The divide between financial planners is becoming increasingly clear cut – there are those who have and those who have not.
There are those who work as a part of a financial planning business and those who don’t. Those who don’t are working in a financial planning practice.
This is one of the key findings of the Paul Resnik/ ING Opinion Leaders survey which quizzed 20 of Australia’s top planners on the way they run their practices, including the likes of George Flack, Kevin Bailey and Phil Guest, paying particular attention to their marketing strategies. The results of the survey will be launched at Resnik Communications’ Sales, Marketing & Practice Management conference which begins in Sydney today and is reported here exclusively by Money Management.
Industry consultant Carol Davis, who conducted the research on behalf of Paul Resnik and ING, says the gulf between financial planning businesses and practices is widening as sharp business owners hone their management skills and leave behind those who have largely ignored the call to corporatise their practices.
Not that she is admonishing planners who have not turned their practices into businesses.
“In fact there are some advisers I spoke to who have very few systems in place but have very successful and profitable practices which still allow its owners time to take extensive holidays each year,” Davis says.
Instead, she says a robust business structure will allow the planner to successfully pass on the business to another adviser in an orderly succession plan.
A business, Davis says, is one in which the owner or owners “concentrate on generating recurrent revenue not dependent on their personal exertion”. In other words, a business is one which is not reliant on the key financial planners for its ongoing success.
Davis says these financial planning businesses will generally have a few key characteristics that set them apart from the financial planning practices.
Firstly, they have taken to sorting though the deadwood among their client base. They have taken the tough decisions on which clients to focus their attention on and which to pass on to other financial planners – either within the same business or elsewhere.
Secondly, the owners of the practice will not see a new client without at least one other team member in the same meeting. The client is not signing up with the individual but with the business.
Davis says feedback from the survey suggests fostering this team culture is one of the most important ingredients required to transform a practice into a business.
“This means incentives such as bonuses should not be based on individual achievement but rather an individual’s contribution to the success of the business. The survey participants told me it is important that a spirit of cooperation is promoted, not competition.”
Putting more weight on the shoulders of the rest of the team means that the owners of financial planning practices must step back from face to face time with the clients of the business.
“That does not mean that they should be immediately withdrawing from seeing their clients, but rather that it is a mindset to offload the least profitable clients,” Davis says.
“One adviser I spoke to had reduced the proportion of time in front of her clients from 100 per cent down to 40 per cent with the eventual aim of reducing that to 20 per cent. Others have yet to pass on any clients but have it as a key part of their business plan.”
Davis says the final characteristic that differentiates a successful financial planning business is a greater reliance on fee-for-service as a revenue source.
She says that fee for service businesses are in a better position to implement a team approach.
“A number of advisers told me they were surprised by the positive effect on the bottom line by taking on an assistant financial planner to better service fee paying clients.”
