For super funds and their advisers

Continual learning and the human aspect of advice

Michael Loizou

Michael Loizou… ‘clients stick around because they trust us to help them’

Experienced financial planners usually develop their own network of advisors, for technical advice, business advice, general advice and just, really, to compare notes. According to Michael Loizou, the founder and principal of Capital Results in Sydney, it’s all about learning. He spoke with Greg Bright.

Michael Loizou says that the most important aspect of a university education is the fact that this is where you are taught to learn. And you have to keep learning throughout your business career, he believes.

A chartered accountant by training, Loizou moved into financial planning in the 1990s because he found the work more interesting. He had spent his first 11 years after graduating high school at the accounting firm Thomas Davis & Co, before moving on to another firm where he was exposed to financial planning. He left to travel for a year and then returned to work for a firm in Leichhardt, while he developed his own client base.

Loizou formed Capital Results in 1998 and in 2006 he merged with another financial planning practice and moved the business from Leichhardt to the city. He bought out his partners’ share in the business in 2011, and now works with his wife, two administrative staff and another planner, where they look after approximately 300 clients. He has established a network of firms he works with on behalf of his clients which includes three accounting firms, a law firm and a mortgage broker. In addition, he speaks with a number of technical experts and managers from reputable financial services firms where he gains insights into their views on global markets and specific sectors – “I think the big risk at the moment is that the US economy may grow quicker than we think and interest rates there rise more rapidly. This is likely to draw a lot of money out of other markets.”

About 60-70 per cent of his clients are close to retirement or in post-retirement phase. “The most important thing for retirees is cashflow,” he says. “We keep one-two years’ worth of pension payments in cash and don’t reinvest the income. Although our clients were impacted by the global financial crisis, the advice we provided meant that they weren’t forced to sell growth assets to pay their pension income. It’s only now that we’ve started to take some profits to replenish the cash.”

The crisis was not a good time for anyone. Loizou recalls that he felt obliged to watch morning television for the first time, because that’s what some of his clients were doing and he needed to know what news and views they were being exposed to.

“I remember in March 2009 one commentator saying ‘you should go to cash and sit this out’. That would have been the worst thing you could do… It’s much better now and my clients are certainly more settled.”

He points out that low interest rates tend to be good for the markets and he doesn’t believe they will go up much, or at all, in Australia this year, or in the US either. When there’s a “hint” of inflation, though, that may change things.

Notwithstanding the probability of capital losses from fixed interest when rates rise, Loizou says: “you need to have diversification, and should have some exposure to bonds in your portfolio.”

His client base is the most important thing in the business and Loizou tries to ensure that there is a “cultural fit” between client and adviser.  He is always working on enhancing his offering to clients and implementing a more formal benchmarking process to help clients keep him and themselves accountable for cashflow and asset values. “Our clients stick around, I think, because they trust us to help them. I like to think all of our clients are well informed too.”

Liquidity is important for the client profile and Loizou says that was emphasised by the financial crisis. Some people, for example, are still waiting to get their money out of mortgage funds.

“That’s also the importance of learning. I didn’t know as much as I would have liked to know… We’re always looking at new things, such as alternatives, but traditional investments are the core to any portfolio and liquidity is something you need to be conscious of a consensus on.”

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