On the hunt for quality

In the recent round table discussion Money Management held with a number of senior representatives from financial planning dealer groups, a key talking point raised was the difficulties smaller licensees have in finding established financial planners who can walk into a position and begin generating revenue straight away.

A range of themes echoing this sentiment arose from the following conversations with directors of a number of smaller dealer groups.

The static nature of experienced financial planners, the costs both financially and in time of training graduates, and the growing demands on planners within an increasingly professional environment were all raised by dealer group representatives.

Quantum Financial Services Australia director Virginia McKay said her dealer group,which consists of 12 authorised representatives, is finding it quite difficult to recruit more experienced financial planners, but is unsure whether to attribute this to a shortage or simply less mobility.

Listening to the current media line about our ageing population, McKay expects that in future we may see a growing void.

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“This is common knowledge around the industry,” she said, explaining that a number of other dealer groups have had the same experience.

McKay said there seems to be plenty of graduates, but recognised that a good graduate and a good financial planner are not necessarily one and the same.

She pointed out that this is not to say that graduates do not make good financial planners, simply that it takes training before they learn the appropriate balance between the technical and people skills required.

“It’s a people-oriented industry. As long as the universities are doing okay [at balancing this], the end consumer will be well looked after,” she says.

Partly to circumvent some of the difficulties in recruiting, Quantum became a registered training organisation, conducting industry recognised training courses for its own staff and those of other firms.

“It’s something we are very serious about, running a structured training program,” McKay said.

She pointed out that while her group prefers experienced candidates for positions, it does take on inexperienced planners “if they show potential”.

As a dealer group that doesn’t offer salaried roles for planners, its planning staff are self-employed, which also limits its pool of applicants.

McKay believes the greater economies of scale afforded to the bigger players gives them greater flexibility in who they employ.

“The big fund managers can afford to take on more inexperienced employees,” she said.

For this reason, the big investment funds and fund managers offer the best chance of a start for newer entrants to the industry.

Shadforths director Jason Reeves has had similar experiences, finding the group had to “breed its own” because finding people who already meet their requirements was often too time intensive.

One approach they have adopted in training their own experienced advisers saw the creation of a graduate trainee program, which places new recruits in an intensive four-year program.

This starts them out as paraplanners, before progressing onto a mentored adviser position and finally onto fully-fledged planning positions.

Reeves said Shadforths has also changed the sales-focused approach that traditionally informed recruitment decisions.

Instead of looking for new planners who come from an insurance-style sales background, the dealer group aims to recruit accountants, solicitors and people from other related professions, because the industry has now evolved towards being a profession.

With 42 planners currently on the books, and a growth rate of around two to three new planners each year, he said they are growing but not as quickly as they could be.

“We’re not growing exponentially … but the lack of supply restricts growth unless you’re prepared to forego quality.”

Reeves thinks the number of people wanting to become a financial planner will only increase in the future as it becomes more recognised as a profession and throws off the stereotype of the door-to-door insurance salesman.

“There is a war for talent that has been ongoing for 20 years,” he said, but believes people will shift into financial planning over time.

However, Reeves noted: “There is likely always to be a shortage of good, experienced financial planners.”

Reeves rejected concerns there is a potential for a glut of qualified financial planners if a sudden rush of people sign on to get their licence, claiming the industry is nowhere near capacity at the moment, and can sustain many more planners than it does at present.

With the tightening regulatory environment resulting from more rigorous scrutiny from bodies such as the Australian Securities and Investments Commission and the Australian PrudentialRegulation Authority, Reeves thinks we will see what he described as the “less savoury” end of the market dropping out.

On the downside of becoming more professional, he thinks planners will increasingly have to compete with the accounting and legal professions for candidates, whereas previously it could draw candidates from purely sales driven areas.

As well as adopting different approaches to attract planners and train new recruits, Reeves believes more needs to be done to ensure financial planners’ time is spent as productively as possible.

To do this, more firms need to build in better technology infrastructure and other systems to free up its financial planners and ensure their time is used in the most effective way.

