Advanced Diploma of Financial Planning

Advanced Diploma of Financial Planning 10 Contingency Disaster Recovery 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

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

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) Birdseye view of the Industry • 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

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.

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.

Structure varies widely……. From AMP and CBA that have several hundred licenced advisers…. …… to a financial planning practice having just one adviser

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

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

“Moving Water never stagnates…..” Anon Designing a Financial Planning Practice • 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?

Some initial thoughts to ponder: Designing a Financial Planning Practice • 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?

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)

How will you charge? Designing a Financial Planning Practice • Would it be an hourly rate? or • A flat fee? • Would there be a charge for implementation the recommendations you provided in your SOA?

Would there be a charge for the initial meeting? Designing and Marketing a Financial Planning Practice • 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?

Financial Planners working in a practice need to be thoroughly aware of the answers to these questions prior to engaging with a client! Designing and Marketing a Financial Planning Practice • 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....

But prior to this, we need to understand the various entities in a financial planning practice. Designing and Marketing 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....:

Principal Designing and Marketing a Financial Planning Practice 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

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….

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?

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?

CORE VALUES Designing and Marketing a Financial Planning Practice 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

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

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

It’s no longer merely a matter of Knowing Your Client and Knowing Your Product Designing and Marketing a Financial Planning Practice • 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.

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

Advanced Diploma of Financial Planning