Will the cost of planner education crimp practice sales?

Many newly qualified financial planners and accountants will choose a salaried position with an institution over a more entrepreneurial consultant role in order to pay down their education debt and other industry entry costs, according to specialist financial services business broker, Paul Tynan.

In a sign of things to come, Tynan believes that fewer financial planners who are relatively recent entrants to the industry will be looking to acquire existing planning businesses.

“Young professionals considering a career in the financial services advice sector must carefully consider how they will enter an industry that is weighed down by educational standards and regulatory costs,” he said.

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“Acquisition of an existing practice and associated financial commitment is definitely not on the cards,” he said.

Tynan said that it was in these circumstances that older accountants and financial planners seeking to exit the industry needed to understand the new industry dynamic and improbability of them being able to achieve the types of returns on their businesses which were common before the global financial crisis.

“Baby Boomer planners are faced with regulatory and educational changes which are only going to increase as technology continues to disrupt traditional business models,” he said. “Education standards, industry and professional accreditation exams / requirements are here to stay and if a course of action is not taken whilst time is on their side, these planners will find the exit strategy being made for them.”

“Similarly, senior age accountants are facing new business models which are moving away from compliance to advice businesses,” Tynan said. “These changes are driven by technology and time delays in taking action will result in exit strategy failure.”

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There is no substitute for "owning" the clients. The new education standards will force current owners to decide if they want to continue to be owners and advisers, owners alone, or exit the business. The UK experience was that many owners stayed on in the business, relinquishing the advice role and taking a more hard nosed approach to the delivery expectations of the new recruits they took on. Business Valuations weren't effected particularly other than briefly at the deadline. The much greater moral issue is how many young advisers are planning on becoming owners through client theft from their current employers. The expected new education standards will fail another generation because, like every bit of legislation in this industry, it targets the wrong issues.

Many advisers who suffer at the hands of ill informed decision makers imposing academic education over practical experience will opt to manage the business and not just sell out as valuations start to fall. The big problem with this strategy is the rising costs of running a financial planning business (like the TPB fee grab, the coming ASIC levy and many others to come) will see margins squeeze out profits to potentially scary levels, making it hard to cover the required income needs of both the business owner and client facing staff to replace them. A terrible outcome for advice professionals and the industry as a whole. A huge win for training organisations. In 10 years time, when Centrelink cannot cope because of the decisions being made now and people who need help have no one to turn to - the politicians of the day will be blaming FASEA and the brilliant thinking of those who came up with this crap.

FASEA and our useless FPA and AFA seem to be missing the point. 90% of existing advisers will not meet the current educations standards even though a high majority have excellent degrees and experience. Average age of advisers is in the late 50's. Very few young adviser's coming through and for those that may choose too its going to be years before they can practice. Nobody I know in the adviser community is going to undertake a new degree just to practice for an extra few years. Therefore can it not be more obvious what is going to happen? Advisers will all be exiting in record numbers with practices and books coming onto the market at the same time and few wanting to buy them or even being able to service them. It will basically be the end of financial planning for all customers except for the very few rich ones.

I couldn't agree more. We are a family business, one adviser is around 5-7 years from retiring, I'm about 12 years in to my career, degree qualified but I'll probably have to go back and study a few bridging courses to up-skill.

We have employed graduates straight out of uni, and unsurprisingly they are green as grass and need a mountain of practical training, which we are happy to provide, but if all of the old brigade have sold out the practitioners of the day like myself won't have time to hold their hands.

The other issue they will face is the 'grey sells' mantra, hell I still face it in my mid 30's with very little hair left! We are certainly preparing our business now to acquire a handful of good practices when the next generation looks to exit the industry and we won't be looking to take on the lower-fee generating class clients that's for sure, which is a shame because they typically benefit the most.

Ok, Who has the maths degree in parliament?
100% minus 90% =disaster for an industry given many of the 90% are well into their 50's and won't do more study.

What a great opportunity for those with the required education and experience, who will be ready to snap up any of these practices when advisers exit the industry. The financial advice system has been overdue for this revamp (ie. FASEA) and lift in credentials for advisers. Unfortunately we may see experienced adviser's leave the industry but these may also be those who became CFPs after completing a 4 day course and has caused the CFP recognition to be deemed worthless. To try justify your position based on experience is ridiculous, would you ever go to a doctor or lawyer who hadn't attended university, so what makes financial advice any different, particularly given the salary you can earn. I look forward to the day where all advisers are degree qualified, financial services is an ever changing environment and if you can't move with the times, your loss will be someone else's gain.

