Platforms are not the future for planners

The keyto future financial planning groups will be selling the relationship, not what platforms the dealer group is using, says Strategic Consulting and Training managing director Jim Stackpool.

Speaking at the recent combined Financial Planning Association (FPA) Principals and Certified Financial Planner (CFP) conference on the Gold Coast, Stackpool says planning groups develop when they look at the wider needs of clients.

“I have not seen any dealer group start up just selling advice. The future will be about helping to solve whole areas of client problems,” he says.

Stackpool argues the platform that needs to be built is one centred on advice, but accepts the financial planning professional is still growing.

Many financial planning groups are still in the start-up phase of business, although a few have reached the management stage of the business cycle, he says.

This is the stage where one planner will only deal with a few clients, charging a fee for the service.

According to Stackpool, groups that fall into this category are Garvan, Howarth and Hillross.

The big four banks are still in the start-up phase of the business cycle when it comes to financial planning, says Stackpool.

“We have to be careful about bank-bashing as they are in the creation phase. Once they get woken up, they can do a lot of damage.”

As planning businesses develop, the key will be to reduce the number of clients a planner sees. According to Stackpool, the planner in a new business usually sees about 250 clients. After a few years the business becomes successful and the planner sees about 400 clients.

He sees a time in the future where the planner will deal with 25 clients with a support team to deal with client liaison.

“We will need new people in the groups who are account managers and they will control the team,” Stackpool says.

“Groups are still too principal-dependent and investment-centred.”

The account manager controlling the various disciplines in the practice will not be a CFP, Stackpool says.

Dealer groups will have to choose which business model they want to use in the future. One model is the ‘cell’ business, where clients belong to cells within a business. The other is a ‘practice’ model, which has clients belonging to the whole firm.

While the ‘cell’ model has more funds under management, the income per client is $260. The ‘practice’ model generates $6,400 of income per client for fewer funds under management, according to figures compiled by Stackpool’s group.

The cost per $1 million of funds under management for the ‘cell’ model is $7,231 compared to $4,276 for the ‘practice’ model.

FMRC Business Development chair Andrew Geddes says the successful firms of the future will have to differentiate their services to survive.

“People are saying financial planning is a new profession, but I think it is mature. The reason why it is mature is because there are lots of you and I don’t see a lot of differentiation,” he says.

Geddes believes as technology drives the financial services industry, the consumer will want a trusted adviser who can spell out the options and help the client take control of their investment decisions.