Financial Wisdom managing director of dealer groups Paul Barrett agrees with many of the points already raised.

He thinks there is definitely a difficulty in attracting experienced planners, but is not sure whether to put this down to a shrinking number of planners or simply a lack of mobility.

He is of the view that financial planning will grow in popularity because of its strong attraction to entrepreneurially-minded individuals.

But he also said that more vigilance is required to ensure those coming into the industry are committed to the important business of financial planning and that they are not simply in it for the money.

One thing he does disagree with is that planning firms can correct the problem by improving their systems.

“That just comes down to a business decision; they should be doing that anyway,” he said.

He also thought that developing graduate programs for newer planners is not going to fix the problem of undersupply in the industry.

The topic at hand was particularly relevant to BenWest director Tony Bennett, because he recently began the process of recruiting a new paraplanner to join his team.

Bennett thought it is almost impossible to find good, experienced planners well suited to the role of independent financial planning, and said this largely comes down to the nature of the industry.

“The good ones are entrepreneurial, so they are not in the market to move around a lot,” he said.

Bennett pointed out that many planners from an institutional background come with habits that mean they are at least initially unsuited to an independent dealer group.

Aware that he is making a generalisation and there are exceptions, he said institutional planners are “attuned to using wraps and structured products, not thinking outside the square [and display] a lack of broad-based planning”.

He also suggested that retention is the biggest concern facing dealer groups in staffing issues.

“For instance, in our firm, we sometimes find we will train people up only to see them move on and become a competitor … it’s pretty dog-eat-dog,” Bennett said.

One option open to some firms is an increased emphasis on the training of graduates and newer entrants to the planning industry, but this is difficult for smaller operators, mainly because of the time required and also the cost to the business in training staff.

“It is time intensive to adequately train [new] staff,” he said.

Bennett estimated that it takes around three years’ training before a financial planning graduate is ready to face customers, and because of this, graduate recruitment is more appropriate in companies that can provide salaried roles.

“Getting decent planners and staff is always an issue because they are the most important part of your business; the better they are, the better your business is,” he said.

Conversely, a number of interesting contrasts become apparent between smaller dealer groups and the bigger end of the scale when speaking to AMP director of advice based distribution, Steve Helmich.

“There’s probably a shortage of new recruits coming into the ranks because people aren’t prepared to train them; there’s a finite number of planners in the ranks,” he said.

“I think it’s a travesty that there are few financial planning groups out there that are prepared to bring in new, fresh, greenfields people and train them in the field of financial planning,” he said.

Helmich said that how quickly the industry grows, with many people keen to get involved in financial planning, depends upon companies providing effective pathways to allow entry.

While recognising that it is a cost, Helmich pointed out that this is also an investment, but one that many groups overlook. Because of the time and cost involved in training a new financial planner, it is often left to the bigger dealer groups working with AMP and the banks to provide the gateway.

Referring to the propensity for some groups to recruit existing, experienced financial planners, Helmich expressed his disappointment with this process.

“I think those who are out there, if their major way of recruiting is by getting established planners, I don’t think they’ve done a great deal to hold their position.

“If there were more and more people willing to get involved and invest money in the profession, the profession would grow quicker,” he said.

Instead of simply seeking out experienced planners, AMP is able to expend some of its considerable resources in ‘growing its own’ financial planners from less experienced candidates who display potential.

While this does come at considerable expense to the company, and is possibly only a feasible option for those dealer groups at the bigger end of the scale, it also has the huge benefit of attracting greater loyalty from those planners whose career has been developed by AMP.

As Helmich explained, AMP’s development process for new planners is quite rigorous.

He breaks it down into an education phase, followed by an activity aspect that involves making regular contact with clients to review plans.

Upon entering AMP, new recruits begin by entering the Planner Experience Program, which is designed to provide them with the grounding to begin taking a more active role within the financial planning role.

From here, they move into a supervised position where they work closely with AMP in-field managers, who are responsible for recruiting, succession and planner development. Along with this, an existing planner may also mentor them. This would normally cover what he refers to as an ‘apprenticeship’ period of up to two years.