure. This will certainly hit businesses associated with discretionary spending first.
Therefore with interest rates on the increase, people should plan to

* retire unnecessary debt
* replace debt with equity where appropriate
* dispose of unnecessary or surplus assets and use this to reduce debt
* increase and improve stock (inventory) and debtor management
* establish (if not already done so) and maintain an accurate cash flow plan.

By following these simple tips and remembering that cash is king you’re already ahead of the pack.

One of the most important lessons to be learned from this crisis was how some businesses maintained staff when others did not.

During difficult times, those in business always look for ways to save costs in an endeavour to maintain profitability. While this is important and necessary for business survival, it is crucial that it is done in the right way.

One thing that those in business can rely on is that over time business will ebb and flow, or in plain speak – it’s either boom or bust.

Regardless of what the state of the nation is, it is always important to maintain a reasonably steady, competent and positive workforce.

This is even more important during difficult times. Therefore I’ve outlined some key things that you can do to protect and preserve your most important asset in the workplace – your staff.
My personal tips are:

* Get rid of unnecessary (in both the staff and management’s eyes) and wasteful expenditure, the message being that it is better to preserve jobs
* Maintain a positive but realistic approach to the future, i.e. you are not off with the fairies but nor are you Chicken Little – the sky will not fall in tomorrow
* Keep staff informed
* If redundancies are necessary – do them in one go, as this will show staff that they are now over. Also do them on a Monday morning so that the staff have the rest of the week to start looking for something new
* Build a team not a hierarchy
* Remember that you are part of that team – you cannot be a leader without a team to lead
* While it is nice to show an interest in personal issues remember to focus on the basics i.e. the business
* Be as caring with family tragedies and genuine illness in the bad times as you would in the good. Everyone will remember
* Continue to seek out positive solutions that suit as many as possible.

If you follow these tips, you can be sure that you’ll get the best out of your employees and that your business will enjoy a healthy retention of staff.

Therefore this time I think it is important to explore what you should do if it wasn’t possible to sort things out before an appointment was made.
So if you have now found yourself in this situation it is critically imperative that you:

* make every effort to cooperate
* be honest with the information that you provide
* seek out independent advice if you believe that some of the things that you have done were possibly not appropriate
* endeavour to research your appointee and establish how they operate
* don’t panic as it is not worth it – for the average person jail will not be on the horizon
* work towards closure of the matter – get in, get it all done and get out – prolonging the matter only causes everyone grief.
* don’t make promises that you can’t keep.

If you’re dealing with a company situation where the end result could be personal bankruptcy, it is extremely important that you seek out both appropriate and independent advice. This way you can sort out your problems early and move on with the rest of your life.

After thirty years in this business I can tell you that you will recover and learn from the experience. You (and a number of others) have probably spent a lot of money on this so make sure that you get value for it.

I can assure you that in these situations reality truly strikes when you are contacted by an appointee, so you can’t bury your head in the sand!

While many appointees are decent people, some have an approach and method that leaves much to be desired. This can be from an impolite and unprofessional approach to making demands that while achievable may not be correct or appropriate for the circumstances at hand.

Seeking additional advice at this juncture simply adds a further burden of cost to the matter. This often isn’t ideal as the person involved is usually already struggling for funds.

Like most things in life, the old saying “prior preparation and planning prevent poor performance” rings true. And it will certainly improve how you cope with the situation ahead, both mentally and financially.

Regardless of how bad you perceive the situation to be, take positive action and deal with it, do not wait for someone else – like a rampant creditor — to take control.

By listening to and following an expert you will know that you are dealing with someone who is rational, compliant with the legislation and can communicate reasonably.

This blog entry generated much debate – debate that is similar to what we need to generate when it comes to turnaround professionals.

Read on to see the initial article and the debate that followed.

Making financial planners professional

ASIC has recommended to a parliamentary inquiry that commissions, volume bonuses and fees based on a percentage of funds under management should be banned.

What grabs me in this AFR front page piece is that in addition to the abolition of commission etc, ASIC also recommends that financial planners be given a fiduciary duty to act in the best interests of a client. I think it would be fair to say that most users of financial planning services would be amazed to find that this is not already the case. Although anybody following the Storm debacle would know that this critical and “taken for granted” principle is certainly not being universally applied.

Financial planners should be trusted advisers in the same way as a doctor, accountant or lawyer. So what is needed then? The professionalisation of the industry.

