Fifteen years ago I linked up with Bodinnars Financial Planning, now part of the Fiducian Group. In some ways those years have passed by in the blink of an eye, but on reflection, what myriad changes there have been in our industry. Through all of this, planners and clients have improved — a good thing.
I joined financial planning just after the 1993 Financial Planning Association (FPA) conference in Canberra, where the hot topic was this new thing called master trusts and whether they would catch on.
At the Perth Conference in 1994 you could sit at a screen in the sponsor’s display area and try something called ‘surfing the net’.
At Bodinnars back then we had a typist pool and advisers squabbled over whose financial plan (basically a letter) would be finished next. Entry fees were the norm; allocated pensions were gathering popularity during the lead-up to the June 1994 rule changes and I think there were only five units, in total, in the CFP course.
I worked with a guy who tried not to pay for breakfast or lunch during December, courtesy of fund manager presentations.
Use of faxes was the fast way to communicate; financial planning software was, at best, limited and sometimes confusing. Compulsory SG contributions were still at 3 per cent and the major initial public offerings, like CBA and Telstra, had not yet hit the streets.
Apart from strategic considerations, planning back then seemed to include a lot of stock picking and perhaps too much attention on product providers. I remember one of our directors lamenting his advanced years and predicting that the 10 years from 1995 would see significant steps forward for planners and investors in Australia.
How right he was — way back then one almost didn’t need a business plan, the number and degree of changes from the Government was enough to keep us, and our clients, busy. Today you would be crazy not to have a business plan.
The mid-90’s was about the time I realised that while financial planning are two words, the far bigger word of the two is ‘planning’. I could see clients had begun to understand that the first step is to look at the people (needs), then the strategy and, only after that, the finances. While the investment (or transaction) was obviously important, it was the direction, timeframe and outcome of strategies that was starting to come to the fore.
The true test for investors and strategies is often shown during times of market downturn. During my 15 years we have come out of the recession we had to have in 1993, the credit squeeze from 1994, where boring capital stable funds delivered their first negative returns for ages, the ‘Asian contagion’ of the late 90s, September 11 in 2001, the tech wreck of 2002 and now this current sub-prime debt led recession.
As mentioned earlier, through all of this I believe planners and clients have become better. Clients are now far more au fait with the difference between investment and saving. Even during this current, extremely disconcerting economic time, some clients are reminding us of earlier days and the approach we took together in terms of long-term strategy and the defence of wealth.
There are clients who now come to see us with printouts and schedules the equal of any that we might include in the formal plan documents we provide to them. They read and quote press and media articles that allow them to be far more involved in the questions of strategy than years gone by.
All of this is a good thing in my view. Keeping track of asset allocation relative to risk tolerance profiles and visiting the issue of rebalancing, auto redemption and auto investment issues at every review meeting have all helped to make the client better informed, better at understanding some of the strategy issues and better clients.
On the adviser front, continuing education programs have grown legs over the years — big time. In our own organisation, apart from the mandatory professional development training days, we are required to keep up with monthly training modules. In the beginning it was a group of say five or six modules a month of four to eight pages each. Now it’s more like eight to 12 modules each month, and some of them run to 20 pages. On top of this, the completion of specific modules is monitored in line with individual areas of the licence so that the technical level of advisers is kept current and appropriate.
These developments by clients and advisers have helped our industry and clients to build confidence in the advice and service. We all know a confident client will stay with their adviser and also be more inclined to recommend others to the service. This current major downturn will be a real test for us all. Last year the sub-prime collapse hit most of us with a degree of surprise (especially the extent of it).
Most clients and planners have bitten the bullet, revisited strategy and are toughing their way through. This one has so far been very challenging and we need to learn from some of the issues that have emerged for our future client strategy and investment decisions. Based on feedback from long-term clients and the development of adviser skills, I have no doubt that we will.
So where to from here? People seem to be embracing the concept of obtaining financial advice at an earlier age than was the case 15 years ago and investment intelligence seems far more widespread. Now we have financial planning offered as a university degree.
More and more planners are specialising and more and more clients are seeking advice in specialised areas — a good thing. Youth and compliance are making their mark in leaps and bounds — that old adage that a bit of grey hair doesn’t go astray in this profession no longer carries near the same clout — yet another good thing.
Rex Doughty is a financial adviser and representative at Fiducian Financial Services.
