Financial planning has been forever changed by the events of the past six years. After all the inquiry, regulation and upgrading of skills, financial advice is taking its rightful place among the professions. A client seeking the services of a financial planner can feel confident that they are approaching a qualified and capable practitioner who has completed years of education, meets high professional standards and complies with rigorous legal requirements.
The professional year (PY) is the bridge that every new entrant to the profession must now pass in order to participate in this new environment. It acts as a finishing school to prepare budding financial planners for the real world of work. It is a qualification of its own, marking the transition from a technically skilled but inexperienced graduate to a qualified professional.
Industry responsibility
On another level, the PY is also going to be the key to furthering the trust in our profession. It’s vital for advice practices to take the responsibility to train and develop a strong pipeline of new graduates to take up a career in financial planning, especially to address the affordability challenges of accessing advice.
While it can seem daunting to take the responsibility of training a graduate on the job, it is important that the PY is seen as a valuable development process for both the mentor and the emerging planner, not just a tick-box requirement. It is an opportunity for the new graduates and career changers to become well-rounded financial planners skilled at delivering quality, compliant financial advice.
The profession now is roughly half the size of what it was three years ago, with the big four banks exiting the financial planning business and the unwillingness of some to embrace the new educational standards.
The profession has around 16,850 people with the formal qualifications to fulfil the role, according to latest figures from the Financial Advisers Standards and Ethics Authority (FASEA). Of those, 14,630 are practising planners and 360 are new advisers who may now be authorised as provisional financial planners, the designation for those who have passed the halfway mark of PY qualification.
Across the 20 universities offering relevant degree courses, around 500 students graduate each year but not all will go into financial planning. In an environment where there may be few incentives to move practice, nurturing and building the pool of new talent coming into the profession is the best way to futureproof the practice.
Forward thinking and successful practices have been and will continue to be the ones taking the opportunity to attract and retain the best talent coming through that education system. While the PY is still a relatively new process and many are yet to embrace it, there is an opportunity to pick the best of the emerging talent and mould them in your own image.
TRAINING FOR TRAINERS
There are benefits for the existing planners, too, as it provides an opportunity for practices to upskill others through training for mentoring and coaching roles. Despite the constant changes in education and professional requirements for financial planners, ensuring there are significant numbers of planners with the ability and willingness to mentor new graduates is an important step as PY training will be the bedrock of sound financial advice for years to come.
Depending on the size of the practice, several planners can be involved in the PY. The way the legislation is structured requires a primary supervisor to sign off at each stage of the programme. But that supervisor can change through the year – for instance, if the supervisor takes annual leave.
Other planners can also be used to train specific requirements of the course. This provides the opportunity to place the candidate with a specialist in the subject being trained and the workload can be spread across several people.
For the supervisor, there is a wealth of practical and personal gains to be had from taking part in the PY. PY candidates can grow the capacity of the business, help with succession planning, free up time that can be spent with clients or running the business and bring fresh networks and perspectives to the practice. The structure also provides increasing levels of autonomy for the candidate meaning their contribution to growing the business increases over time.
Working alongside a seasoned professional can also expose the provisional financial planner to the disciplines of running a small business such as a financial advice practice, helpful networks and career opportunities.
At a personal level, there is the satisfaction of giving back to the profession, helping someone along the way and establishing lasting relationships built on trust and shared experience.
MORE THAN A FORMALITY
Anecdotally, it can make for a more productive practice. For example, having a candidate learning the ropes of client meetings alongside an experienced planner can create time for the supervisor to see more clients. The aspiring financial planner can document the meeting and do the prep work for the paraplanner that would otherwise be done by the supervisor, but with the benefit of having discussed the clients’ needs beforehand.
Another benefit of participating in the PY as a supervisor or sponsor firm is in developing their own robust understanding of the skillset for a successful planner in the particular practice and articulating it through the program. The PY is broken up into four quarters of formal and supervised learning totalling 1,600 hours. That means the supervisor and sponsor firm need to have a well thought out and structured programme with milestones, a clear sense of what is to be achieved at each stage and what a successful finished product looks like. What will give a practice confidence in taking on a candidate is having the goals clearly articulated and knowing what they are signing off on at the end.
It is a significant commitment. The practice needs to understand that they are responsible for teaching new entrants the necessary professional competence in order for them to be registered with the Australian Securities and Investments Commission (ASIC) by the AFS licensee as a relevant provider.
That said, the requirements are not so onerous as to be beyond the capabilities of even a one-man band to complete. It can be tempting to over-engineer the program, to load in so many specifics that the standard cannot possibly be met.
It’s understandable that firms might want to be cautious in complying with these new legal requirements, but it is neither helpful nor productive to have unrealistic or excessive requirements built into the programme. As with any goal-setting process, the goals for the PY should be clear, attainable, have milestones along the way, and successfully identified.
GIVING CANDIDATES THE BEST START
The danger of overengineering the program can be avoided by working backwards from what a successful planner looks like and then structuring the training accordingly. Keep in mind that the PY is only one year of experience. There is plenty of refinement still to come from a career in financial planning.
The point of the PY is to give the candidate the best start in the fundamentals of practice – technical ability, client care, and practice skills, regulatory compliance and consumer protection, professionalism and ethics – and allow them to build from there. Similarly for the financial planner in training, it is crucial to keep and maintain accurate records of having satisfied the work and training PY standard.
As the PY becomes more entrenched, the range of tools available to help manage the experience is growing in range and sophistication. Some candidates have been recording their hours and progress on a spreadsheet. The Financial Planning Association of Australia (FPA) is developing a comprehensive PY tool which should help licensees, career changers and students to simplify and streamline the mandatory documentation processes. The association also offers a tailored PY training plan, mentoring and coaching resources, and automated certificates upon completion of stages.
As a profession, we are moving from a very prescriptive regulatory environment to a professional environment and the transition with the PY is one of the most important steps in that direction. Practices need to take their responsibility seriously to contribute to the process and put aside concerns that their investment in training a candidate could be lost when they just pick up and join another firm or strike out on their own. If candidates are not properly trained then it is a cost to the firm and the wider profession because those individuals might not become as successful or productive a planner as they could have been.
However prospective planners will still have plenty to learn as they settle into a full-time practice. The FPA wants to grow the pipeline and the next generation of financial planners and ensure we are continued to be perceived as the trusted professional by our client’s. Giving the provisional financial planner a successful PY experience with education in a supervised environment and on the job experience will help make them a true professional.
Anne Palmer is head of education and professionalism at the FPA.
