The principals and owners of small and rural financial advice practices are usually flat out. But proposed government legislation requiring a ‘professional year’ before advisers enter the profession, threatens to dump just one more thing on their shoulders if they want to develop new advisers.
The chief executive officer of the Financial Planning Association of Australia, Dante De Gori, is warning that the implementation of the professional year must accommodate the needs of small suburban and rural practices.
“The program and criteria needs to be rolled out across all business models and all practice sizes,” says De Gori, adding that it: “can’t just be something that big institutions and banks can handle.”
Brett Schatto runs Pride Advice, a practice with 12 staff in Adelaide. He is supportive of the idea of a professional year.
“It’s probably one of the most tried and tested ways of becoming a profession,” he says. “We are in a similar family to accountants – we’re not the same, but we’re similar in that we deal with money and finances.”
But Schatto says the devil will be in the detail and determine if the year is workable for smaller firms. “It depends on the cost versus the benefits,” he says, adding a professional year “could be quite costly” to implement.
“There is a reason a client pays $650 an hour to see a partner of an accounting firm – it’s all [things like a professional year costs] are all factored into the price,” he says. “Until we know what it looks like I can’t say it’s worth the money it’s going to cost.”
Adaptation
Schatto believes that both the industry and smaller practices should adapt. While smaller practices will be less inclined to have someone doing a professional year, he says, they would be more inclined to poach someone from a bank or a larger dealer group.
Under that scenario, larger practices would effectively become the training ground for advisers. They would help advisers get a start in the profession, before moving into smaller practices.
Schatto also says the professional year could lead to the development of consultants who go out to practices and help facilitate the year “as opposed to it falling back directly on the proprietor of the business.”
Schatto already has a paraplanner who he is training to become a planner. They sit in on client meetings.
“If the requirements of a professional year are similar to what I’m doing already, it’s not going to be a problem at all.”
The professional year is common in a number of professions including accounting and engineering.
A year can be a long time
Tony Greco, a chartered accountant who completed a professional year, says the concept of a professional is a move in the right direction for advisers. Greco is now a senior tax adviser at the Institute of Public Accountants.
Advisers are “trying to gain what the accounting professional has gained: trust in the marketplace,” he says.
“It’s a stepping stone to get where the accounting profession is – and has been – for some time.”
Greco says smaller firms do have less resources to manage professional years. But he believes the onus of the professional year doesn’t reside with the owner, but with the aspirant adviser.
Most of a chartered accountant’s professional year is completed outside of business hours, Greco notes.
“Larger firms do provide some assistance with days off for attending exams, but most of the bulk of the work gets done outside business hours.” Greco says the professional year is “an investment in oneself.”
“That person can leave the next day,” he says. “Once they’re fully equipped those people can leave.”
Viewed from that perspective, it means that firms, particularly smaller ones, shouldn’t have to go to extreme lengths to help a person completing their professional year.
Still, it is a win, win situation for both the firm and the aspirant, Greco says.
“The more educated your staff, the more opportunity you have to provide competent service. “It’s risk management from practice perspective; you want your staff to be well resourced.”
But De Gori says the proposed professional year for advisers is different from the likes of accountants.
‘Retro-fit’ not the answer
Accountants undertake a professional year to become a member of a professional body, such as the CPA or chartered accountants. An accountant can still practice without a CPA or CA designation.
But De Gori says that isn’t the case with the adviser professional year. “This rule means you can’t be a financial adviser unless you’ve done a professional year,” he says.
“It’s a real hurdle, a requirement that you must meet if you want to provide advice, be on the register or want a job.”
That higher hurdle means the requirements need to be “more accommodating,” De Gori says.
Like Schatto, De Gori says the details will be all-important, and it must cater to all types of advice models.
He says a bank might have the resources to have someone sitting in every interview and every aspect of the professional year process.
“But with other business models, they may not be able to have someone dedicated to just supervising one person 24/7; but they could have a people with a role in a supervisory process that reviews, audits and signs off one.”
De Gori says the key to a successful professional year for all business models is not to be too proscriptive. He cautions against having the professional year requiring a specific number of plans completed, or a specific number of clients interviewed.
De Gori is also calling for licensees to accept that the professional year needs to be different, however. He says licensees want the year to be in line with the way they on-board advisers today.
“That’s the wrong way to look at it,” he says. “The way we have done things in the past hasn’t been the right way. We need to look at this from a fresh perspective rather than retro fit it.”
