1 The Financial Planning Environment

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Advanced Diploma of Financial Planning
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Advanced Diploma of Financial Planning
INTRODUCTION
• This Presentation provides an introduction to the contemporary
financial planning environment
• It goes on to review some fundamentals concepts of practice
management and typical structures that are utilized in financial
planning practices in Australia
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Advanced Diploma of Financial Planning
Birdseye view of the Industry
•
Major Players in Australia are – Banks, Financial Services and Dealer
Groups
•
The industry is “concentrated” – i.e. Big 4 banks + AMP = 48% of Market
•
AMP Financial Planning is the largest, with almost 2,000 advisers
•
It has its own academy (Horizon at St Leonards, Sydney) and a large team
of specialist recruiters
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Advanced Diploma of Financial Planning
Birdseye view of the Industry
•
Each of the big four banks has one or more large dealer group(s) that figure
in the top ten (in relation to total adviser numbers)
•
The rest is made up of independent advisers and non-bank owned dealer
groups
•
The large institutions compete on basis of their reputation, ability to cross
“sell” financial planning and products to existing clients
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Advanced Diploma of Financial Planning
•
Given the sheer cost of implementing regulatory changes and compliance
related issues, let alone training and professional development, running a
dealer group is an expensive business
•
It is hardly surprising therefore, that dealer groups are constantly merging
and getting larger in order to reach economies of scale!
•
Smaller companies and individuals compete on basis of their own value
proposition and speciality.
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Advanced Diploma of Financial Planning
•
Currently, there are about 18,000 advisers in Australia and about 160
Dealer Groups
•
But….the top 20 groups have more than half of the market share!
•
…and just 3,000 of the 18,000 advisers are not aligned with any product
manufacturer
•
ASIC is therefore particularly concerned that advisers with a dealer group
alingned to a product manufacturer (i.e. AMP, NAB, Westpac or CBA etc),
do not recommend their manufacturer’s product merely for the sake of
convenience or higher revenues.
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Advanced Diploma of Financial Planning
•
Structure varies widely…….
From AMP and CBA that have several hundred licenced advisers….
…… to a financial planning practice having just one adviser
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Advanced Diploma of Financial Planning
In General, advisers can be either:
Salaried/employed by a principal or a large financial services house –
under this structure, they do not usually own a share of the business and
do not own the client relationship
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Advanced Diploma of Financial Planning
Or
Alternatively,
They can own their own book and be licensed by a dealer group or have
their own AFSL
In this structure, they could be either be a sole trader or be a director of
their own company
If they are the director of their own company, then the company would be
a Corporate Authorized Representative of the Dealer Group
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Advanced Diploma of Financial Planning
Designing a Financial Planning Practice
“Moving Water never stagnates…..” Anon
•
It’s often been quoted that if you aim at nothing, you will surely get there….
•
Hence, it is vital for a company to actually examine the business it is in
•
As a financial adviser working for a practice, what “business” are you engaged in?
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Advanced Diploma of Financial Planning
Designing a Financial Planning Practice
Some initial thoughts to ponder:
•
•
Are you a GP or a specialist?
•
Will you offer a basic range of advice related services encompassing
superannuation, investments and personal insurances? Would you refer more
complicated advice to a specialist?
Will you complete your own Statements of Advice, or will you outsource these to a
paraplanner?
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Advanced Diploma of Financial Planning
Designing a Financial Planning Practice
•
Will you offer superannuation and investment advice or just focus on risk advice or
will you offer all of these?
•
If you do specialise, what will you specialise in?
•
Would it be:
•
Investments and accumulation in superannuation (including superannuation
consolidating) or
Retirement Planning or
Estate planning or
Specialist personal insurances (Key person, business succession insurances etc)
•
•
•
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Advanced Diploma of Financial Planning
Designing a Financial Planning Practice
•
How will you charge?
•
Would it be an hourly rate? or
•
A flat fee?
•
Would there be a charge for implementation the recommendations you provided in
your SOA?
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
•
Would there be a charge for the initial meeting?
