Many of the financial advisers I've been talking to seem to have switched into a kind of survival mode: batten down the hatches, just ride it out, and if we get through we can resume our pre-GFC lives and forget the whole thing ever happened. This attitude is a real cause for concern.
On Boxing Day 2004, nations fringing the Indian Ocean including Indonesia, Sri Lanka, India and Thailand were devastated by one of the deadliest natural disasters in recorded history.
The event had no precedent, and as such there were no systems or processes in place to warn people in the affected areas and mitigate the catastrophe.
It came as no surprise to me that many advisers felt they were equally unprepared for the battering they received at the hands of the global financial crisis (GFC) ‘tsunami’.
Many of the advisers I’ve been talking to seem to have switched into a kind of survival mode: batten down the hatches, just ride it out, and if we get through we can resume our pre-GFC lives and forget the whole thing ever happened.
This attitude is a real cause for concern.
I attended an Association of Financial Advisers (AFA) Government and Policy Committee board meeting recently that highlighted for me the stark reality that our industry is staring into the face of a second huge wave.
We’ve got an intense and sustained media focus on the provision of advice right now.
The spectacular, though relatively isolated, corporate collapses and well publicised losses of small, and large, investors’ funds have led to calls from all corners for greater regulation, tougher licensing, harsher penalties.
The issue has become a political one as well as a regulatory one and the Financial Planning Association is definitely feeling the heat. What I’m calling ‘FSR Mark II’ is on the way and it will have a significant impact on our industry.
It’s not all bad news
But, looking through the apparent doom and gloom, in many respects I think the current crisis can be viewed as the greatest opportunity for professional advice firms. Seriously.
Now knowing first-hand how quickly the earth can shift beneath us, if you can ignore the urge to treat the current experience as an unfortunate incident, a one-off, and assume that transformative events like this are always just around the corner, you enhance your own capability to safeguard against the same level of unpreparedness.
So, battening the hatches isn’t going to do the trick. If you think things are tough now, it’s probably going to get tougher and those of you who feel your businesses weren’t prepared for the onslaught of the GFC really need to start planning how you can ensure the survival of your business, whatever happens.
So, what have you learned?
Which of you can put your hand on your heart and say that you’re happy with how your business has performed in the past 18 months? That your business is not only surviving, but prospering?
For those of you who know it’s not blind luck that got you into that position — it will only have been because of the serious consideration that has gone into your business planning, carefully taking into account necessary contingencies and the possibility of significant challenges to your environment.
Back to my tsunami analogy. As a result of that tragic event, a range of tsunami warning systems and processes have been put in place. If, God forbid, the same thing were to happen again, each and every affected nation would be in a much better position to respond quickly and prevent a catastrophe of the same proportions.
And, in this context, for those of you who have been surprised at the hit your business has taken, now is the time to plan your own ‘early warning’ systems, and put in place a solid plan that helps you withstand the next potentially threatening wave.
Murphy’s Law: If it can go wrong, it probably will
With the mantra of our friend Murphy firmly in mind, the driving theme of our professional development conference this year was how to ‘future proof’ your business.
We wanted to arm delegates with the ability to plan for all possible eventualities.
Think for a moment about your own business: imagine one or two things that, if they ceased to exist, would probably mean that your business couldn’t survive.
For example, what if commissions on the super guarantee disappear?
What if professional indemnity costs doubled, or a new regulatory regime increases two-fold the time you have to invest in compliance?
I’m using real-world hypotheticals here; as the advice debate is increasingly politicised I really do believe we can’t take anything for granted, and practice planning must necessarily reflect the idea that if anything can happen in our industry, in this next phase it will.
The all-too-common tragedy of the advice segment is the number of very good advisers who are unwilling or unable to make their businesses simple, systematised and industrialised.
By taking your learnings from the GFC tsunami, and preparing for the inevitable next wave, you can make sure your business is in a position to prosper, whatever the weather.
Steve Browning is executive manager Guardian Financial Planning and Cameron Walshe.
