I have been interested in some of the comments made by the press and by even some areas of the financial services industry about the quality of financial planners.
I have been interested in some of the comments made by the press and by even some areas of the financial services industry about the quality of financial planners.
Much of this press has been negative. The intriguing thing to me is that the standard of adviser in the industry has lifted significantly over the last 10 years. There are now a significant number of highly professional people in the financial services industry who are very well qualified to practice as financial planners.
Our experience within Associated Planners is that the industry is now attracting people with post graduate qualifications, including masters degrees and/or the Diploma of Financial Planning (DFP). Many of these people have come from funds management, banking or accounting backgrounds.
In our case, they are all highly competent people who have a full-time focus on giving good financial advice – representative of the best interests of their client.
And, what’s more, it’s encouraging to note that many of these people are joining the industry at grass-roots level. At Associated Planners, we have appointed more than 50 young qualified people over the last couple of years into member firm offices. Once there, they take on an internship, where they spend a couple of years learning the technical side of the business. Under guidance, they will also sit in front of clients and embark on a serious education cycle, including the DFP
The average level of revenue per Associated Planner’s adviser is very close to $300,000. These people are dedicated financial planning professionals who ob-tain most of their business from existing clients or centres of influence.
We have noticed that some of our competitors show average revenue per adviser of less than $30,000. Our translation of this situation is that these advisers are clearly part-time and spend most of their time in another specialisation, for example accounting. I will comment on this later in the article, but my question on this is simple:
If you are going to have brain surgery would you go to a surgeon who specialises in that procedure or would you do it with someone who dabbles in that field per-haps a few days a month?
I don’t think there is any doubt that there is an emerging trend in the finan-cial services industry for the development of multi-disciplined, multi-consulting practices that provide the total financial advice to the client across all areas of lending, retirement planning, estate planning, wealth crea-tion, accounting and legal advice. All of these sector specialists will play a role in delivery to the client of a final and all encompassing result. Because each of the partners in this consultancy or network are specialists in their own field, the client also gets the very best of advice.
This leads me to the issue of conflict of interest. There has been some comment recently that it is in a client’s best interests that a financial planner be a qualified accountant before becoming involved in financial planning. I agree that many accountants make excellent financial planners but I believe that where the accountant is acting as both the accountant and the financial planner of the client, it does raise one serious issue: who provides the checks and balances?
Many of our clients are referred to us by accountants, who are encouraged to be involved in the advice given. In many cases, the accountant will work in the practice with the financial planner, but in other cases, the accountant forms part of a network with the financial planner.
Obviously, when a financial planner does analysis of a client situation, they will also look at the client’s tax structure. This will be done in the context of the client’s desire in relation to financial independence or any other finan-cial goals.
This means that the tax structure of the client is being viewed by a third party and in some cases, will provide an opportunity to ensure that the client’s needs and objectives are being met. Once the financial plan has been developed, the accountant will have an opportunity to ensure that what the financial planner is recommending fits with his/her understanding of the client’s desired outcomes and the most effective tax structure. Each therefore provides a check and bal-ance to ensure that the client is getting the very best of advice, and that is reflective of their current and potential situation.
There is a strong trend globally for accountants to become involved in financial planning. While this is a positive move, I believe it is important that the fi-nancial planning sector of the accounting firm be a specialist function, rather than a general function performed by all accounting partners. My belief is this will provide a client with the best outcome.
Let me acknowledge that there are good sector specialists within the financial services industry. I cannot condone, however, that just because someone is a good sector specialist automatically means that they will be a good financial planner. What we must always keep in mind is that we are trying to develop the best possible solution for the client and that only comes from very good advis-ers. This means industry experience, access to market research, guidance through mentoring, concentrating on the impact of industry legislation and consumer driven change and, of course, business management.
Ray Miles is the managing director of Associated Planners Group.
