When leading international higher and professional education provider Kaplan arrived in Australia, few people predicted just what an impact this fast growing subsidiary of The Washington Post would have on the education landscape.
Yet, financial planners have been at the forefront of these upheavals as a series of acquisitions have rapidly reshaped the existing planner education market.
Combine this with the seismic shifts created by the education requirements ushered in by Financial Services Reform legislation and you have a very different scene to that existing only a few short years ago.
Based in New York, Kaplan has had a big appetite, snapping up Tribeca for $55 million in 2006 and then adding the $36 million education business of the Financial Services Institute of Australia (Finsia) this year.
All this change has generated concern amongst financial planners about market consolidation.
As Pinnacle Financial Services Academy managing director John Prowse explains: “I have a lot of regard for Kaplan, but I am concerned about a single dominant provider in any market. I am a believer in competition.”
Fairfax Business Media is another group hearing from planners concerned about market consolidation. As the company’s general manager Rob Thomason notes: “We have had feedback about the lack of choice in the market.”
While pointing out Kaplan has “picked prime targets for acquisition”, University of Western Sydney senior lecturer and head of program for the Bachelor of Financial Advising Sharon Taylor believes some of the concern flows from lack of clarity about Kaplan’s education philosophy for the Australian market.
“Is it to raise standards or to gobble up the education market?” she queries.
Market misunderstanding
Kaplan argues concerns about market dominance are misplaced and the result of a “significant misunderstanding about the position of Tribeca and Finsia”.
According to the firm’s Australian chief executive officer Warren Jacobson, “The view out there is that the businesses were competitors, but 70 per cent of Finsia’s enrolment was in postgraduate education and focused on the broader financial services market”.
“Tribeca was entirely focused on the vocational education business and its strength was in financial planning.
“Finsia and Tribeca were far more complementary than competitive businesses. [Bringing them] together in the broad financial services market, we are more dominant, but not in specific market areas.”
He argues many education options remain for planners. “There is still a plethora of providers out there. Historically, education in Australia is a very fragmented market and that is likely to remain.”
FPA general manager – Professionalism Deen Sanders agrees that concern about Kaplan’s market dominance has been overstated.
“The reality is that it doesn’t mean that much,” he says. “I am not concerned, but I would be if there was any competition to lose. The greater concern is that there is not enough competition in the first place.”
Sanders feels much of the anxiety about Kaplan’s dominance is misplaced.
“Two providers becoming one is not the issue, but the overall lack of competition is,” he explains. “Our members want more education offerings and greater choice and this is the real concern, but the current consolidation isn’t.”
Low barriers to entry
Sanders may get his wish for more competition, with a number of other providers both investigating and actually entering the planner education market.
Fairfax Business Media has confirmed it is looking at the area, while Hubb Financial was interested but has now decided to wind back its development activities.
“We do intend to have a presence in the space,” Thomason explains.
“For us it is a natural extension of the Financial Review and Asset magazine. We are working on a range of programs for financial planners, financial service market participants and retail investors.”
He says moving into the area will allow Fairfax to better utilise the intellectual property (IP) it generates in-house from its extensive team of journalists.
Pinnacle is another company staking a claim and as Prowse notes, this new venture is unlikely to be the last.
“The good thing is there are not high barriers to entry and our arrival shows new companies can enter and make an impact,” he explains.
“So I would be surprised if the market dominance by Kaplan stays that way.”
Jacobson agrees competition is well and truly alive. “Our advantage is in our resources and our capacity to invest in and maintain our content, but competition still exists,” he says.
“We compete with smaller registered training organisations, but we also have to focus on quality and the educational appropriateness of our products to meet our customers’ expectations.”
And this extends well beyond vocational and ongoing CPD education for planners.
“We are interested in providing ‘cradle to grave’ solutions,” Jacobson explains. “We want to provide access to quality education that helps people develop their careers.”
Prowse says Pinnacle will be seeking to differentiate itself in several areas, including the student experience it provides. “We will differentiate ourselves on customer service and the clarity of our student materials.”
The company’s main offerings will focus on revision of original learnings, updating knowledge to incorporate regulatory changes and developing deeper understanding.
Push for professionalism
Taylor is largely unconcerned by Kaplan’s presence and believes the quality of the tertiary sector’s offerings are increasingly being recognised by the wider market.
“I have dealers coming to me asking for my graduates,” she explains.
“There is space for everyone in the market. Universities are there to raise standards and practises, so they do not come at it with a commercial focus.
“We offer an ideal of professionalism; not to push people through quickly.”
One benefit flowing from Kaplan’s size is the opportunity to leverage its deep global knowledge base to offer new educational insights to Australian planners.
“Kaplan has a lot of course material on general business and this is transferable across boundaries,” Prowse comments.
“I’m sure they would want to bring this intellectual property to the market and if you have a good technology platform, then it would be cost effective.”