Now I know many financial planners would be affronted at the suggestion that their industry is not already professional. However until the unsophisticated retiree (living in Townsville?) can walk into his or her financial planner fully confident that his or her financial needs are coming first second and third (and certainly well ahead of the financial needs of the adviser), true professionalisation has not been achieved.

What do lawyers, accountants and doctors have in common that make them eligible for “trusted advisor” status? University level qualifications, some kind of “internship”, and professional affiliation are three things that spring to mind.

And yet, to become a “Certified Financial Planner”, the prerequisites of entryinclude a relevant university degree, and one year of “appropriate relevant” experience.

So what is the obstacle to financial planners attaining the same “trusted adviser” status of other professionals? It has to be the remuneration system.

FPA CEO Jo-Anne Bloch is quoted in the AFR as saying that the abolition of fees based on “funds under advice” will result in the “profession’s” loss of viability.

How do doctors, lawyers and accountants remain viable I wonder? These professionals bill for their time – a rate that varies according to their level of expertise, specialisation and experience.
Is there any valid argument as to why financial planners should not seek viability for their own profession on a similar basis?

This article drew an immense response. Business Spectator was inundated with feedback from both sides, which resulted in Nick writing the following reply on his blog…

A financial planner hits back

I knew that I would be touching a raw nerve when I raised the issue of professionalism in the financial planning industry yesterday.

I received this very illuminating response via an email from a Senior Financial Planner who’s identity I will preserve. Its insights make it well worthy of sharing with you.

Dear Nick,

I have read your article posted on the Business Spectator website and would like to give you some feedback if I may.

I read with distress every article bashing financial advisers and while I am the first to say there are many cowboys, there are also many good ones who do not deserve this witch hunt. I would like to point out some issues.

1) Many financial planners do not have any tertiary education at all
2) The current degree prerequisite for those wanting a CFP has only very recently come into play
3) Most advisers do not even have the CFP qualification.
4) The majority of older planners were given the CFP on a platter with minimal requirements – the standards have slowly been lifting only last few years

Doctors (GP’s) charge approx $10 per minute and charge for time facing the patient (that is why most appointments are only 10 minutes so that they can squeeze as much revenue as possible). Financial planners do 80 per cent of the work behind the scenes including compliance, implementation, strategy and due diligence. Other specialist doctors charge exorbitant fees which are certainly not time based.

Lastly, it is scary that ASIC are prescribing what not to do, instead of what to do. Their expertise is not in this area. Off the record, while ASIC has a good reason d’etre, in reality they have next to no expertise, particularly in the financial planning arena and are overtly hostile.

The main issue is not in the charging (although this should be addressed as a separate issue and in particular how it relates to conflict of interest) but, as you alluded to, capability and standard. Add to this integrity and you have a good adviser. The problem in the financial planning space is not fees as this can be manipulated and abused as in any other business but rather having a consistent minimum standard and not such extreme variance in capability.

Would be interested in your feedback.

Regards
Senior Financial Planner

OK, so here is my feedback:

Firstly, the comments on ASIC are interesting – and Alan Kohler today has pointed out ASIC’s tardiness on this issue.

Secondly, you have identified the issue of “minimum standards” in the industry. I can only say that it must be extremely frustrating for those financial planners who have taken the time to study at tertiary level and put themselves through an accreditation process to be painted with the same brush as the “many” who have no tertiary education and who have not bothered to become certified.

Thirdly, I note with interest your point that “of older planners were given the CFP on a platter with minimal requirements”. “Grandfathering” is usually done for political and promotional reasons – was it really so poorly handled for CFP’s? If so, that is a shame and just another obstacle the true professionals in the industry obviously have to grapple with.

Finally, my sincere thanks for taking the time to write and for sharing this perspective and for furthering this important conversation.

From here, I decided to add my opinion as this issue is something that we are currently looking at with relation to Turnaround professionals.

Below you will find the email that I sent to Nick Samios at Business Spectator . . .

Hi Nick

Very interesting,

I have had some interesting discussions within the profession re the Financial Planners and let me open with the fact that there are some FP’s that I have a lot of respect for. However when issues surrounding the profession are raised many of them make the same comments. May I please respectfully pass on the following observations?