•
How often would you conduct a client review? – Quarterly, semi-annually or
annually?
•
What “Triggers” would you use to initiate a client review? (i.e. Change in personal or
financial circumstances – are these defined in your office client manuals?)
•
Would you charge for an annual review? If so, how much and would it be the same
for all clients?
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
•
Financial Planners working in a practice need to be thoroughly aware of the
answers to these questions prior to engaging with a client!
•
You have to balance your offering and the fees for this offering with two factors -
•
(i) The market is highly competitive and some dealer groups have the advantage of
being owned by a well know brand....
•
(ii) You are a professional and therefore like any other professional (doctor, lawyer,
accountant) you should not discount the value of your advice and therefore the
price you charge for this advice....
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
•
But prior to this, we need to understand the various entities in a financial planning
practice.
•
No two practices are identical, and practices also evolve over time
•
But generally, a practice will comprise of all or some of these entities....:
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
Principal
Administration
Senior
Planner(s)
Senior
Planner(s)
Practice
Manager
IT Support
Junior
Planner(s)
Junior
Planner(s)
Junior
Planner(s)
Paraplanner
Marketing
Note: In most practices, the lines are not hierarchical, but more fluid – i.e. The principal can have
Frequent contact with junior planners and paraplanners on a direct basis
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Advanced Diploma of Financial Planning
•
In a large practice, the principal is generally engaged in networking, strategic
alliances and management
•
Usually, the principal will not be engaged in advising a large number of clients, but
only a few long servicing clients that have been with the principal since the early
days of the practice
•
The practice manager would take care of the day to day running of the business,
including recruitment, staff management and compliance related issues
•
Depending on their experience and the size of the practice, they could also assist
with client acquisition and client retention
Discussion Question: Class to work in pairs and come up with a one or two liner
that best describes the Unique Service Proposition of yourselves (as financial
planners) or the financial planning company you hypothetically) work for….
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
•
There is a massive array of services and products in the financial planning space….
•
There are a large number of companies and institutions offering these services &
products, either face to face, or over the internet or phone…..
•
How will you compete What is your Unique Service Proposition?
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
Usually, from a client perspective, there are two things a client seeks in the financial
adviser….
1. Can I TRUST this person?
2. What benefit will I get out of it?
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
CORE VALUES
A company or corporation is an entity that is designed, defined and run by humans and
therefore, just as humans are characterised by core value, a company also therefore
must have core values
Core values could include:
•
Integrity
•
Honesty
•
Always placing the clients needs before the advisers needs
•
Assisting the client to achieve their goals
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
MISSION STATEMENT – this flows from the core values….
MISSION STATEMENT – should be succinct and achievable!
Every significant decision that is made by the company should be consistent with its
mission statement
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
MISSION STATEMENT – can be then refined into Investor/Client Value statements –
i.e.
•
We are committed to capital preservation, whilst aiming to provide returns higher
than the RBA cash rate
•
•
OR
We believe that Financial Planning involves maximizing your wealth by
incorporating Asset Protection, Asset Growth, Income Planning, Disability Planning
and Estate Management
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
It’s no longer merely a matter of Knowing Your Client and Knowing Your Product
•
Products are changing and evolving and so are clients – focus on the strength of
your advice and how you package this
•
Clients are either disinterested, confused or apprehensive about their options in
retirement
•
•
Constantly changing regulation and stock market bubbles further complicate this
process
In conclusion, your role as a financial planner is to alleviate this confusion by
providing clear, sound and consistent advice.
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Advanced Diploma of Financial Planning
Designing and Marketing a Financial Planning Practice
•
Your role as a financial planner is to alleviate this confusion by providing clear,
sound and consistent advice.
•
It is therefore essential that robust financial planning practice management
strategies are in place.
•
This ensures that less experienced financial planners obtain the necessary support
and training and also ensures that all advisers (experiences or otherwise) are
monitored and audited on an on-going basis
•
The end result is that appropriate advice is available to clients and that financial
planning is recognized as a legitimate and valuable profession
Copyright TAFE 2014
Advanced Diploma of Financial Planning

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