People are tired of restructuring and they don't see an end to it. Most felt that companies are not giving current structures long enough to see the results. People surveyed felt that just when they thought they could come out of the trenches, another round of fire was aimed at them.
The battle reference was mentioned several times by respondents. So fatigued were some people that they spoke about leaving the industry altogether, even though financial services was the highest paid industry, they didn't care and said a reduction in salary was worth the life balance they would achieve.
The battle fatigue that people are experiencing no doubt has an effect on motivation to do their role and how they feel about the organisation they work for. Some felt that expectations were too high and results simply not achievable. They are getting pressure on the home front as well because of the hours they are putting in.
However, high bonuses were being paid and high achievers were hitting their targets across the industry. These high achievers said they worked longer hours with fewer resources to get those results. While the money is good, some respondents questioned how much longer they could go at that pace.
Salary bands have barely changed in four years, but at the senior end of the market, good candidates are still in short supply and commanding competitive packages to move.
The long-term incentives have begun to build again, so attracting the best candidate may now cost an organisation a sign-on fee. Good candidates are definitely harder to move as the fear of change is always on their mind and better the devil you know. While the perception is that a lot of good candidates are out there, the reality is high achievers are generally looked after and moving them is hard.
The company will also fight hard to keep them and counteroffers are very common. Such candidates get counteroffers every time, so addressing such offers at the beginning of a recruitment process is essential.
The decision to move to another organisation is not an individual decision, it is a family one. Families generally err on the side of caution and advise their partner to be cautious. They have seen their partner stressed and working long hours, and starting with a new company means starting again and re-proving themselves.
It has to be worth it financially for the candidate to move and they want a strong contract as a fallback. Clauses in contracts with notice periods of three months to six months are common. Both companies and candidates want these clauses.
This, however, could be a problem for a company headhunting as it may have to wait for its new employee for up to six months while they are on gardening leave. It could also be a problem for the candidate, as a company may not want to wait or be able to wait. Change is inevitable, progress is optional
Written by Lena Coates, Financial Recruitment Group senior specialist consultant
Just when the industry was becoming more optimistic about the year ahead, the amount of change continues to present obstacles and many are still grappling with change.
It reminds many people of the introduction of the Financial Services Reform Act 2001 a decade ago when the minimum education standards were regulated for financial planners.
Planners were confused, resistant to change and there was an exodus from the industry. Many may say that planners had it good for a long time, however, over the past few years they have been confronted with the affects of the global financial crisis and the uncertainty surrounding global markets, making their clients very cautious and moving investment funds to cash and term deposits.
Add the Future of Financial Advice (FOFA) reforms into that mix and advisers are again looking at what the future holds for their businesses and making the hard decisions based on the many potential issues facing them today. Practice development managers were feeling the pressure both from the financial planners they looked after and also from the dealer group to gain scale and have aggressive recruitment and retention targets.
The methodology at Financial Recruitment Group (FRG) for conducting this survey, in conjunction with ifa, has not changed over the past eight years.
Data was collected throughout the year and industry professionals from the banking sector, global institutions, dealer groups and boutique financial planning firms were interviewed.
Financial planning
Banks are doing well and that is reflected in conservative comments about business in the year ahead for them. However, they are still restructuring and more retrenchments will occur. A lot of financial planning business is coming from risk insurance, term deposits and fixed income and clients are steering away from the traditional equity and debt products.
Respondents also said more technology is making it easier for clients to easily access information. They are more informed than ever before and ask a lot more questions of their financial planner.
Clients now concentrate more on their core needs and instead of up-scaling their home, buying the long-awaited boat or splashing out on expensive luxury items, they prefer to conservatively invest their cash and superannuation.
The remuneration for bank financial planners has not changed and depending on the activity of the planner it was anticipated that they should come close to their targets this year, with some going beyond their targets.
But this outlook is not reflecting the financial planning industry as a whole. The uncertainty surrounding FOFA is reverberating throughout the sector. Those financial planning practices that have been proactive and have changed, or are changing, their value proposition to meet the needs of the client were better placed to meet the challenges of FOFA. They had a rosier outlook for the future.
Clients are much more fee-sensitive, therefore financial planners are seeing the need to be more transparent and have a fee structure and value proposition that is easily understood. There is a lot of competition for clients.
