PP EDM EOY 2015 banner_900x250_v2

It has been a year when we were invited to consider life on both a human and a cosmic scale. We witnessed the continued rise of Islamic fundamentalism and its humanitarian and geopolitical consequences; and we saw for the first time details from the surface of one of the furthest objects in our solar system. The 29th prime minister of Australia was sworn in, less than a year after the 28th. The turmoil on the political scene was a neat analogue for the turmoil experienced in the financial planning industry, while the photos from Pluto reminded us that there is always a bigger picture to consider.

Over the course of the year, the final form of the Future of Financial Advice reforms was settled, and the government responded formally to a range of reviews and inquiries including the Parliamentary Joint Committee on Corporations and Financial Services inquiry into proposals to lift the professional, ethical and educations standards in the financial services industry; the Financial System Inquiry; and the Review of Retail Life Insurance Advice (the Trowbridge Report), including the Life Insurance Framework. And before the year’s close, it has released draft legislation covering the Parliamentary Joint Committee proposals and the Life Insurance Framework.

Buried beneath this avalanche, it was easy to lose sight of the fact that all of the reforms were framed with a relatively few, laudable results in mind, foremost among them the restoration of public trust and confidence in financial planners and in the services they provide. For an industry reeling from the fallout of advice scandals dating back the better part of a decade, the reforms should have been welcomed; understandably, however, there was considerable concern about the details, the unintended consequences and the implementation.

Ultimately, and notwithstanding the discomfort that reform inevitably brings, the industry is ending the year in better shape than it started in. There is now undoubtedly a foundation in place on which a profession can be built and flourish. Here, in their own words, is how a range of individuals selected by Professional Planner saw the year just passed. We include a quick, by-the-numbers snapshot of key metrics for the industry, prepared by Business Health.

 

YOUNGER_Neil_300x600The institutional licensee

Neil Younger,
General manager – advice, ANZ Global Wealth

“2015 has been dominated by reform agendas, including the Life Insurance Framework and a focus on new education requirements for advisers. While it’s been a challenging year, it has been a year of strong growth in adviser practice productivity.

“ANZ Wealth has been focussed on preparing adviser businesses for the new world, and will continue to do so in 2016 and beyond.

“ANZ Wealth has been preparing for these changes throughout 2015, and has progressed several initiatives to support advisers to meet them.

“We have engaged The Ethics Centre to provide guidance on how we can assist advisers to create and meet higher standards within their own practices.

“We have also begun developing learning pathways for advisers who need to lift their level of education, and moving them to compulsory professional membership over the course of this year.

“Advisers are seeking support to run their businesses more efficiently. They are looking at process improvement and toward technology to reduce the cost of running an advice business and manage the complexity of compliance.

“There is also a demand for support around growing revenue, and our focus is to meet that need by growing lead sources and through practice consultancy services.”

 

The non-institutional licenseeBRISTOW_Rod_300x600

Rod Bristow
Managing director, Infocus Wealth Management

“What a year it was! Heightened scrutiny from well-publicised advice failures leading to regulation, regulation and more regulation. The Life Insurance Framework and Financial System Inquiry reports recommended a future path and break from the practices of the past and the role of consumers continued to change, empowered by technology to take control of their wealth.

Robo-advice began to emerge in a significant way in Australia. There were notable structural shifts within and between manufacturing and distribution of wealth products and services. And advisers found themselves having to adjust to institutions’ subtly different approaches to product sales, driven by a shift in emphasis from product to advice.

Mergers, acquisitions and divestments continued as industry participants settled strategies for the future. And finally, there was gradual but steady progress from an industry toward a profession and a focus on restoring trust through the right culture and ethics in successful advice businesses.

“Yes, this has been a year of unprecedented change; however there’s a lot to look forward to in the coming 12 months.”

 

GEORGE_Alexis_300x600The risk expert

Alexis George,
Managing director – insurance, ANZ Global Wealth

“Whether the Life Insurance Framework was an appropriate response to perceived shortcomings in the risk space or not, we are where we are, and it’s now about moving forward.

“The changes will be significant for all parties involved, with clarity being essential to progress the implementation. It is essential that the industry now works together to make this a smooth transition.

“A core priority for our business is to support advisers to deliver insurance solutions to more Australians. We will continue to support advisers and provide guidance on how they can meet these changes in a prepared fashion.

“Meeting a 1 July 2016 date was difficult to achieve, particularly as during the consultation period the proposed changes were constantly changing, including the start date. Now that we have certainty on the start date, the transition period, and the remuneration rules that apply between now and 2018, this hopefully assists advisers to adjust their business models to the new remuneration model.”

.

