The rush by Australian financial institutions to implement new education standards across their financial advice channels could have wide-ranging impacts at an individual practice level.
So says Gareth Hall, managing director of Lifestyle Financial Planning, a Chatswood-based practice that is an authorised representative of the Commonwealth Bank-owned licensee Financial Wisdom.
“I think the area it’s going to be really difficult for are [those] people in the regional areas. They don’t have the same talent pool,” Hall says.
Though he suggests the education standards announced by CBA last month won’t have much impact on his own practice, he outlines a couple of areas he expects could be problematic for others.
Lifestyle Financial Planning employs 14 financial planners, 11 of whom hold the Certified Financial Planner (CFP) designation the bank will require all its senior financial planners to attain by 2017.
“We don’t employ somebody to even write advice for our clients unless they’re authorised,” Hall says.
“That always has been our strategy, that our clients have access to more than one adviser.
“For our model, that works really well. Again, our size allows us to do things that other smaller firms wouldn’t be able to.”
Challenges at the smaller end
These include a greater difficulty for sole traders and smaller practices to grow their headcount, due not only to a lower concentration of those who possess the necessary qualifications, but also to the likelihood wages will increase in line with a higher standard of qualifications.
“For small practices going, this is going to make it harder to grow, and more difficult for people to get a start in the industry,” Hall says.
He also refers to the potential for the raised education standards to reduce the number of new financial planners entering the industry – which seems to contradict the stated aim of the government to increase public access to financial advice.
“The previous government’s stated goal was to make advice more affordable and obtainable [but] everything in the last three or four years has made it less attainable,” Hall says.
A strange dilemma
Hall refers to the situation as “a strange dilemma”.
“In any profession, you get a few bad apples and they taint the whole barrel. Everyone suffers as a result,” Hall adds, but acknowledges that “when it’s money, it needs to be protected.”
“Public perception means that we’ve got to raise the bar and improve perception, because I know [that until] a few years ago, it was really easy for people to become an adviser.”
While Hall’s business has an implicit standard it sets for its financial planner, other financial planning practices have had explicit educational standards in place for some time.
Subsidised training strategies
Anne Graham, managing director of McPhail HLG Financial Planning, says that since its inception the firm has encouraged and assisted all staff to continuously improve their education.
“They don’t even have to be client-facing people to improve their skills,” Graham says.
“We will pay for the course, and we will also provide some study leave as well. For the past 12 years we’ve done that.
“But I don’t think we’re alone in that. It stems from my own experience when I was doing part-time study. The policy was you do your study on your own time – and if you pass, we will pay the cost of that course. So the staff member will pay upfront, and we will support them.”
When a staff member successfully completes a course unit they provide proof of their result and a receipt, and get reimbursed. “So there’s no excuse not to do it, in terms of cost,” Graham says.
“You may get some younger staff who can’t [afford it], and we would consider paying for them upfront. I don’t want that to be a barrier to them improving themselves – and us, as well.”
McPhail HLG employs six people, including three financial planners, who are all CFPs and who are all undertaking further education still.
Three other staff are at various points along the path to becoming CFPs. Graham says a culture of continuous improvement, of which education is an integral part, produces a stronger business and better results for clients.
Westpac sets its own standards
Graham says the public announcement by Westpac that it would demand higher educational standards for its financial planners was not a surprise – Matt Englund, head of McPhail HLG’s licensee Securitor, had already advised practices of what was coming.
“When I saw that I thought: ‘Beauty – that’s really good,” Graham says.
“It says to me that the licensee I am associated with has the same values that I do, and this is just backing that up.
“I think that generally, something like this is a bit of a quantum shift. It will be a burden [for some] because you may have advisers who have been advising for 25 or 30 years and may not meet what their licensee standard is. They have to make a decision.”
Their decision may be to quit the industry altogether, she says.
“You’ve got to be willing,” Graham says.
“For someone – and this is my age group – in their 50s, I understand that it’s difficult to go back to school. People may be running a business; they’ve got families.
“You can fit it into your life if you place that importance on it. It’s all about goal setting. That’s what we do for clients.
“Some people are going to be challenged and be upset with this, and I empathise with that.”
Graham says the cost to businesses of training staff may be reflected I nan increase in the cost of advice the clients. Businesses will need not only to recoup the costs of training and education, but more highly qualified staff command higher salaries.
