Financial services loses its appetite for recruitment

The financial services industry is slowly losing its recruitment drive as economic and regulatory uncertainties linger. However, while some find it difficult to grow, others seem to be rapidly increasing headcount, writes Andrew Tsanadis.

As we enter the New Year, it has become increasingly difficult for financial planning professionals to stop and consider their career outlooks.

Amidst global market turmoil and the Government’s proposed industry reforms poised to come into effect from 1 July this year, dealer groups are reviewing their business models and preparing for the months and years ahead. 

For employers, growing talent from within is the key to a healthy and profitable practice, with institutions continuing to invest more resources in training and professional development academies to recruit and retain staff.

Financial planners this year will be content to build a career based on the fact that the grass isn’t always greener on the other side, and will be more likely to remain with a dealer group if they do not yet have the expertise to land a role with a potentially better salary package. 

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With the state of the euro zone in relative darkness, most institutional dealer groups in Australia are looking to reduce process and staff costs.

Banking and finance sector data from SEEK’s December year-on-year figures revealed that advertisements for financial services jobs were down across a number of sectors (see Figure 1).

Similarly, a recent study by eJobs Financial Planning Recruitment found that advertisements for financial services and insurance industry vacancies fell across all states over the three months till the end of October last year, but were still 11 per cent higher than the same period in 2010.

At the time, eJobs managing director Trevor Punnett pointed to the Commonwealth Bank’s now successful bid for Count Financial, the merger of AMP and AXA, and the continued growth of institutionally-owned dealer groups against the diminishing backdrop of non-aligned financial planners as a major factor in this fall. 

This trend is continuing as boutique financial planning practices favour consolidation in weathering the economic storm, while banks look to expand their staff numbers.

From a candidate’s perspective, eFinancialCareers head of Asia-Pacific George McFerren believes financial professionals are interested in new opportunities, but are hesitating to change roles due to global financial market volatility.

Meanwhile, the Financial Planning Association (FPA) is continuing its push to raise the bar on entry-level requirements for financial planners.

What’s happening? 

“In a lot of respects, I don’t think the market has changed a lot in the last 12 months”, said Profusion director Alison Loader.

“As far as financial planners are concerned, there’s always the market for experienced and talented financial planners who have a proven track record, and that hasn’t changed at all.” 

Most dealer groups have already realised that the number of experienced financial planners out there in the market is not enough to meet demand. 

“The war for talent with financial planners is certainly not over – all organisations are certainly looking to grow planner numbers,” said Hudson Australia director, financial services, Stuart Jackson.

“Overall for financial planning, the market this year will continue to be as positive as it was last year.” 

Bank-aligned dealer groups are being particularly aggressive in luring planners who were not content with the major merger of AMP and AXA, as well as the acquisition of Count by Commonwealth Bank, Jackson added. 

Robert Walters consultant for financial services firm Domhnall Fahey believes that talented financial planners will always have options in the jobs market. 

“Employers will not only review their retention strategy, but will focus on succession planning in 2012, particularly for roles where skills shortages are the greatest,” he said. 

For example, the long-term shortage of external auditors is leading to an increasing number of accountancy firms undertaking long-term strategic planning and developing future managers.

One of the more significant effects of the Government’s draft Future of Financial Advice reforms on recruitment trends is the growth of scaleable advice services, particularly in the institutional space.

Phone-based financial advice in particular, is something that will be a significant factor influencing the way dealer groups take on planners.

Phone and internet based financial advice services, which the big instos are trying to introduce already, will provide an opportunity for RG 146 graduates to take their first step into the industry.

“[Scaled advice] is a fantastic recruitment tool in terms of bringing financial planners into the industry and training them into financial planning roles, and that will be a big trend over the next twelve months,” said Loader.

Fahey points to the return of the ‘one stop shop’, an obvious response to the government’s legislative changes.

Financial planners in major dealer groups are now moving to take on dual planner and relationship management roles.

Bank-aligned dealer groups have not yet moved into mortgage lending financial advice, but Fahey believes the growth of these new avenues of business will provide an opportunity for financial planners to set their skills apart from other candidates. 

Another significant driver for change in the market will depend on whether experienced financial professionals choose to move.

Research from eFinancialCareers suggests a flight of senior level staff will bring changes to internal strategies and kickstart recruitment at all levels within the financial services industry.

Employer sentiment

According to Hudson’s national employment expectations for the January to March quarter of 2012, employer sentiment in the financial services/insurance sector continues to soften, falling 13.6 percentage points year-on-year from 28.6 per cent in January to March 2011.

Around 18.2 per cent of employers surveyed said they planned to decrease headcount, but almost half intended for it to remain unchanged, the report found.