How ironic Johnny that you think advisers who completed 8 subjects of the Adv Dip of FP 15 years ago to get a "shortcut" to the CFP status (Dip+ 5 years experience then), should all exit the industry now, so you can buy up their practices cheaply. Their shortcut is disreputable, but your self serving shortcut is apparently valid. You sure you aren't just another Millenial that wants the keys to the world after 5 minutes at work? Experienced a drop like the GFC yet? Seen anything like the tech wreck of 2000? When you're on the other side of 20 years plus experience, you'll understand why clients value a bit of grey and how shallow your comments are. And if you do get to 20 years plus, will experience suddenly count for something?

Oh Long Term Cynic, you may think you're wise beyond your years however the end races towards quicker than you can cope. If adviser's think it's too difficult or too hard to achieve the education requirements in the set time frame, then you're forgetting the main reason you got into this industry, to help your clients get into a better position. Sadly it sounds like you won't be there for their journey, however, if your waiting to jump ship, I'll throw you a weight and be waiting to help your clients actually achieve their hopes and dreams. Did you find it difficult explaining to your clients why you lump their hopes and dreams into the one or two ideas (i.e. tech stocks or MBSs) off the back of poor research provided by the likes of S&P or Moody's rather than due your own due diligence. Are you still recommending clients invest in Aussie banks based on yield and they are as good as "bricks and mortar'? Given my 17 years experience, MFP, ADFP and salt & pepper hair, I'm still happy to move with the times rather than complain about the future....how did you ever make it through explaining the GFC, oh wait, we're back where it started....Maybe it's time for a career change rather than be a Cynic, I'd ask you what you think you're practice is worth but it's likely depreciating given your optimism of the future, if it exists at all.

Johnny, when you put down CFPs, you put down the whole profession, hence the reason for my initial response to you. If you think your education is a competitive advantage, you should demonstrate it, rather than belittling the rest of your professional colleagues ( perhaps its time for you to revisit the definition of "professional"). These education rules will put many fantastic experienced advisers into early retirement - there will be an unprecedented loss of wisdom and many a client will be moved onto junior advisers that have generally only seen good times - that is the cost of imposed deadlines. For the record, I've surpassed the tentative FASEA requirements and have years left to contribute thanks, I'm not a stockbroker and our pre GFC clients are still working with us and living their dreams, not mine. So well done, your reply was both generally and specifically incorrect.

If you can't move with the industry then it quickly passes you by. Your statement is quite typical of a boomer, "We worked hard for our careers", "We didn't have it handed to us"... When Millennials say they aren’t interested in the pointless grind Boomers like yourself put themselves through, a cynical being like yourself seem to view that as entitlement. Succeeding without sacrificing your teens and 20's is, in a Boomer’s world, cutting in line. No, we (millennials) may not have experienced a drop like the GFC or the tech wreck of 2000 just like you never experienced an anemic job market and student loan debt (to obtain qualifications to work in this industry that somehow you like to believe you are exempt from). You say you have been in the industry for 20+ years... you too were one day young, inexperienced and eager so what gives you the right to criticize anyone else having having a red hot go to succeed and learn.

I am now becoming a mortgage broker as well. Average loan around my area is nearly one mill. That means I get $7,000 in upfront commission, as well as a 0.2%pa trail! Twenty loans in a year thats $140k plus trail. Multiples for a book now over 2x. No SOA, SOAA,ROA,FPA,AFA,MFP,CFP,DFP,GFC,TPB oh and did I mention no new degree in a few years time. The Cert IV suited me just fine. Knocked it off in an afternoon! Oh by the way around $500-600 for an ACL application as well. Oh and since the banks tend to only give new business/clients a better rate, if I wait 1.5 to 2 years I have no clawback and can churn the deal to get the client a better rate and get paid all over again.

It's not a bad gig for now, but ASIC are coming for it. The only thing holding them back is the fear that it will put upward pressure on loan rates, otherwise the comms would be scrapped in favour of a flat rate with an adviser service fee built in on top.

Good luck to you, though!

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