The issues of succession planning, costs of running a business in the current financial climate and the possible rising costs as a result of FOFA have caused financial planners concern about the value of their business and some are looking to sell and exit. In fact, experts in this field believe business valuations are the lowest they have been in over nine years.
In relation to financial planning recruitment, talented people are still in short supply and the demand for good-quality planners who can generate business from their own centres of influence and referral sources has not wavered.
The conundrum is that if a planner is successful with his own strong centres of influence, the prospective hirer needs to present a compelling case for them to move from one organisation to another.
Financial planning salaries have not moved from last year, however, some boutiques instead of offering bonuses and commissions are offering equity in the business in place of that. This is a way of curbing their costs and building their own succession/exit plan.
As in the past surveys FRG has completed, this year's findings for the traditional commission structures for financial planners varied from business to business.
Some offered good commissions on new business and recurring revenue. Some were moving to the validation model that is traditionally used within the banking sector, which allows the practice to cover not only costs but also on-costs before the planner moves into bonus territory.
Although it was recognised that inflows were slow, most felt they would come close to the previous year's reward.
Dealer groups and practice development managers
Recruitment has also been top-of-mind for practice managers in an increasingly competitive environment."
Lonsdale CEO Mark Stephen added his thoughts: "It's certainly been a competitive year for the entire industry in terms of planner recruitment and practice management. Lonsdale has kept to its philosophy of targeted and selective recruitment based upon quality member firms rather than quantity.
"In these challenging times, the clever words of Warren Buffett are very appropriate, 'price is what you pay, value is what you receive'."
Lonsdale has spent considerable effort on the provision of value when it comes to business management and practice development services to the associated network, particularly in relation to its FOFA preparedness.
"Our early adoption and collaborative approach towards the new FOFA regime, has meant we haven't lost focus on targeted recruitment, looking at quality firms that align with our value, culture and sense of community," Stephen said.
Good paraplanners in short supply
The consensus is that good, talented paraplanners are in short supply. However, in breaking with past trends there seem to be more experienced paraplanners on the market.
The reason for this is the current rationalisation of costs within the smaller boutiques and some bank and non-bank financial planners deciding the sales side of planning was not suited to them and paraplanning appealed to them more because they would still be able to use their skills and stay within the industry.
This year's and last year's surveys show the technical skills for paraplanners were not consistent. The general reason was that if the paraplanner was being recruited from a small financial planning practice into a bigger organisation, then the paraplanner had not had the opportunity to construct plans from a holistic view because their employer perhaps focused only on a couple of areas.
One change that has emerged is that companies now have two levels of paraplanners: seniors with three years' plus experience and then paraplanners with one year's plus experience.
Organisations were building training and mentoring into senior paraplanners' key performance indicators. This creates an avenue for up-skilling and promotion for the newly-recruited paraplanner into a senior role.
It is also less difficult for a company to recruit at that end than it is to go to market for a senior paraplanner, and it creates a natural succession plan.
More companies are providing bonuses/incentives for paraplanners based on plan production
and/or revenue generated from plan production. This also has made it a more attractive proposition, particularly for planners from the larger institutions who do not want to be planners anymore.
Conclusion
The industry is still uncertain about the year ahead. Financial planning is still concerned and confused about the impact and ramifications of FOFA on their businesses, with respondents thinking businesses that have already moved to a fee-for-service model are better placed.
Also, a number of planners are concerned about the value of their business with some wondering if it is it time to exit, while others are sitting back waiting for change.
Inflows are slow and more emphasis is being placed on retention of clients, while more financial planners were working in the risk space, which is still in demand by clients.
On the dealer group side, it is more about retaining existing planners, as more and more organisations pressure PDMs to build scale.
There were acquisitions and mergers of businesses and that will continue, with a few independent dealer groups feeling they will be well placed to attract advisers who do not want to be part of the larger organisations - and that is fine with them.
Bonuses are conservative, but many practice managers anticipate they will receive some bonus this year.
There is some optimism and in most cases companies will replace people if they leave, but there does not seem to be growth. It will be interesting in next year's survey, assuming FOFA is eventually put to bed, how the industry will react to the proposed changes and what the fallout will be, but for the time being it is business as usual.