Jacobson confirms Kaplan is exploring this possibility. “There is a strong strategic imperative to take content or technology to bring into the business here.”
However, Sanders has doubts about the success of this, noting the “Australian education market has historically not responded to that approach, and our members are asking for more choice and not necessarily more online programs”.
From Kaplan’s perspective, the transfer could work both ways. “In the financial services space globally, we have a very strong reputation,” Jacobson says.
“There will be cross-pollination of intellectual property, but equally we can apply knowledge from here overseas.”
This includes taking local content into neighbouring markets such as Singapore and China.
Creating opportunities
Aside from the vocational market, Kaplan has also been busy in the higher education sector signing a deal to acquire two South Australian institutions – Bradford College and Grange Business School.
Bradford College is located on the University of Adelaide campus and provides pathway programs to the university, which is a member of the so-called ‘Group of 8’ schools, which is considered Australia’s leading tertiary institutions. Grange offers programs in accounting and other business subjects.
According to Jacobson, these deals are about broader business opportunities, with the Finsia acquisition providing the necessary postgraduate courseware and accreditation for the financial services market.
However, Taylor is curious about the purchases. “It is an interesting choice as they are not big names in that area. I presume what they are up to is an easier pathway to university articulation than creating their own courses.”
Kaplan has similar arrangements in other countries, with college pathways and foundation programs in the UK through the University of Sheffield and Nottingham Trent University, and in the US with Northeastern University.
It has similar ventures in China and Singapore, with Asia viewed as an important area for future development.
As Kaplan Asia president Mark Coggins noted when the Bradford/Grange deal was announced: “Australia’s status as an education hub makes it a key location for Kaplan’s growth, and we look forward to playing an increasing role in the market for higher and professional education in the region. This acquisition reflects Kaplan’s continuing investment in the Australian higher education sector.”
Raising the bar
Asia aside, the Australian market still offers many opportunities for the willing education provider, according to Sanders.
“The FPA is keen to encourage greater competition and greater choice for planners in education offerings. We would like to see much more choice and range in financial planner education,” he explains.
Sanders claims the market currently only offers three types of product – higher education related, CPD and courses with a vocational approach.
“There should be a whole range of products available,” he says. “It’s not the education market’s fault, it’s due to the regulatory approach. Frankly, FSR genericised the education market down to PS 146 and that is virtually all that is available now, when our members are needing richer, higher and more varied programs that enrich their professionalism.”
Sanders is not alone in his concern, with Taylor agreeing standards need to move higher. “ASIC have made an attempt to increase standards, but in my view it has not taken a strong enough stance,” she says.
“We have a different focus – not just to meet RG 146 requirements. We would like to see the bar higher than that. Any course you can do with minimal amounts of interaction and deep reflection leads to lesser standards.”
Taylor argues it is all about professionalism. “To my way of thinking, if you are serious about being a professional, then you need to do more than minimal education.”
Jacobson agrees standards need to rise. “The benchmark to entry is RG 146, but just meeting this is not enough,” he says.
“Increasingly, we hope to position ourselves as a partner to the industry and industry associations to ensure there is no concern about quality and the professionalism of candidates and education.”
Interest in higher standards may reflect a maturing of the post FSR market. According to Jacobson, the education market has moved on from focusing on RG 146 compliance to now seeking more specialist and niche courses.
However, the previous compliance focus means the industry has lost much of its training expertise for other topics, Sanders says.
“Five or six years ago there were experts in a tiny area in the market who would only train in that specific area all over the country, but those people are gone. They were wiped out by the nuclear irradiation of PS 146 and the industry is the poorer for the loss of varied CPD options.”
Filling the gaps
While agreeing gaps exist in the current education offerings, Prowse believes there is little advantage in providing a wide variety of offerings at entry level, as it can lock students into a particular provider.
“To the extent that you differentiate then you can’t give cross exemptions for previous study and students must continue with the one provider throughout their course. This is not good as it reduces competition,” he explains.
“The best solution is probably a common approach to initial training and then very different approaches to ongoing training.”
Prowse points to product accreditation as an area where there are gaps in the offerings. “There is no really coherent system for product accreditations. Accreditation is one area we will be taking a look at,” he says.
Sanders believes a fresh view of education is necessary. “Education doesn’t only come from educational institutions. It comes when two financial planners share ideas – that’s education.
“That’s why I am not so concerned about consolidation. Others are exercised by this probably because of their view about where education occurs.”
He is keen to encourage dealer groups to take more responsibility for encouraging and recording their training and education activities – wherever they occur.
“The industry is fixated on the idea that they are consumers of education when they need to recognise they should be its genesis and starting point,” Sanders insists.
This is particularly so when it comes to ongoing education. “CPD is the currency of a profession and we need to encourage people to pursue that. It’s not enough to simply accept the menu of education available,” he says.