1. Prior to the demise of the insurance industry as a result of the introduction of compulsory superannuation there was a fledgling profession of financial advisors which were in the main, if not entirely, independent players.
2. When the life insurance trade collapsed (being replaced by super) the significant players i.e. the big institutions were not willing to allow such a loss (as you would expect) to any other party and immediately stepped up a process to become significant players within the new industry.
3. In this move they ensured that their many insurance agents and advisors (salesman) would be legitimate and protected players within the new environment. Thus a system was created that essentially critically linked most if not all advisors to the suppliers (the insurance/finance companies) and also grandfathered in many unqualified and inexperienced (in broad financial planning terms) players that your friend refers to. It also ensured that the basis of remuneration would remain in the same manner as their “advisors” had become accustomed to, i.e. commission based.
4. The FP profession as it then was, stood back and did nothing; some say they were actually quite happy with the likely ultimate result (a controlled market with high rates of return).
5. The major players then ensured that the ability for anyone else in the system to challenge what an FP said was severely curtailed. The most significant industry impacted in this move were the accountants who had no idea what was really going on until it was all too late. Hence the major issues raised about incidental advice. I was even taken on by a FP over advice I gave to someone who was a director of a collapsed company and who was on the verge of bankruptcy. The professional FP’s supported this stance.
6. Your friend relates his story to the local doctor, it is a very good analogy. When I am sick I go to the doctor, he/she looks at the situation makes an assessment (including referrals) and provides a solution which is conveyed in plain English in simple terms and I leave with a clear understanding of my predicament and the planned solution and that it was the doctors advice (I do accept there are occasions when this does not happen). When I see a FP I end up with a document that is virtually the size of a phone book, full of disclaimers and saying at the end of the day that its ‘my call.’ I do understand that much of this is legislation but the FP profession did nothing to prevent the situation from getting to the point that it did. After all such a document would clearly support the significant commissions that they were receiving and don’t forget that many of the advisors were actually tied to the vendors of the products that they were recommending. Any question for the need for independence was completely ignored!!
7. Around this time some of the other players were now actually concerned that they had actually missed the gravy train and were seeking to try and get back on. This was evidenced at least by CPA Australia’s once desire to establish its own license, something that I fought passionately against.
8. We now have a system in turmoil because no one thought the process through at the start.
9. To relate this now to our own situation at TMA we must first accept a simple fact: – “Financial Planners are like solicitors and Turnaround specialists are like accountants” What do I mean? In the first case they have legislation in essence protecting their role and name, the latter do not.
10. Since the advent of the GFC (or any other buzz title you wish to give it) I have been inundated with an amazing number of approaches from so called ‘turnaround specialists’ who want to link with me or provide additional services clients that pass through my door. Some have been true professionals, but some have also been nothing more than con men seeking to strip all stakeholders of assets by disguising pure phoenixes as turnarounds.
11. If the TMA does not seek to grab as many of the true professionals and bond them to the organisation and in the process make significant and constructive noise to the legislators on how our industry must be molded then we will not stand at the forefront of a profession, but merely as semi-legitimate minority amongst a sea of charlatans.
12. If you don’t agree then look at the pinnacle status that one financial professional recently took the IPAA to, imagine how the world might be different had the IPAA taken action against this member’s mentors all those years ago when a large part of the profession were actually raising concerns.
13. We as the foundation builders of our profession in Australia should seek to welcome and entice the majority and be prepared to set a standard and to remove those that cannot maintain that standard. Failing to do so I suspect will only leave the true and positive development of the profession as an event that will only occur many years into the future.
14. We will move out of this cycle sooner than many expect so we have an opportunity to effectively situate the profession well prior to the next market correction, which according to many pundits will be the true and fundamental correction.

As you can see debate is very easily generated when it comes to contentious issues such as industry professionalism.

Blogs are certainly an outlet that can be used to generate much discussion and debate. Therefore be sure to follow my blog here at condon.com.au, as you never know what you’ll discover!

Until next time,
Schon.

For some employers it has been simple — they have taken the bull by the horns and simply restricted access to the sites or only made them available during a certain time periods each day (usually lunch time).

However for those employers allowing their staff to have free reign when it comes to accessing the internet, it has been reported that staff are spending as much as 40% of their time aimlessly visiting sites like Twitter or Facebook.

The fundamentals of this whole issue are that this is really not something that can be tolerated or accepted. If an employee was to add 40% to the price of a product with the intent to pocket it for their own gain there would be hell to pay. The words fraud, con artist or some other relevant unpleasantry immediately spring to mind.

