Paraplanners bolster advice process

A number of years ago at a Financial Planning Association (FPA) conference, the head of an American financial planning group suggested planners would become the back-office people and client relationship managers would have the key role in meeting the client.

As with many predictions, this has not happened in Australia, although the client relationship manager model has been adapted.

Under the Australian model the financial planner still meets with the client and assesses their needs, but the actual plan is produced by the paraplanner in the back-office.

However, some dealer groups now have a client relationship role, but they spend their time on administration duties to make sure everything is happening for the client on time.

Macquarie Wealth Management associate director Doug Webber said his organisation uses both paraplanners and client service assistants.

“Paraplanners are critical and the (financial services) industry devalues them by placing them in the sales process,” he said.

“Lots of planners rely heavily on paraplanners to get across the technical issues.”

Webber admits there are ‘bucket shop’ paraplanners who churn out average plans, but there are those that can produce a Statement of Advice (SOA) and provide technical support.

“We want our paraplanners to not only answer technical questions, but be able to produce a properly worded SOA,” Webber said.

Ipac national manager, advice development, John Darney said a few years ago the dealer group tried reducing the number of paraplanners. The result was a drop in the productivity of the planners, so paraplanners were reinstated.

“We recognise different people add value in the advice chain,” he said.

“The advisers’ skill is at the coalface working with clients, and this is a highly personal skill.

“By supplying paraplanners to handle the technical work, you are freeing up the adviser to do what they are best at.”

Darney said paraplanners also quicken the process, which helps meet the regulatory requirement that plans are produced within five days.

“We see paraplanning as an additional layer of technical support to the adviser,” he said.

“It is also an additional opportunity to add value for the client.”

Paraplanning should be seen as a career path to becoming an adviser, as the advice industry needs more planners, according to RMIT University adjunct professor Wes McMaster.

“We need to bring in new financial planners and increase the number of advisers to meet demand,” he said.

“It is an opportunity to start at the bottom of the ladder for young graduates out of university who want to become a financial planner.

“They have to join the FPA [Financial Planning Association] and enrol for a post-graduate diploma, which is exactly the same route as an accountant starting their career.”

McMaster said at this stage they join the advice industry as client service assistants, which gives the graduate an understanding of the administration of clients’ accounts and portfolios.

“They are there to make sure the adviser’s recommendations are implemented, and it also gives the graduate experience in low-level research,” he said.

“The next move is to become an assistant financial planner, which is another name for paraplanner.”

McMaster said this career path is creating a formulated structure to enable the paraplanner to move to a service level that will involve conducting reviews for clients.

“They will be building people skills to use in client relationships,” he said.

“It is hands-on training for the paraplanner, which they can use later in their careers.”

However, McMaster said some people are now making paraplanning their career.

“It suits some people to stay in paraplanning and they end up in a supervisory role,” he said.

“Being a paraplanner is not a dead-end career.”

Darney said the experience gained as a paraplanner is very useful for progressing towards being a planner.

“The experience of being a paraplanner equips the individual for a role as a planner,” he said.

“It can be seen as a career path, although we are seeing people who want to stay in paraplanning but move to a management role in the back-office.”

Many dealer groups now employ both paraplanners and client relationship staff, although the roles are usually clearly defined.

The client service assistants at Macquarie are the chasers and deal with service level enquiries.

“Depending on the organisation, most of the client service people can communicate with clients, but they won’t be producing plans.”

Webber said at Macquarie, paraplanners and client service people have defined roles and it can be a career path for the right people.

“We have paraplanners with different levels of expertise and some will become planners in due course,” Webber said.

“But others see paraplanning as a chance to see if they like the financial services industry before going travelling around the world.”

Webber said the move from client services to paraplanner is good, as the individual picks up a lot of skills working in administration that will be useful in later life.

“Starting as an administration assistant can be a career path if the individual has the ability,” he said.

“Growing these individuals is also beneficial for the business, as recruiting good paraplanners and advisers is very difficult.”

Ipac also employs client relationship co-ordinators (CRC) whose role is to chase the paperwork.

“The CRC doesn’t become involved in advice, they are there to support the adviser,” he said.

“We do demarcate the role from paraplanning.”

Being an ipac CRC can be the first step to becoming an adviser, although the individual will move through paraplanning before becoming a fully fledged adviser.

“We have had CRCs move to paraplanning and subsequently onto becoming a planner,” Darney said.

“The appreciation of the client relationship comes more at the paraplanner stage, but learning about the administration side of planning is good experience when the CRC eventually becomes a planner.”

But not every organisation believes there is a role for paraplanners.

Equity Trustees does not employ paraplanners, rather using client relationship managers to deal with clients.

“Our structure and our clients mean we cannot outsource services such as paraplanning to third parties,” Equity Trustees portfolio manager John Guadagnuolo said.

“We need someone to understand the solutions to a client’s needs and investments so they get better advice.”

He said in some areas of the financial services industry advice has become generic, whereas Equity Trustees has created a solution that was a point of difference.

“You can do risk analysis and then ask the computer to produce a set of numbers that is the advice,” Guadagnuolo said.

“We believe personalised service that provides a number of options for the client is the better solution.

“This develops a climate of trust with the clients.”

Equity Trustees runs its own Australian equities fund, which is available exclusively to its clients. It is run on the lines of individually-managed accounts.

“We produced a fund that sits well with our clients, as generic advice doesn’t suit the private clients who come to us,” Guadagnuolo said.

“The fund and advice are not suited to advice that comes from a black box.”

The company employs client relationship managers who deal with clients on a day-to-day basis and work with the asset team.

The asset team handles the investment of the equity fund and planning solutions for clients. There is a financial planner in the team.

Advice is focused on Australian solutions, as Guadagnuolo said clients aren’t interested in overseas shares.

“The relationship managers do provide other Equity Trustee services such as estate planning, looking after nursing home payments or other trustee services,” he said.

“We do not give advice in the more traditional form as we do look after our clients from cradle to grave.”

Guadagnuolo said the holistic approach means the solutions are more comprehensive, which has eliminated the need for paraplanners in the organisation.

However, one dealer group that hasn’t employed paraplanners in the past has now recruited two because of demand from advisers.

Synchron director John Prossor said the group has employed one paraplanner in both Perth and Melbourne.

“Previously, it had been up to the adviser to decide if they wanted to employ a paraplanner,” he said.

“But the dealer group has now employed these two paraplanners to work with advisers in the group.”

Prossor said thanks to modern communications it didn’t matter where the paraplanners were based.

“Planners are time poor and it made good sense to outsource the writing of plans to the dealer group,” he said.

“This enables the adviser to spend more time dealing with clients.”

While Synchron does not employ client relationship managers, the directors of the dealer group, who are advisers with their own client base, have found a different solution.

“All the directors’ personal assistants are authorised representatives and deal with a lot of the communication with the clients,” Prossor said.

“This does also involve chasing matters that the directors have recommended to clients.”