The all but certain reforms to the financial services industry have seen a number of major institutional dealer groups and banks undertake project work on the way they operate their business, and this is having a significant impact on recruitment sentiment, said Loader.

Business effectiveness, including process excellence and human capital, are all being reviewed to improve profitability in an uncertain 2012.

“It’s all about scale. The major banks all have significant wealth management and financial advice businesses, and they would almost all be in growth mode,” said Loader.

“Organisations – whether they are boutiques or bank-aligned dealer groups – are looking for a greater share of wallets from their clients and better ‘bang for buck’ in terms of profitability, and that’s where these effectiveness reviews come into play,” she said. 

Fahey agreed, saying banks were very focused on performance, and would require financial planners with strong sales results and a proven track record in growing funds under management.

He added that with bank-aligned institutions continuing to change their business model and building talent from within the company, graduates who are finding it tough to land a position will eventually be given the chance to get their foot in the door.

McFerren believes that many banking and financial services professionals will return to Australia as the economy stabilises. Competition for roles will heat up in the mid-to-senior and executive levels as candidates abroad return with increased skills and considerable international experience.

“Much of this is in comparison to recruitment trends over the last 12 months, when we once again saw candidates heading overseas for work following improvements to certain international markets,” said Hays Banking director Jane McNeill.

In today’s market, McNeill believes experienced wealth management candidates will remain in high demand with both boutiques and large banks offering competitive salary packages, flexible working patterns and books of business.

“We have also seen an increase in the utilisation of contract staff to help bridge the skills gap, particularly at the paraplanning level, so that financial planners can focus on servicing clients,” McNeill said.

Large firms in particular are attempting to position themselves as the employer of choice for top talent by promoting specified career progression opportunities, she added. 

Almost all large institutions have created programs for growing their talent from within.

One of the well known professional development programs in the industry is the AMP Horizons Financial Planning Academy, which offers a 12 month ‘professional year’, featuring 10 weeks formal academic training and 9 months ‘on the job’ experience working as a financial planner.

MLC Advice Education also offers academic training, ranging from basic RG146 courses to Advanced Diploma in Financial Services.

Colonial First State's Institute of Advice also offers training for both new and existing financial advisers, while Macquarie Private Wealth offers technical and product skills training, practice development, and compliance courses. 

Salary expectations 

Financial planners hold relative power in determining their salary, and if they have the right skills and qualifications, they have the ability to look for new opportunities if they are unhappy with their current salary arrangement, Loader said.

“It’s an uncertain world that we live in. The sense that I get is that if financial advisers are reasonably happy with the key aspects of a particular role then they are more likely to stay,” she added.

Fahey noted that for the last six months experienced financial planners and graduates alike have opted to move into bank-aligned dealer groups for the stability and career progression which the slowly-fading boutique market is finding difficult to match.

On the flip side, he believes that it is a candidate-short market, and there is quite good earning potential for financial advisers with proven sales experience.

According to research by Robert Walters, the base salary for a financial planner ranges between $70,000 and $90,000, while growing commission paid on reaching sales hurdles reflects the need of both independent and bank-aligned dealer groups to drive up profits.

While McNeill conceded that hefty bonus payouts have become a thing of the past, she – along with most recruitment experts – believes that ‘talented’ financial planners will have the ability to negotiate their career choices.

Developments in salary expectations have very much gone hand in hand with the growing expectations of employers who are now demanding planners and fund managers bring more to the business table in terms of skill and experience.

Recruitment experts agree that a number of non-aligned businesses do not have the scope or resources to implement large training programs, and junior planners are more highly sought after by the banks because it allows the business to develop and retain talent and eventually fill the skills shortage gap.

Typically, the lower salaries are offered for roles at the client services or support levels, while more experienced candidates in private banking, transactional banking and financial planning top the list of the highest paid professionals in the financial services industry, said McNeill. 

“A typical salary for a relationship manager in private banking is $110,000, while a dealership manager in the financial planning industry can earn around $190,000,” McNeill said.

Hays Recruitment director Nick Deligiannis said that while 2012 will see employers placing greater impetus on rewarding proven performers, organisations will tackle this by instead reviewing employee benefits, discussing potential career paths, and offering training and development. 

What are they doing to get a job? 

Legendary musician “Fats” Domino once said, “A lot of fellows nowadays have a B.A., M.D., or Ph.D. Unfortunately, they don’t have a J.O.B.”

And as this man rock n’ rolled his way through the music charts, potential financial planners too must make their talents known in a sea awash with eager candidates. 

Fahey said attitudes towards recruiting have changed in the past year, with bank-aligned dealer groups requiring financial planners to move to a more holistic financial advisory role.

