A financial planning firm’s potential professional year (PY) obligations should complement sound commercial induction and development programs for graduate recruits, a new report suggests.
While smaller financial planning firms have decried the PY requirement as a cost that places them at a disadvantage to larger firms, the principal and founder of Grad Mentor, Alisdair Barr, says a PY can dovetail nicely with the business and commercial requirements of financial planning firms that hire university graduates.
“If you manage the career expectations and the induction and development of a millennial [within] your firm in that first 12- to 18-month period, then all the professional year requirements and expectations should only add to that,” Barr says.
A professional year forms part of legislated new education and professional standards for financial planners. From January 1, 2019, all new financial planners – those whose name has not been on the financial advisers register (FAR) before that date – will be required to undergo a professional year under the supervision of an appropriately qualified financial planner. A new standards body, established under the Corporations Amendment (Professional Standards of Financial Advisers) Act will determine the precise elements of the PY.
A Grad Mentor report suggests it can take from 18 months to two years before a graduate hire reaches the so-called x-point, when they tip over from representing a cost to being a profit-generating member of staff.
The report, The Perfect Marriage – the graduate and the firm, sets out best-practice approaches to attracting, developing and retaining graduate talent, based on the real-life experiences of 16 financial planning firms.
It finds that the basis of a successful marriage between a graduate and a firm can be measured in seven key areas: alignment of values, flexibility in work style, knowing the bigger picture, leadership values, regular performance reviews and feedback, personal career planning, and remuneration. And it says the “graduate lifecycle” can be divided into four distinct phases: resourcing, induction, development and retention.
The factors that constitute a perfect marriage between graduate and firm also constitute the foundation for a good PY program, Barr says.
“It makes good sense to help businesses we work with to make sure they get their millennials to and past the x point,” he says. “If somebody takes a graduate on, good business sense says to help those businesses have the right conversations around resourcing them, inducting them and developing them over time.
“That’s almost like the warranty or the assurance policy on those placements. The professional year, diagnosis around technical competence, ethical competence and all the competencies should be overlaid on top of that. As a business is putting people on, it should be doing certain things in that first 12 months to make sure they maximise the return on their investment.”
No excuse not to hire new talent
Barr says the logistics of hiring a graduate and setting out a career development plan, overlaid with the requirements of the PY, should not be an excuse for even small firms not to hire new talent and contribute to the growth of the financial planning profession.
“Spend time finding the right people, and understand why you’re looking for them,” he says.
“But also make sure you’ve got a framework around induction and development and a regular conversation to ensure that when we bring new people into this profession and into a particular firm, we give them every chance of flourishing in that firm and in the profession.
“We’ve all got a responsibility to ensure the new people have a good outcome and experience, because that ensures the future of the place.
Barr says firms also need to make sure they’re set up the right way to encourage the graduate to stay long enough to make economic sense.
“You want to make sure you’re getting a return on them,” Barr says. “Potentially, you want them to stay. Definitely you want them to develop. Definitely you want to be contributing to the profession by making sure you’re inducting people into the profession well. It needs to be delivered simply and easily by the firm to make sure it’s attractive, not a deterrent to bringing new people into the profession.
Professional development and the requirements of the professional year, whatever they may look like, are best delivered by the employers themselves, Barr says.
“If we need to have another firm or an outside organisation coming in to deliver it, then it becomes a costly exercise for all concerned,” he says. “If we can provide the framework to a business that, as part of its operations, is bringing in new professionals, then part of its responsibility is making sure to run them through a certain amount of [technical and ethical training and supervision, as well as] career embedding. If they can deliver that in a simple and effective manner, it will work well for everybody.”
Degree requirements should be broad
Barr says a crucial issue the standards body must address is which university degrees it will accept as relevant for determining entry into the profession.
“What [constitutes] a relevant degree needs to be discussed,” he says.
If the definition is too narrow, he argues – for example, if it’s restricted to specific financial planning degrees – “we will not have enough people to sustain the future of this profession, because those degrees are not filling up with enough yet”.
“If you can go and get somebody who’s studying an investment banking degree or an accounting degree or an economics degree as a baseline, and then give them the specialty around financial planning, then we’ll have enough people,” he says.
“If we [take a hard line], we’re going to end up really, really short. If we’re open to the idea of exploring what relevance is, and broadening that and doing a good job of highlighting that the profession is a great place to be for someone studying a general finance degree, that’s a great place to be.”
