A boom decade has seen those inhabiting even the lower ranks in the financial services hierarchy commanding absurd salaries. This is great news for those starting out in the industry; not so good for the small financial planning practice owners looking to expand.
Large financial institutions have bid up the price of advisers, paraplanners and other support staff to such high levels, making it difficult for many boutique advisory firms to run at capacity, let alone grow. According to the Financial Recruitment Group (FRG) remuneration survey published in May, a junior paraplanner in Sydney could expect to pick up $73,000 – a jump of $9,000 compared to 2006.
Meanwhile, in Canberra, the pace of salary growth for inexperienced paraplanners has been even stronger with the average rate increasing by $13,000 in two years – although the absolute figure is much lower in the ACT with the average salary hitting $55,000 in 2008.
The FRG figures also show experienced paraplanners (that is, over three years in the role) will cost on average $95,000 per year in Sydney and $70,000 in Canberra, the cheapest place in the country to recruit. Prospective employers would also have to factor in a bonus of anything up to 40 per cent.
Another recent survey of advertised vacancies in the NSW financial advisory sector, carried out by eJobs Recruitment Specialists, also shows paraplanners have been on a remuneration roll. Trevor Punnett, head of eJobs Financial Planning, says the demand for paraplanners has been running hot for the last three years.
Although the survey found a few entry level paraplanning roles were advertised at $45,000, the lower level paraplanner salary typically started at $65,000. “One specific role, advertised a few times, sought a one-year experienced PP [paraplanner] with a degree and offered $55-75K plus a $15K bonus,” Punnett says in his report. “One must hope that for $90K they got a much more experienced person than they appeared to be asking for!”
The eJobs survey also shows financial planning office admin/client services officer roles typically range between $45,000 and $50,000 for those with up to two years’ experience and up to $65,000 for more experienced staff.
But, according to Punnett, there are signs the rocketing pay rates for paraplanners may soon come under pressure with early signs of falling demand now appearing. He says for the first time since eJobs has been surveying the industry, the number of advertised jobs has fallen, both nationally and in NSW, compared to the previous year. The drop was slight (down 1.6 per cent in NSW and 4.6 per cent nationally) and demand for back-office staff and financial planners is still high.
However, if the trend continues salaries will inevitably take a hit, Punnett says. With inflows and funds under management expected to fall as a result of the general downturn in the financial sector, he says many small advisory firms, in particular, might face some tough decisions soon. “This [downturn] has yet to play out, but we may start to see some practices reconsider their staffing situations.
Certainly excessive salaries for non-essential and/or non-revenue producing staff may now be considered more closely,” the eJobs report says. For example, Punnett says paraplanners who might have been producing, say, 20 statements of advice in a week could now be completing only 10. Business owners might be able to reallocate other work to paraplanners to take up the slack but this may be a misuse of expensive resources.
“It could be that outsourcing [of paraplanning] becomes more attractive,” he says. Conor Donoghue, FRG manager NSW, agrees that the heat in the paraplanning market is coming off somewhat. “I see it more tapering off rather than falling,” Donoghue says. He says bonuses are expected to drop next year and supply of paraplanners should also increase as graduates of large dealer group “academies” enter the market.
For smaller practice owners, that could result in better back-office recruitment opportunities and a chance to reverse a long-time trend. “Smaller financial planning firms have always struggled to compete with the large institutions [for staff],” Donoghue says. “And it’s not just about the dollars but also the other benefits the institutions can offer.”
But some of the boutique practices have been learning these tricks – offering flexibility and a raft of non-monetary incentives (gym membership, for example) to keep their teams intact. “Smaller practices have to focus on their support staff,” Donoghue says. “If they lose staff the principal will be spending more time doing back-office tasks instead of spending time in front of their clients.”