The associationRANTALL_Mark_300x600

Mark Rantall
Chief executive officer, FPA

“2015 will be seen in historical terms as cementing the foundations of financial planning as a profession on an industry-wide basis. Whilst the FPA built those foundations over the past 25 years in the form of education, certification and a professional code of ethics and conduct – including a structure of member accountability – this was not true of the whole industry.

“In its response to the Financial System Inquiry, the government announced the implementation of degree-entry requirements for new financial planners and the establishment of an industry code of ethics supported by enshrinement of the terms “financial planner” and “adviser” in law. This will eventually bring the whole industry into a recognised and respected professional framework. The draft legislation released followed the detail of the FPA’s 10-point plan released in May of the previous year.

“On a more contentious note, draft legislation on the Life Insurance Framework was also finally released, capping upfront and ongoing commissions to 60 per cent and 20 per cent respectively and introducing a two-year responsibility (claw back) period. This will have a dramatic impact on risk advisers’ remuneration and the way they structure their business.

“Whilst most advisers have accepted the framework there is still a vocal sector within the industry trying to mount a campaign against the reforms.”

 

CHAMALA_Suniitha_300x600The financial planner

Sunitha Chamala
Associate wealth adviser, BDO Australia
2015 Gwen Fletcher Memorial Award winner

“The government’s draft legislation on professional standards will require the standard of professionalism, education and ethics within the industry to rise. This move towards providing high-quality, ethical advice that is in clients’ best interests cemented my decision to complete the Certified Financial Planner (CFP) certification program.

“While the regulatory changes that have been proposed and/or made in the past 12 months may assist in promoting confidence in financial advisory services, it will have to be seen whether they lead to an increase in the number of consumers seeking and receiving customer-focused, quality advice.

“The emergence and growth of the robo-advice sector and broader-based digital advice will continue to disrupt the industry. While there may be a place for robo-advisers, clients with complex personal and financial situations are likely to seek holistic financial planning advice and continue to place value on a personal relationship with their trusted adviser.

The challenge will be how to leverage technology and digital advice to complement the traditional advice model and increase efficiency.”

 

VOGT_Andrew_300x600The super fund

Andrew Vogt
General manager – financial planning, First State Super

“Prompted by the findings of the Financial Services Inquiry, 2015 has been a year in which the role and purpose of both superannuation and financial planning have been debated at the highest levels of government. These debates, while highly useful, have prompted uncertainty for some nearing retirement, as well as those already in retirement. They have also increased the need and demand for trusted financial planning services, advice and products.

“The past year has also seen an increased need for aged-care advice, which has placed a further demand on financial planning teams, and for professionals with specialist knowledge and skills in this sector.

“As a profit-to-member fund we have sought to meet our responsibility to these evolving needs by: continuing to build the financial planning team, recruiting aged-care and risk insurance specialists; holding additional retirement and aged-care seminars; increasing our telephone advice offering; and by substantially increasing our regional footprint by opening member service centres closer to where our members live.”

 

HENDERSON_Ray_300x600_2The consultant

Ray Henderson
Partner, Business Health

“As another year of changes, challenges, opportunities and threats passes by, here are four of the key take-outs we observed in our work with Australian practices throughout the year.”

91%

of clients are prepared to refer their adviser to others. This stat has remained consistently high irrespective of market conditions or legislative changes, indicating a high level of client satisfaction – no change is a good result in this case.

17%

is the average practice profitability (after allowing a $100,000 notional salary per principal). While an increase over our 2013 results, this still doesn’t represent in our view a reasonable return on the investment put in by principals. Better business practices = improved financial performance.

50%

of business development managers are personally monitoring adviser compliance. The question remains in our view – is this really the best use of their time and expertise?

30%

of advice practices have a structured way of seeking client feedback. A reassuring increase from two years ago, but it still means that 7 out of 10 practices aren’t seeking this feedback.

 

REED_David_300x600The Adviser of the Year

David Reed
Retirement adviser, The Retirement Advice Centre
2015 AFA Adviser of The Year

“We’re starting to get some clarity from the government in terms of the path forward for the overall profession. But overall, 2015 has been a fatiguing year. It’s been a quite exhausting one, from the government, from the association, even up to TASA [Tax Agent Services Act 2009 reforms being introduced] a month or two ago. The goalposts have moved quite a lot, so coming towards the end of 2015 we look back and say it was a highly successful year, but a fatiguing one.

“It would be easier if we had a clear pathway from the start, but because the goalposts have been moved on a number of occasions, for whatever reason … it’s been hard to get clarity as to what hurdles we’re supposed to jump over.

“For our own business, it’s really been the crystallization of what our vision was that started in 2010. The rebranding of our business really only occurred two years ago, and we’ve been able to launch a lot of our client initiatives, and measure the response. With Beddoes Institute doing the client survey, we get an understanding now of what they like and what they don’t like.”

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