Financial planning is emerging from a being a cottage industry and evolving into a more corporatised and professionally-operated business model, ready to meet the more complex needs of consumers. I have recently returned from a visit to South Africa where I presented to the Graduate School of Business at Cape Town University. The South Africans are very focused on the changes to the Australian financial services sector in the past decade as they are embarking on a similar path. Business succession and corporatisation are high on their agenda and they are very interested in our experience in this area.
Another industry that has experienced substantial change in Australia is the childcare industry. Prior to the emergence of ABC Early Learning as a force, most childcare was provided on a small scale and there was an ad hoc approach to the way different centres were run. They were owned by small entrepreneurs who typically worked in the centre and had very little business acumen or management expertise outside their own small business. Childcare centres have become amalgamated and increasingly professional with brand and corporate systems that have led to greater efficiency.
This is also starting to happen to financial planning practices. Many owners of small practices have matured to the point where they recognise that in order to grow to the next level they need to bring in professional management. Sound business management is crucial if the transition from a small practice to a medium-sized business is to be achieved successfully. Business management is the delivery and administration of management principles within the planning practice. It involves the effective use of the human resources of the practice as well as the material resources to achieve the business' goals and purpose.
Very few planning practices have a comprehensive business plan in place. This is strange considering the focus we have on planning when we talk to our clients. Somehow, many businesses have simply grown as more clients have been accumulated. The lack of a business plan can lead to poor business positioning. A business plan can help to determine what the core activities of the practice are. So many planners fail to understand the relationship between activity and income. After analysis it can often be seen there are many activities being performed that are not core to the practice and can even be loss making when they are properly accounted for.
There is a huge skill shortage in the financial services sector in Australia. In fact, during my visit to South Africa it was pointed out that Axa and a number of other organisations are heavily recruiting planners to immigrate to Australia. Some very attractive offers are being made and we may see a lot more South African planners filling roles here. This is indicative of the competition for qualified people. It needs to be recognised that effective development and management of our staff is crucial to business expansion. Succession planning for key staff makes a practice more robust. In order to grow, you need to become an employer of choice to secure and retain the right people. There needs to be a clearly-defined culture that differentiates the business from its competitors. The team needs to be aligned and to understand the purpose of the business. Younger people particularly are increasingly looking for a home in an organisation that aligns with their values.
In preparing a business plan, care should be taken to state the corporate vision as well as the organisational structure that will enable you to expand. You should use the planning exercise to set the business direction, including its goals and objectives, and you can then define the resource allocation needed to achieve your plan. It needs to identify the resources required to achieve the goals and describe how those resources will be obtained. The plan needs to be appropriately communicated to staff so they can be aligned will the goals of the business.
A business plans is much more than the basic financials that are prepared for a bank manager. It can be so much more than the pure financials. A plan can be used to set goals and to lay out what needs to be done to achieve them. Many business plans are often lengthy and too complex. As a result, they end up sitting on the shelf and never being referred to or used on a regular basis.
Part of expansion involves standardising processes and work flow and it is important to minimise structural overlap and duplication. It is difficult to expand if you don't have a central administration and client management system. Many of the problems facing planning practices are due to a lack of management skills. Specific management skill sets need to be introduced within leadership roles in the practice. This can take the form of additional training or it may simply be recruited into the practice.
Your staff is your most valuable resource and essential to the success of your business. It is important to properly induct new employees, provide sufficient training and development, and to form effective ways of dealing with difficult staff. You can develop effective performance appraisal and reward systems and implement staff retention schemes and long-term incentive plans. The culture in the practice has to be determined from the top down. Leadership is vital to the development of a successful business culture. Culture flows through every aspect of your business. It influences behaviour and in turn shapes the service offering of your company.
