Quick and dirty is not the way to recruit planners

One of the most important of the revolutions being wrought in financial planning by the new regulatory regime in general, and PS 146 in particular, is that occurring in recruitment procedures.

Twenty years ago, industry recruitment methods were targeted at introducing high performance sales people, and performance was almost entirely defined by sales volume. Technical knowledge and relationship building were a minor part of the picture. The aim was to find people who could get sales, and get them quickly.

When assessing recruits, managers were encouraged to pay little regard to experience within the industry (“all that can be trained”), and sometimes to regard interest in the technical side of advice as a negative (“we want sellers, not spellers,” I was once told).

The bonus arrangements with the managers responsible for recruitment were also heavily skewed towards finding inexperienced people and turning them into effective sales people within weeks or at most, a few months.

The end results of this approach were retention rates for both advisers and business that were simply appalling.

Underpinning this approach to recruitment was a regime of high, up-front commissions for the adviser, high charges for the client, particularly on early redemption, and little regulation of competence. This combination meant that most of the costs of this highly inefficient system were borne by the client, and never mind the brand damage.

Regulation and the moves to trailing commissions and fee-based advice has meant that this system, always inefficient, has become completely untenable.

Some say “thank goodness we have all those old ways of working behind us”; the accepted wisdom is that standards have moved up substantially in recent years.

However the reality is that there always have been good advisers, and that the criticisms of the methods of the past do not apply to many individuals who operated at the time. On the other hand, some of the assumptions about the progress that has been made are also too optimistic.

Integratec sees far too many client files and exam results from experienced advisers that point to a product push approach and an attitude to technical competence that is not much better than what was seen under the old system.

In the transitional phase the industry is in now, there are four main approaches to recruitment.

The first is to do very little. Many networks large and small now have a major problem with the average ages of their advisers and inadequate succession plans in place as a result of recruitment being continually reshuffled to the bottom of the to-do list.

The second is to attempt to recruit old-style advisers in the old way, but with a lot more lip service to the new model. I’m sure every education provider has been under pressure from the people in this camp to produce a diploma level course that will meet ASIC requirements and that can be run in eight days for new candidates. This group is really saying that they want salespeople on board quickly, with the minimum nod to legal requirements.

The third approach is to poach existing advisers from other networks, although these people may be open to further offers from other poachers with bigger cheque books.

The fourth is to build professional careers in financial planning. This may mean recruiting customer service or client support personnel with a deliberate eye on the potential for candidates to move at some point to a planning role.

I would also include in this career building category the approach of taking people with experience and expertise in areas associated with financial services matters, and providing the training and other resources needed to effect a transfer or extension of areas of practice to encompass financial planning. This is the option being taken up by large numbers of accountants, and many banks are now looking to grow their planning strength from internal resources with relevant experience.

Doing nothing will not be an option. The old ‘quick and dirty’ model will not only risk problems with regulators, but will not lead to economic client retention rates.

The recruitment winners will be medium to large groups who can either learn how to leverage and enhance the existing skills of experienced accountants, bank managers, stockbrokers and the like, or who can build extended career and training pathways for new entrants, to produce the new breed of adviser: the holistic, truly objectives based, client focused, technically expert adviser.

John Prowse is the general manager ofIntegratec .