Loyalty called on to stop planner exodus

Earlierthis month, Godfrey Pembroke made headlines after 11 of its financial planners broke ranks and departed the MLC/National Australia Bank (NAB) subsidiary for greener pastures.

Although planners moving from one group to the next is not a new phenomenon, financial planning principals and fund managers are scratching their heads on how to prevent their planners from leaving in the first place.

One solution dealer groups and fund managers are utilising is loyalty programs.

According to Macquarie’s financial planning manager New South Wales Jeffrey Wrightson, getting planners to stay is a very complex process.

“You have the planner who is wanting to secure [his or her] financial security and then you have the dealer group which is probably split, trying to create efficient incentive for its company and at the same time, trying to protect its own business at the client base,” he says.

According to Wrightson, the greatest developments have been in the equity arrangements of different sized planners’ offices.

“The biggest thing in the past few years has been a degree of divergence in the smaller rather than larger groups,” he says.

“With the smaller groups, the equity is usually tied up with the principals, and the younger planners don’t see any ability to work in the business as they are not given partnership opportunities or any shares. There is no succession planning.”

MLC adviser services general manager sales Matt Lawler has experienced the departure of planners from a large institution to a smaller business structure first-hand, most recently with the above example of Godfrey Pembroke planners moving to VectorFinancial Consultants Limited.

“The Vector people came up with something different. It was just a decision to move on,” Lawler says.

He says retaining planners is not about forcing them to stay, but rather creating an environment where people feel comfortable to work.

“At the end of the day, if it was something that everyone agreed with and everyone aligned to, there wouldn’t be a need for other groups,” Lawler says.

He says retaining planners is all about the infrastructure of the dealership and its service offering. Dealer groups need to provide planners with a comprehensive package, one that includes business platforms, practice management options as well as integrated financial solutions.

“In our view, it’s the packaging of all services that are required of all the life cycles of the client,” Lawler says.

In providing the client with a great service offering, financial planners are also empowered, and in turn present a strong business offering to both.

“We have a very clear business model and it’s uncompromising in some regards. But you have to have a very clearly articulated business model that advisers can align to,” Lawler says.

Hillross Financial Services managing director Jack Regan also believes in strong business models to articulate the business direction to financial planners.

However, he says financial considerations are a critical part of a dealer group’s business model because people expect to be remunerated for a good job.

Hillross has an equity buy-back opportunity in place for its financial planners, as well as substantial succession planning strategies that are supported by in-house financing.

“We’ve got a policy framework in place and so what we’ve tried to do is make a market model that is competitive with the market. We’ve [found this] the best mechanism for keeping people,” Regan says.

“However, there are still all manner of things, such as equity participation, that can be used, but our view is that people have basically got to add value and operate in a transparent and operative market model. Pay people what they are worth and create certainty,” Regan says.