Graduates adding value in Professional Year

The well-documented exodus of financial planners from the advice industry has created a significant problem for advice practices trying to grow their business or secure a succession plan.

In the past the banks’ salaried advice channels acted like a ‘nursery’ for new financial planners as they had a ready pool of referrals from employees who wanted to transition into advice and the deep pockets to set up a program for them.

AMP Horizons Academy was also a pathway for new advisers and from 2015 they were offering six intakes per annum into their program. The number of vacancies AMP offered for the 2022 Graduate Program was between 20-29. 

With the banks exiting advice and dealer groups like AMP drastically reducing their graduate programs, the pipeline for newly-qualified advisers has dried up. Further exacerbating the problem is the natural attrition of financial planners retiring or otherwise leaving the industry which will reduce the pool of qualified talent even more over the next few years.

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One possible solution is to attract planners back into the industry. Colin Williams of Wealth Data estimates that there are currently over 2,000 qualified advisers who have passed their Financial Adviser Standards and Ethics

Authority (FASEA) exam but have left the industry for various reasons. Some of these advisers may be tempted back but the cost of hiring would be expected to be quite high given that they had a reason for leaving and therefore may require a premium to be enticed back.

Many small to medium financial planning businesses will find it difficult to justify the cost of hiring an experienced financial planner and may struggle to provide enough new clients to keep them busy. Typically, this results in the incumbent advisers working progressively longer hours and weekends potentially resulting in various mental health problems and stress on the family. 

The Australian Financial Advisers Wellbeing Report 2021 found 73% of advisers participants were experiencing burnout from work, 67% were feeling some level of depression and 33% were seeking medical care to manage their health symptoms caused by work stress.Not employing someone to assist is clearly not a sustainable solution for these smaller businesses. While the rising cost of hiring a qualified planner is often not an option, the lower cost of hiring a university graduate may be an alternative.

A graduate is a far more affordable option for these businesses and more versatile as they are able to assist with all facets of the planning process. They can be deployed as and where needed in the business, whether it’s in admin, paraplanning or assisting the adviser in a client meeting until they are ready to take on the role of unsupervised client facing adviser.

However, it may not be easy to find them. According to Williams, only 346 new advisers have commenced across Australia since the Professional Year was introduced on 1 January, 2019. Given the bad publicity around financial planning, it is easy to understand why a university business student may choose accounting or economics before financial planning. Nevertheless, this may change as the industry moves towards a profession and higher salaries can be commanded due to a limited supply of graduates in the next few years.

The problem is that there is a requirement for the financial adviser to mentor and supervise the graduate over the 1,600 hours of work they complete in the first year. This includes keeping a record of their observations of the graduate’s work completed under supervision and ensuring that the graduate’s logbook is complete and accurate. This level of documentation holds both the supervisor and graduate accountable to their respective roles.

The Professional Year program is designed to progress the graduate through the following steps:

• Quarter 1 – Client observations and support to supervisor (experienced adviser);
• Quarter 2 – Supervised client engagement and advice preparation; and
• Quarter 3 and 4 – Indirect supervision of client engagement and advice preparation.

The concern for many advisers is how their business can gain value through this process for all the work required by the supervising adviser and how successfully can the graduate transition from supervised to unsupervised client engagement after the first six months. Many advisers will be concerned that graduates won’t have the confidence or the skills to manage a client meeting.

CASE STUDY

Tony Cafarella of AFM Wealth Strategy in Adelaide found that his workload was becoming too much, but to justify the cost of an experienced adviser would require purchasing another book of business with all the associated issues and hassles.

Tony decided the simpler option was to hire a graduate. He liked the idea of training a graduate in the way he wanted so he would not have to deal with any bad habits typically picked up over the years.

Zac Kessner started working for Tony on a part-time basis while still studying at the University of South Australia and then started his Professional Year in January 2022. Tony quickly realised that while Zac needed training in some areas of financial advice, he was very tech-savvy and willing to learn. So, he asked him to attend training webinars and watch training videos for the client engagement software that the business had been using for years but had never quite managed use to its full capability.

Zac quickly learned how to use the software. He was able to assist Tony in preparing for and conducting client meetings, as well as preparing the SOAs and ROAs. 

Using the software’s online questionnaires, they received client information prior to meetings and could discuss the client’s broad financial circumstances, issues and goals and determine what the client’s priorities were. This gave Zac valuable experience in planning out the meeting and ensuring that all the important issues identified by the client were being covered as well as identifying other opportunities where they could add value. 

Zac attends the meetings, capturing the relevant information from the conversation directly into the software allowing Tony to use the visual modelling calculators and tools on the wall mounted TV screen to explain the strategies and possible options explored with the client. Zac found the retirement cashflow calculator was particularly useful as he was able to model a number of strategies before the meeting and then adjust them live to show the clients the impact of changes.

After the meeting, Tony and Zac would quickly de-brief and discuss how the meeting went and what the next steps would be, there was no need for a detailed instruction as Zac already knew the strategies discussed and what the client wanted. 

The information entered and saved into the software during the meeting would also make up a substantial part of the required file notes and SOA/ROA, saving time in the process. 

Tony sees a number of benefits from having Zac assist in meetings:

Zac gets a better understanding of the various strategies that may apply to clients with different circumstances and is able to watch Tony conduct a client meeting, build rapport and handle tricky questions. These are the skills he will need when he starts seeing clients unsupervised;

Tony is able to maintain an uninterrupted conversation with the client as he is not the one inputting data and he is able to show the value of his advice through the visual explanations of the impact of various strategies; and

The clients experience a much more interactive and interesting meeting and are making informed decisions as they have a better understanding of why Tony is recommending certain strategies and what the expected benefits are to them.

Another advantage is that Tony’s mentoring obligations for Zac are conducted largely as part of the normal business processes and, with several client meetings a week, Zac’s logbook is quickly filled with examples of ‘supervised support’.

Tony feels that Zac is complementing his strong technical knowledge, learned at university, with the soft skills required to build client relationships and is learning how to conduct client meetings by actively participating in the client meetings.

Both Tony and Zac feel he will easily transition to a Provisional Financial Adviser after the first six months of his Professional Year are completed, at that time he can add further value to the business by seeing clients and preparing advice with indirect supervision from Tony.

A challenge for Tony will be retaining Zac once he is fully trained and experienced, however, Tony can see a pathway for Zac to grow with the business as they take on more graduates in this way and would ultimately like to see Zac providing a succession plan when Tony is ready to retire.  

Hans Egger is managing director of Astute Wheel.