Therefore companies need to take decisive steps to prevent their employees from wasting time on non income producing activities (albeit time is effectively included into the product or services retail value).

Those businesses that want to be fair to their customers as well as ALL of their employees will take significant steps to control the problem, either by restricting access completely or only allowing it for a specified time throughout the day.

However those companies who allow staff free reign are far more likely to run into financial problems later on. This is because their competitors who restrict internet access will be able to get the most out of their staff during business hours, rather than having them waste time and money on staff that spend a large proportion of their time updating their social networking status.

From an OH&S and Human Resources perspective, a variety of psychologists have also raised serious concerns relating to the long term impact that such sites are having on the current generation of youth.

Finally, there are also the possible ramifications of liability for the business that may arise from one employee making an untoward or inappropriate comment about someone else (employee or not).

I can quite easily go on but it certainly appears easier and safer to simply get rid of social networking from the office altogether!

The client thought that negotiations were going well, he felt that he would be able to pay the large corporation on his own terms. He was wrong. The lawyers were simply talking to him to establish his situation so that they could commence bankruptcy proceedings against him.

This client is now bankrupt, as the corporation went to court to seek the money back that they were owed. While this may seem ruthless, they had the legal right to do this. It is therefore imperative that you take responsibility for your own actions, otherwise you too could find yourself in the same situation.

If it looks as if legal proceedings are about to commence against you — or have already started, you mustn’t take matters into your own hands. You need to seek honest and independent professional advice from a lawyer.

A lawyer can deal with a corporation’s lawyers head on. They have the experience and will know your legal rights. You wouldn’t perform heart surgery on yourself, so why take legal matters into your own hands?

Fight fire with fire.

If this sounds like your situation, feel free to call me on 02 9893 9499.

What never fails to shock me is the number of IP’s who are willing to act in such a capacity.

This week, I want to expand on this further. I see so many people come through my office doors broke, yet can find the funds to pay a variety of advisors, who then leave them worse off.

The best piece of advice that I can give to people who are in financial trouble is to be honest from the outset with your insolvency expert, this way your case can be resolved without any hidden surprises, or more importantly, extra costs.

If you’re not honest, you’re guaranteed to be caught out in two ways:

1. You’ll potentially end up paying more than what was initially quoted by your insolvency expert, and/or
2. The other advisors you seek out won’t always tell you the truth if they are simply fee focused. You’ll also end up having to pay your insolvency expert on top of the fees you’ve been charged by the so called “experts” that you sought out.

One thing is for sure, the two above mentioned points are guaranteed to cost you both time and money.

The most common external advisors I see people seek out are the people who pretend to be professionals. Often these “professionals” are simply sales people who will promise the world, but deliver nothing.

I find when people are under severe financial stress, they only hear what they want to hear and often that is all these snake oil salesmen are able to deliver. They don’t deliver real advice.

So for my real, honest and independent advice — stick to the good turnaround and insolvency professionals. They’ll provide honest and independent advice, that’s far better than worthless advice that costs you a fortune.

If you’ve found yourself in financial trouble, feel free to call me on 02 9893 9499.

Over the many years I have been involved in this industry, one thing remains the same — people who go broke usually don’t have much when it comes to assets, especially assets of value.

Yet, one thing that has all of a sudden changed is the number of “broke” people who supposedly can’t afford to pay their commitments under the bankruptcy or liquidation yet are able to fund a barrage of experts or purported experts to assist them in not meeting their commitments

One of the interesting factors is the number of IP’s that are willing to assist in these circumstances.

If you find yourself in the situation where you need the help of a trustee or liquidator, my first piece of advice is to be open, honest and frank in your dealings with them. There are always solutions to problems and the process is meant to protect both sides — so be honest!

So be sure to rely on the processes that your trustee or liquidator has in place, and work with the people charged with the responsibility of dealing with the situation to ensure that it is resolved in the fastest possible manner. Where the trustee or liquidator is not acting appropriately there are various avenues through which complaints can be lodged.

Always remember — the truth makes a bitter pill easier to swallow.

Presumably when Brown launched his legal action, he took some time to estimate the risks, however like many clients I see on a daily basis, probably never thought that his legal costs could ultimately lead to a massive financial hit — for some people, it even results in bankruptcy.

Launching legal action when one is wronged is something that many Australians do. However, this can be a VERY costly exercise which results in the aggrieved party looking for ways to cover their legal costs.

