More jobs for the same pay

The real story of financial planning recruitment this year is not that the prevailing skills shortage continues to broaden, but that there has been no corresponding rise in salary levels.

The shortage has been ongoing since 2003, when equity markets started picking up after plateauing in late 2001, yet base salary increases are characterised by their restraint.

This restraint was a surprise finding of this year’s annual Hays Salary Survey 2005, according to Nick Deligiannis, senior regional director of recruitment agency Hays.

“You would think that the shortages would be putting upward pressure on base salaries, yet there hasn’t been enormous movement for qualified financial planners.”

Deligiannis suggested two reasons for the restraint, which is coinciding with an “absolutely massive shortage across the board, from paraplanners right through to CFPs”.

He says one reason is that “a massive wage component built on uncapped commission potential has eliminated the need to have significant base increases on salaries”.

To emphasise his point, Deligiannis says only 1 per cent of survey respondents lifted base salaries for financial planners in general above 10 per cent in the past year. Paraplanners predominated in this latter category, he says, suggesting this group “has enjoyed the largest base increases on salary levels during the year”.

Salary restraints

About 10 per cent of employers who responded to the Hays survey increased salaries by between 6 per cent and 10 per cent.

The vast majority of respondents — about 60 per cent — increased salaries by between 3 and 6 per cent, while another 30 per cent lifted them by up to 3 per cent.

Increases for planners and associated staff in the risk insurance sector were found to be “anywhere between 6 per cent and 10 per cent”.

The other reason Deligiannis gave for salary restraint is that remuneration is “increasingly becoming only one of several factors that attract and retain planners”, he explains.

“Non-financial benefits and other financial benefits packaged into the salary are these days equally as important a criteria and in some cases rank even more important than salaries.”

Among the non-financial benefits, he says, career progression has become an “absolutely critical issue for planners these days”.

Deligiannis adds: “This includes an ongoing investment in training and professional development of planners in what is now a heavily regulated sector.

“Also very important is the cultural alignment within an organisation, such as having an open door management policy, and a more positive culture in the workplace.”

Financial Recruitment Group executive director Peter Dawson believes a “net same position” in overall planner numbers in industry is acting as a restraint on salary growth, which he said has “shown little uplift above CPI over the last three years”.

The impact of compliance

Dawson says that while industry is “actively recruiting new planners, this is coinciding with the departure of a lot of planners” from the industry since the onset of the Financial Services Reform Act.

“A sizeable number of baby-boomer generation planners are retiring, and some large dealer groups are active in transitioning out advisers who don’t fit into their business.”

Compliance, too, is also exerting a restraint on salary growth, notwithstanding the prevailing shortages of planners, according to Dawson.

The associated risks are influencing employers to try to recruit only those advisers that have a “proven ability to hit the ground running in terms of writing business”, he says.

“Most of the dealer group managers I speak to have a strong view they will only employ or fast-track people with competence.

“They just can’t afford to do otherwise in the FSR environment, as the regulator has shown a very active interest in financial planners, and about their future intent,” Dawson says.

Dealer group recruitment

At the same time, according to Dawson, employers are increasingly realising they have to be more creative in their total salary packaging to attract advisers in times of shortage.

“It’s a competitive environment for good planners, and that’s why many dealer groups are continually looking at their service offerings.

“In the last couple of years, in particular, a number of dealers groups have revisited their entire service offer to their planners.

“Notable examples of this have been the renegotiation by RetireInvest and Genesys of their contracts, both incorporating a number of remuneration provisions.”

The competitive environment is also evident in the fact that most major dealer groups now have staff who specialise in recruitment of planners. Dawson adds: “Alternatively, their practice development managers have implemented key performance indicators (KPIs) around that.”

Anew generation

A major challenge facing industry in raising planner numbers is in attracting and retaining young planners in the industry, according to Dawson.

“You’ll find a number of young planners spend some time in advice and then go into the sell side of the business, such as funds management or other streams,” he says.

An example of that challenge is the recent initiative by ING to launch a ‘hot house’ for training new people from next year, who will then be used as a resource for the ING dealer group (see p35 of MM Nov 10 issue)).

“This initiative suggests we’ve reached the point where there is a real focus by some companies to find new ways to bring in fresh blood,” says Dawson.

“A lot more resourcing is now been put into ongoing training to overcome shortages, and that also forms part of their planner retention strategies. If you know that your company is going to look after you in terms of training, giving you skills to move on to higher opportunities, you’d tend to stick with the picture,” he adds.

Alison Loader, head of recruitment at the Profusion Group, says a new trend has emerged among clients to “forward plan” to try to overcome the skills shortage.

Client feedback suggests that retention strategies are an area to which they are currently paying particular attention to with their forward planning, Loader says.

“Some of our clients are offering up-skilling and training opportunities as an inducement for existing staff to transfer into the financial planning sector.”

She says clients are also now “listening very carefully to the reasons planners want to leave their current employ, and are sometimes making an appropriate offer.

“Obviously how attractive a client offer might be will be dependent on what those specific requirements are.”

Non-financial benefits

Loader agrees that employed financial planners “generally tend to look for a strong structure, both in terms of paraplanner, administrative and client support”.

“They also look for strong management and leadership from people who actually understand financial planning and have real direction. Strong client referral sources are also important, as are a robust compliance structure and assistance to be able to work within that structure,” she adds.

In turn, she says, employers are paying more attention to planner qualifications than previously, and that’s “over and above the obligatory PS 146 entry point”.

Loader adds that strong technical skills and an ability to work within a tight compliance framework have also become important criteria to employers.

“The ability to develop relationships with referral sources is also very attractive to employers, in a market that is tighter in terms of sourcing clients than it was five years ago.”

Forward planning

One dealer group that has embraced the concept of forward planning as a way to overcome the ongoing skills shortage is WB Financial Management.

Chief executive Steven Eager says the Queensland-headquartered dealer group has “very much adopted a strategy of growing our own advisers”.

Eager says the strategy is partly motivated by the fact that the cost of employing graduates and young inexperienced recruits is now between $60,000 and $80,000.

He says the program, which was implemented 18 months ago, had “become necessary to enable our advice businesses to be able to grow incrementally”.

“Our businesses are growing at a rate of between 25 and 30 per cent per annum, and for that we found we needed an active recruitment strategy.”

The strategy is very heavily focused on offering recruits a full-career path, including business ownership opportunities, he says.

“We rarely look at recruitment from the perspective of ‘it’s just a job’, and accordingly we look at employing only those people who want to make a career of financial planning. The people we bring on board now are those we see as being the future equity participants in our adviser businesses.”

Model WB Financial Management candidates are those who have an undergraduate degree in commerce or business or similar, and they must have some experience in the workforce in a related discipline.

“They must demonstrate to us that they want a career of financial planning, recognise that they need a lot of training support and have a realistic expectations of remuneration,” Eager says.

For those successful candidates that “fit the bill”, he says, WB Financial Management relies on creating a professional environment in which they would want to stay in.

“This includes training recruits in the business management side of the business, and in the business of the licence. Recruits participate in our monthly management and board meetings, and in our business planning sessions, getting to see all of the financial performance of the licence,” he says.

Eager acknowledges that there “are times when you have to choose the best of what’s available” under current market conditions.

“However, our strategy of looking at recruitment as a lifetime decision generally enables us to attract the right person for our positions. If we don’t succeed we go back out to the market and look again, relying on the fact that we are a national group to keep the process going,” he adds.