The changes flowing from the Future of Financial Advice (FoFA) package are likely to cause a whole host of ructions for the business models of financial advice. Ever since the ball began rolling down the hill, we’ve been witnessing the debate shift and change, with increasingly urgent questions about the future of the dealer group model that has been a core strength of the Australian financial planning landscape.
With this topic as a focus in Professional Planner we will no doubt see discussion about the services, costs and profitability of dealer groups, with claims about scale and efficiency, reach and research being defining features of the dealer group decision criteria. However, in the future professional space of advice, I believe the choices about which dealer group to go with may well be made on very different sorts of criteria from the traditional approach.
There will always be room for value propositions built on profit, brand strength, homogenised compliance and national reach; but the more deeply we engage with the idea that the role of the individual financial planner revolves entirely around their personal, professional obligation to serve the unique needs of their clients in a unique way, the more we might see a shift in the way financial planners think about dealer group services.
The FPA strategy announced last year and rolling out now has focused loudly on this personal change; however, a quieter but equally vital plank of our strategy is the recognition that financial planning is a local service. Clients make a decision to receive services from a financial planner in their local community – or more often than not, their local network – and whilst the brand of the dealer group is no doubt an influence on that, their purchase decision is often significantly informed by their knowledge of the practice and the people within it.
We want to make sure those clients are making good, informed decisions about which door to walk through to get that advice. Which is why we’ve shifted our quality assessment and professional branding to focus on the local office (practice) of the individual professional planner.
Only those professional practices that meet the criteria of having 75 per cent of their planners being FPA members and 50 per cent being Certified Financial Planners can apply to become an FPA Professional Practice. This is because all the evidence shows that professional obligation is a clear differentiator in the minds of consumers and also has a strong influence on the way planning is undertaken.
With branding benefit comes obligation though, and Professional Practices also have to commit through contract to supporting the provision of professional advice, in accordance with the Code of Professional Practice, and be subject to compliance and review obligations to ensure our consumer promise is actually delivered.
We believe this will become a key decision point for financial planners. Knowing you’re working in a Professional Practice that can demonstrate through objective evidence how it is acting above the basic legal requirements not only acts as a quality indicator for clients but also for prospective planners.
We all know that positive, professional, focused dealer groups have been a driving influence behind this approach; and the value proposition argument for that will only get stronger for those dealer groups that can support and nurture the individual professional and the local professional practice to participate in genuine professional obligation. The difference might only be that the future might be slightly more negotiated between profession, professional and dealer group.
There is no doubt that strong dealer group brands, compliance confidence, profit options and service offerings will always be features; but the professional value proposition will come from the comfort of working for a practice, authorised or supported by a dealer group, where both can demonstrate through evidence of contract and commitment that they support your ideals of professional client relationships and support your personal need to act and be identified as a professional.
Deen Sanders is deputy chief executive officer and head of professionalism for the Financial Planning Association of Australia.