One common method of payment that people consider is the ‘no win / no fee’ option that some legal firms offer. This is where you take your case to court, and if it isn’t successful, you are not liable for payment.

As the average person does not have the funds to fight a legal battle, this may seem like a great way to ensure a preservation of one’s savings. Alas, while this may appear like a good idea, all of the ramifications must be considered.

If you win — fantastic!

If you lose — then what? Over the years I have had many clients who, while they don’t owe their solicitor any money, receive an adverse costs order against them that is so big that it has decimated all of their savings, resulting in bankruptcy.

So my advice is quite simple — always analyse the situation first, and seek out appropriate advice from someone such as your accountant.

Finally, ask yourself one question — is it really worth risking everything for legal action that may cost more than its worth in the long run? If it is, good luck!

It’s funny you know, over the years, no matter how often I’m a panelist or key note speaker, I always get asked the same question first – when do you get a turnaround/insolvency specialist involved, I understand it needs to be early, but how early?

As much as I’d like to say it is when you miss your first BAS, or when you bounce your first cheque, there is no definitive answer. Yet, in terms of franchises, there are three signs to look out for:

1. when there is a consistent negative trend that the franchisor and the franchisee are unable to identify a method of rectification for,
2. when an event of significant financial or economic loss occurs, or
3. when there is a breakdown in the relationship between the franchisor and the franchisee.

If any of the above three points apply to you, it is imperative that you make sure that you consult a turnaround/insolvency expert who will proactively and responsibly advise you on how to best rectify the situation.

The best possible news that you can receive in this situation is if you are advised that there is a way out that you can actually control yourself.

However, if the meeting results in the development of a turnaround strategy, then surely it was not too early to seek advice and the whole approach has been proven correct.

Yes I acknowledge that there are some unfortunate advisers who only know how to say ‘liquidate’, but surely the point is to get good advice early – not bad advice late.

Also, remember that trading while insolvent does not start when you don’t have any money left, it starts when you begin making decisions that leave you without money.

If you believe that this applies to your franchise call our office today on 02 9893 9499.

While it’s important to take action early, the problem is that they didn’t receive the right advice. This has meant that they haven’t dealt with the problem properly and they are now worse off.

There are two main reasons why this occurs:

- increased downturn
– incorrect advice from an inexperienced “expert” who sold them a product for price rather than to fix the problem.

Having been in this industry for over thirty years, I find that a business that is losing money each month will not be cured with a VA. While a VA may be needed, it is best that this is done in conjunction with other remedial action to both curtail and fix the loss. For example, closure of a plant, branch, line, product or some other significant change.

Furthermore, if you can’t pay your bills because you have all of your long term plans on short term leases, you certainly don’t need a VA to rearrange the businesses funding.

I have seen so many people make so many unnecessary and costly mistakes over the years. Seeking professional advice is most definitely the key.

I do warn though, that taking action is costly, and in a distressed state you are likely to only have one chance, so it is important that you make the right choice.

Remember what’s important is that you open both your eyes — to see what is ahead — and your ears — to listen to the advice that you are given. Therefore you’ll be told what you MUST KNOW not what you WANT TO HEAR — no matter how bitter the pill is to swallow.

If this sounds like you or your business, it’s time to take action. Call our office today on 02 9893 9499.

Dealing with people in financial distress is not necessarily a simple process. It is often driven by statute, however the actions of the individual or business involved can make it extremely difficult to resolve.

Often people won’t take action soon enough, they’ll sit on their hands or bury their head in the sand, as they believe that they can solve the problem themselves.

Occasionally this is true, but usually it isn’t. If the situation isn’t dealt with immediately, it will continue to fester, grow and the issues will certainly become more complex.

This means that rectifying the problem will become harder and take longer, and removes alternatives that may have been available earlier.

Other parties such as lawyers will also need to get involved, therefore increasing the overall cost of getting back on track – costs that could have been saved had this been dealt with earlier.

So what’s the common theme here? — delay. Delay in acting in your own best interests will cause you more trouble. Delay will cost you more money. Delay won’t benefit you at all.

However, it’s not always too late. By taking action earlier and more often, costs can be saved and all stakeholders can get a better result.

A word of warning though, when you do act earlier there are more assets available. Unfortunately this means some unscrupulous practitioners will lose sight of resolving the problem in a way that maximises the return of all stakeholders, to benefit their own bottom line.

If this sounds like you or your business, it’s time to take action, call our office today on 02 9893 9499.