The paraplanning piece in the financial advice puzzle

Despite misconceptions that paraplanners solely write statements of advice (SOAs), two industry experts believe they will become more involved in the advice delivery process as Quality of Advice Review (QAR) recommendations are implemented. 

According to the Paraplanner Hub’s 2023 survey of more than 200 respondents, a paraplanner’s main tasks include writing SOAs, modelling and projections, producing records of advice (ROAs), product research and data entry. 

However, their role has no formal definition, nor is paraplanning recognised as a profession in its own right. 

Melanie Drago, senior consultant at Tangelo Advice Consulting and managing director of Tempie, a short-term placement solution for advice firms, said this is due to a lack of clear professional standards and educational requirements alongside an oversimplification of paraplanning duties as only creating SOAs.

VIEW ALL

View all

“I fear if the industry doesn't recognise that paraplanners need to be developed and recognised as a profession, in about three years we are not going to have enough qualified paraplanners,” she told Money Management.

The survey additionally discovered that 82 per cent of paraplanners are over the age of 31 while just 1 per cent are under 25 years old. 

“Either we need to recognise them as a profession and start training them or advisers are going to have to start learning how to use complex modelling software pretty quickly,” Drago added. 

Hayley Knight, director of Contract Paraplanning Services, also observes the incorrect assumption that paraplanners are less qualified than their financial adviser counterparts.

“This misconception often arises due to lack of understanding of the role and the lack of formal education requirements for paraplanners.

“They have the same technical knowledge as the adviser, yet also have an in-depth understanding of the CRM and back-office processes,” Knight commented.

The Paraplanner Hub’s survey discovered that 42 per cent have a diploma in financial planning, 41 per cent have a bachelor degree in a relevant field and 35 per cent have an advanced diploma of financial planning.

“About 11 per cent of paraplanners are even registered on ASIC’s FAR, which is a number I’d like to see increase,” Drago said.

Paraplanners and super funds

Writing a recent op-ed for The Australian, Michelle Levy discussed the ‘phase 2’ proposals in the Quality of Advice Review (QAR) that will see super funds giving advice to their members in order to improve access to retirement income advice.

“I worry that prescribed education standards will create a sort of halfway house with teams of paraplanners providing financial advice to members of superannuation funds. That would not in my view be a good outcome,” she wrote.

In response to Levy’s comment, Drago explained that paraplanners providing basic advice won’t necessarily be a negative outcome - it just isn’t the solution Levy had envisaged. 

“Super funds will need to start training up advisers, and perhaps paraplanners may be a good start to getting more advisers into the market,” Drago offered. 

“I also think having paraplanners deliver some advice (overseen by an adviser) while they embark on a professional year might be a good outcome.”

Paraplanners should be able to easily discern if they can provide basic advice within their scope, she added, or if they need to hand off to an adviser who can provide more complex strategies. 

Both industry experts reiterated the value of paraplanning amidst growing fears of technology replacing the field altogether. 

Nearly 40 per cent of paraplanners are worried about the threat of AI impacting their roles, the Paraplanner Hub found.

In a previous conversation with Money Management, Knight also recognised the rise of video SOAs as another unfamiliar trend concerning paraplanners. 

With these uncertainties in mind, she believes it will be up to paraplanners to drive a positive transformation moving forward.

“It is incumbent upon paraplanners to spearhead this shift, redefining their role from merely ‘document producers’ to becoming integral contributors in the financial advice process.

“In the end, financial advisers will always require the expertise of a paraplanner, but the nature of this service is likely to evolve significantly from the current ‘one-size-fits-all’ document approach,” Knight said. 

Moreover, Drago is confident that advice is never going to be delivered by an industry of just sole advisers or computers. 

“Advisers haven’t got enough time to be everything to everyone and they need specialist support people to provide quality and timely advice.

“Paraplanners are part of this industry and will continue to be as long as clients need advice, and advisers need expert support.”