Culture is king: Retaining PY talent in advice

Retaining new entrants in the advice industry as they complete their Professional Year is a key focus for advice firms in 2024, while younger generations increasingly value workplace culture more than ever.

Discussions around how to cultivate the next generation of financial advisers and consequently retain new entrants have long permeated the advice profession.

Since the beginning of the calendar year, the industry has welcomed nearly 59 new entrants as of 29 February, according to Wealth Data.

Adviser Ratings’ Musical Chairs Report found that the third quarter of 2023 saw the highest number of new entrants (122) in five years and a further 78 entrants joined in Q4. 

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While the amount of new advisers commencing has been strong, commentators believe the higher number of adviser exits offsets this progress being made as the same survey found 251 advisers left in Q3 and 264 left in Q4.

“Unfortunately, challenges continue on the supply side, with just a slow drip of new entrants joining the profession,” Adviser Ratings wrote.

Andrew Dunbar, director and senior financial planner at Apt Wealth Partners, previously echoed this sentiment: “The intake rate at the moment is probably still not high enough to where it needs to be long-term to service the Australian community.”

With the number of those departing exceeding those who have joined, retaining new advisers and PY candidates remains more important than ever.

Speaking with Money Management recently, Dunbar outlined the several approaches that Apt Wealth Partners implements to preserve its staff levels.

“We do a number of things, and it starts right at the beginning by setting out a clear pathway,” he said.

The national financial advisory firm heavily invests in the next generation of advisers through three key stages: completing an internship, progressing to a graduate program, and then undergoing the PY.

“We’ve always felt that our competitive advantage in the market was going to be based on the strength of our people, by attracting and retaining the best people and developing them ourselves. Our internship and graduate program is one of the best things that we’ve invested time, money and effort into over the last decade or so.

“We don’t need more advisers – we want more great advisers. This process is about making them a great adviser, not just ticking the box and getting the adviser title. You actually need to put in the development work, do the proper learning and be patient to reap the real rewards of becoming a far more successful adviser over the long run,” Dunbar explained.

PY students at Apt Wealth Partners can also access dedicated mentors in the organisation for extra guidance and eventually seek equity ownership by becoming a shareholder of the business.

Money Management also spoke with PY candidate Rachel Hubbard, who works as a financial planning assistant at IPS Wealth Management, and noted the importance of having one’s career development clearly mapped out.

“If a firm can offer you career progression and the opportunity to do your PY, I don’t think people would bother moving to another firm afterwards. But if they can’t offer you the ability to move into your PY, then people will move,” she said.

Remuneration versus culture

Attractive remuneration, as expected, also remains at the forefront of staff retention, Dunbar said.

Adviser Ratings recently discovered that new advisers can expect higher salaries, with over 60 per cent of financial advice practices enjoying profit margins above 20 per cent – a figure which includes owners’ salaries.

Moreover, average rises in advice practice revenue is surpassing 5 per cent annually, while more than one-third (35 per cent) of firms are experiencing a “remarkable” 15 per cent surge in revenue.

“This financial health is creating a ripple effect, particularly in the realm of adviser salaries. As practices become more prosperous and strategy-driven, the demand for skilled advisers is soaring, making it an auspicious time to be in the industry,” Adviser Ratings wrote.

While an appealing salary will always be important, fostering an enjoyable work culture and employee value proposition is equally crucial, Anne Palmer believes, general manager for education and professionalism at the Financial Advice Association Australia (FAAA).

“It’s not just about wages, it’s also about workplace culture,” she remarked. “It might be really important for a new entrant to have flexibility to work from home or the office. They might want bonuses or team-building activities that help retain staff.

“Certainly make sure people are paid appropriately, but also as a business and as an employer, it’s good HR practice to engage across all those levels.”

For Hubbard, having flexible working hours to balance her family life was crucial when entering into her current role as a financial planning assistant completing her PY.

“I think it’s personal for what you want and need. For some people, 9–5 suits their family, but I needed that [flexibility] and that was my one thing,” she described.

Last year, Money Management explored the trend of advice firms taking the leap of faith with flexible work weeks. For example, national advice firm Invest Blue adopted a nine-day fortnight pilot, giving all full-time employees an extra 26 days off per year and came at a cost of some $1.9 million annually.

In addition, the industry experts all recognised that having a sense of purpose and fulfilment as a financial planner is a key motivator for new entrants.

Palmer explained: “People want to change the world and help Australians become more financially stable. Work is not just about paycheck. It’s about that motivation of feeling like you’re making a difference, to not just your clients but the organisation which is a big factor in retention.”

Hubbard added that for some new advisers, finding satisfaction in their job could mean working with particular niches in the firm’s client base.

“You need a workplace that is going to support you to move into that specialty area of where you want to go and support your progression. It could be working with just retirees, or maybe high income families,” she said.

“Whatever it is, there’s lots of different niches in the industry and the different strategies that come with different demographics. A younger client in the accumulation phase where they’re trying to build up wealth is going to be very different to someone who’s talking about going into aged care.”

The road ahead for new entrants

In the five years since the Hayne royal commission, an array of efforts have been introduced by the government aimed at stemming adviser losses and accelerating the flow of new entrants.

Most recently, ASIC confirmed it is incorporating legislative amendments to the financial adviser exam, with the March exam set to reflect the changes.

This will see the short answer questions removed and replaced with multiple choice questions, as well as removing the requirement limiting exam participation to new financial advisers who have completed an approved degree and existing providers.

Palmer certainly hopes that changes like these will create the tangible impacts that the advice profession has been yearning for.

“We are seeing an uptick in the number of new entrants going up every year, so we are really hoping that it will make a difference,” she said.

The general manager is optimistic about the “super enthusiastic” cohort of new advisers, who haven’t felt weighed down by the period of upheaval and regulatory overhaul in previous years.

“They’re not really burdened by all the changes the profession had in the past – they haven’t had to go through all of that. They just enter the profession as it is now and they’re super excited to get started. We find that they are generally a very enthusiastic bunch.”