The skills learned as a paraplanner are vital when making the career change to financial advice, writes Mark Larmour.
As someone who took the step from paraplanning to becoming a financial adviser (during the global financial crisis, no less), I sometimes wonder how those new to the industry manage without the skills one develops as a paraplanner.
For me, paraplanning has provided a solid foundation for my career as an adviser.
Of course, experience as a paraplanner does not guarantee success as an adviser. A paraplanner may face considerable obstacles and discover new skills need to be developed in order to switch roles effectively. We’ll come to this in a moment.
First let’s consider the role of a paraplanner and how this experience can help to create an ‘adviser in the making’.
The role of the paraplanner evolved in our industry to allow financial advisers to spend the bulk of their time on activities related to their key skill – advising.
This may involve meeting and presenting to new clients, servicing and reviewing existing clients or marketing and networking to generate future clients.
Outsourcing of the plan preparation and areas of research and compliance to paraplanners allows advisers to focus on these core activities.
Generally, a paraplanner prepares the Statements of Advice on behalf of the adviser.
They may also have input to the strategy considerations, assist with ad hoc calculations and be a technical resource for the financial adviser.
Most advisers would want their paraplanner to have completed, or be on their way to completing, their financial planning qualifications.
A paraplanner can be involved in the following steps of the financial planning process:
Step 1: The initial meeting
A paraplanner may sit in on the initial meeting to gain a further understanding of the client’s personal circumstances.
Or, if working from a centralised office, they may make use of the adviser’s file notes or additional instructions.
Step 2: Sorting through client data
The client data collected at the initial meeting will be used as the basis for the adviser’s recommendations.
The paraplanner may identify matters requiring further discussion and liaise with the adviser during this process.
Step 3: Analysis of strategies
This is an area where the paraplanner can add value by modelling the results of different strategies the adviser wishes to consider.
A paraplanner is likely to have a better understanding of the financial planning software than the adviser, and will be able to generate a variety of reports and outcomes.
Step 4: Preparation of written recommendations
The development of a compliant Statement of Advice is the main function of a paraplanner.
Step 5: Implementation of the plan
Generally, this step does not involve the paraplanner. However, they may assist the adviser if any changes are made to the strategies after client discussions.
Step 6: Providing ongoing service
The paraplanner may assist with the development of the Record of Advice following client review meetings.
Being involved in these steps as a paraplanner provides an ideal background for those who take the next career step as a financial adviser.
Of course, paraplanning is a career in its own right, and there is a high demand for those who choose to stay in this technical role.
So how does a background in paraplanning help as a new financial adviser?
Apart from an understanding of the financial planning process, let’s consider the three guiding principles of financial planning:
- Know your product – A paraplanner gains exposure to various products as part of the Statement of Advice preparation. This can help ensure that future product recommendations provide the outcome sought by the client.
- Know your client – At a basic level, collecting client data provides details of the client’s position. However, an adviser also needs to understand what it is the client is seeking to achieve. This is where communication skills may require additional focus and development.
- Educate your client – Having sound technical knowledge and experience across a wide range of strategies as a result of working as a paraplanner does provide a level of comfort when dealing with clients. The challenge is explaining technical terms in simple, easy-to-understand language without confusing the client.
Making the change
Hurdles the paraplanner may face in the transition to advising include relationship building and communication skills.
These can be developed over time. Observing a senior adviser during client meetings is a great way to pick up tips.
For example, the paraplanner may learn how to structure the meeting so that all compliance requirements are covered while still allowing for time to build a rapport and answer the client’s concerns.
Learning how to explain concepts in clear, everyday terms is another benefit from observing a client meeting.
It’s amazing how keeping industry jargon to a minimum helps to keep a client engaged – and let’s face it, most clients don’t find discussion of the Financial Services Guide all that thrilling.
A ‘debrief’ with the adviser after the client meeting can help with pointers, such as why the adviser addressed the client’s questions in a particular way.
Talking to other advisers is also very valuable.
In my relatively short time as a financial planner, some of the best tips have come from listening to other advisers talk about their own experiences.
This includes non-client matters such as ideas for growing a client base and marketing suggestions.
Paraplanners who wish to become advisers need to be able to identify gaps in their existing skills and experience.
This can be hard to do on your own. For this reason, it may be helpful to seek out a more objective view by engaging the support of an experienced adviser willing to act as a mentor.
As our senior advisers move to retirement in increasing numbers, paraplanning can become the nursery for the next generation of advisers.
Experienced paraplanners already have a sound understanding of the financial planning process.
They just need to be given the opportunity to develop their skills further.
Mark Larmour is a financial adviser at Fiducian Financial Services.