For instance, a retail customer seeking a mortgage would now most likely be put in touch with a financial planner.

Similarly, on the institutional side of a bank’s financial planning business, companies are seeking commercial financial planners who can sit closely with front-line relationship managers in order to provide wealth management financial advice to commercial businesses as opposed to just retail clients.

“Over the next twelve months, a financial planner’s role will work to a more relationship-based model, whereby an financial adviser will not only be providing advice but will also be trying to cross-sell other products,” he said.

While the need for adequate experience has traditionally been more highly valued to both non-aligned and institutional dealer groups, the importance of ‘up-skilling’ will become a significant trend over the next twelve months.

Referring to the wealth management sector, McFerren pointed to the continuing trend of a number of businesses merging their heads of retail and institutional to form joint sales teams, reducing overall headcount and saving considerable expense on salaries.

As a result, potential financial planners will need to have relationships at both adviser and head office levels.

Hudson accounting and finance national practice director Dean Davidson said that specialist skills are highly sought after within the financial services industry, with financial planning, underwriting, mortgage lending, retail banking and sales skills remaining in high demand.

The banking sector in particular, will be looking to increase permanent headcount in retail branches on the back of enhanced customer service offerings. 

Deligiannis believes that technology and social media has offered employers, recruiters and hiring managers powerful new recruitment tools, but warned against using such enhancements exclusively in the hiring process. 

Although social media has long been used by employers to screen potential candidates, Deligiannis believes issues arise when employers use social media alone to decide who they will hire. 

McNeill said that LinkedIn continues to be the primary networking tool used by candidates, in addition to Facebook and Twitter, and advises candidates to assume their social media profile will be checked by not only potential employers, but when current employers consider promotions and succession planning.

Top dogs get a meaty bone

Shareholders and the public largely turned a blind eye to executive pay when the economy was booming, pre-global financial crisis. How things have changed.

In a consorted attempt to shine a moral light on corporate greed, intense protests have continued to crop up around the globe, most of which have been fuelled by the initial Occupy Wall Street movement in New York last year.

Australian Shareholder’s Association (ASA) chief executive officer Vas Kolesnikoff argues that there is no genuine market for executives. 

“Companies tend to work out what they want to pay their executives –  whether that be through short-term or long-term goals – and generally, they pay them. This year, we’ve seen goalposts shifting more than you’ve ever seen,” Kolesnikoff said. 

In regards to the Corporations and Markets Advisory Committee’s report on executive remuneration released in April 2011, he said the review only implemented limited legislative changes to the way companies are required to report on executive salaries and the criteria by which an executive’s salary is based on.

Generally, power lies with remuneration consultants, directors and executives who all have a vested interest in pay being as high as possible.

Outgoing Westpac chairman Ted Evans believes that on the issue of unreasonable executive pay “boards have brought all the problems on themselves by not taking a disciplined approach to the issue and listening to shareholders”.

Kolesnikoff believes a review of an executive’s pay packet should be based on long-term criteria, because there is no “lasting benefit” when a company’s board relies on short-term incentives.

While he conceded that the major institutional banks have generally outperformed the negative returns of the ASX 200 index, their performance is in very low single digit positive territory, and does not justify the multiple pay increases of executives of bank-aligned dealer groups over the past five years. 

Until recently, there were no set consequences for a company board receiving a significant vote against its remuneration policies.

Given the importance of this issue, the Government decided shareholders who take on the risk of investing their capital for a share of the company’s profits and losses deserved more say over how the pay of company executives is set.

Now, under the newly passed ‘two-strikes’ rule, shareholders will have the ability to vote on whether to ‘spill’ the board of directors (that is, remove the directors) over remuneration concerns.

 What to expect this year?

 Recruitment experts agree that both boutique and bank-aligned dealer groups will begin 2012 extremely cautious, with most financial institutions under immense margin pressure. 

The uncertainty undermining European markets will continue to be a major factor in the reduction of process and staff costs in Australian financial institutions in the first half of the year, said Jackson.

Despite this, he said the second half of the year will see the outcome of world economies become clearer, and see hiring freezes lift, to an extent. 

Fahey believes the coming year will be dominated by the banks, despite the fact that a number of financial planners are sometimes frustrated with the sales targets of institutions.

“A large number of banks have reshaped their management and operational structure, and so we expect to see demand for strong candidates,” said McNeill.

She believes outside of the larger banks, a conservative approach will be taken and involve restructuring to cut costs.

“Therefore, finding candidates with the desired experience may mean managing expectations or increasing salary, since the main motivation for candidates at present is stability,” she said.