Government reviews of financial planning, and the pace of industry change likely as a result, offer a great chance to innovate and put the industry on a more secure footing to counter its critics and competitors, the managing director of Securitor, Neil Younger, has told the group’s 2010 national convention in Adelaide.
Younger said that seizing the opportunities presented by the reviews would require planning firms to rethink some of the traditional ways of doing business. He said a revolution was not required; rather, an evolution of current thinking would be the way to go.
Younger also declared the global financial crisis “officially dead” and said it was time for planning firms to shift their focus from survival to renewed growth.
“It’s dead; it’s over; we do not have to concern ourselves with it again,” Younger said. “It’s actually time to start growing our businesses once more.
“One thing this industry can be assured of is that things change. This time, the changes we will see across our businesses will be more significant than ever. You’ll not be able to apply, necessarily, old solutions to new problems. You’ll need to innovate.
“Innovation is about evolution, rather than revolution. You can find ideas from your peers, from different professions.
“The reality of innovation is grabbing ideas from people you interact with on a regular basis, learning from those ideas, and looking to implement them in your business.”
Younger said it was time that financial planning be “recognised appropriately as a profession”.
“Some of the things that have been part of the industry in the past have held us back from that tag of ‘professionalism’,” he said.
“I think the undertones for the reviews are positive in terms of what this industry…will look like.
“Often I get asked questions: ‘Why is it the industry, or Securitor for that matter, have not gone toe-to-toe with the industry super funds?’. ‘Why have we not stood up and defended the value of advice?’ And whilst the value of advice is certainly defensible, some of the behaviours or practices of our industry probably haven’t given us the most solid footing for defending our territory.
“I think this move to professionalism, probably accelerated through these reviews, will give us a platform for an appropriate demonstration of value of advice out into the market – an appropriate platform to campaign on.”
Younger said becoming a profession meant many financial planning businesses may have to restructure, to operate organisations within a true profession. The changes would include weaning the industry off revenue streams like superannuation commissions and, eventually, volume bonuses.
“There are some certainties in what we will see. We will certainly see increased education standards. We certainly will see a fiduciary obligation across our businesses, and that’s not a bad thing. The reality of putting the client first is not a principle I think anyone in this room would not subscribe to.
“One of the things that we do expect is that commissions on superannuation will be banned. The government is looking for a platform agenda on this particular point, and it will be banned. And it more than likely will extend out to managed investment schemes as well, outside of superannuation. So for some of us, we’re going to have to think about what’s the impact of that is in our business.
“It really is defined as the unbundling of product and the commission built into that product. So it doesn’t mean an end to your ability to use superannuation as a vehicle for charging clients, but the mandated structures around superannuation and the defined commission attached to them, will be gone.
“There are plenty of questions being asked around volume bonuses, and what we think in that area. I think the reality is we will see volume bonuses ultimately wound out of this industry, but it’s probably not going to happen in this next wave of regulatory change in the short term.”
Younger said the extent and the pace of change taking place in the industry shouldn’t stop planning forms from refocusing on growth. Having survived the global financial crisis, it was time to look ahead.
“I think the question for us all is: What are we doing around growth?,” Younger said.
“How are we going to focus our attention back on it? It might not growth as represented by funds under advice. But we need to turn our attention to how we can find our new clients into the future.”
Younger paid tribute to the work of Geoff Lloyd, who resigned on Friday as head of general manager of advice and private banking for BT.
“He was very committed to the business and had many good relationships and friendships,” Younger said.
Tongue-in-cheek, Younger said: “He in fact asked me on Friday if I’d be prepared to do a one-minute moment of silence, and I said: ‘Geoff, you and I have been competing for air time on-stage for too long; absolutely no chance I’m going to trade away another minute of my speaking time to you, ever.”
Professional Planner is attending the 2010 convention as a guest of Securitor.
