Financial planning practice principals have considerable room for improvement in attracting young talent and planning their own succession, according to a national study conducted by Zanetti Recruitment and Griffith University.
“I think there are a lot of professions that utilise graduates far better than we do and I think the industry as a whole [including] educators, licensees and individual businesses, need to come together to create something far better than what we do today,” said Ric Zanetti, founder and principal of Zanetti Recruitment & Consulting (in the left of picture).
He presented some of the key findings at Best Practice Forum, held in Sydney on Thursday and organised by Conexus Financial, owner of Professional Planner.
The study was a 15 month project spanning financial planning businesses of various types and sizes, including self-licensed firms and those of 42 different Australian Financial Services licensees. It drew responses from 335 participants across 218 firms .
Around 85 per cent of respondents indicated they intend to grow staff numbers over the next year.
Of these, 65 per cent expected to use graduate recruitment to support this, and all those with annual revenue of more than $5 million intended to utilise graduates. “But many of them don’t know where to find them,” he said.
The challenge of scale
While emphasising the importance of harnessing graduate recruitment, Zanetti acknowledged the challenge of doing this, particularly for smaller practices.
“As a small business, it is very difficult to grow your own staff without it having an impact on the performance of your service to clients, and potentially on the balance of your staff.
“Graduate recruitment is an extremely difficult task, especially for firms of less than five staff,” Zanetti said.
Forward planning of recruitment needs is particularly important for small to medium businesses, where a lack of scale often also creates time constraints around finding the right candidate.
“We find when a small business with only one [client service officer] loses that individual, automatically, they’ve probably got four weeks notice and 100 pre cent of that resource to fill,” he said.
As a result, many businesses with a desire to develop graduates in order to create a more sustainable model instead focus on hiring only experienced staff in order to meet more short-term workload demands.
“You need to build a talent pool of people. Do not wait until someone leaves, throw your hands up in the air, and say ‘I’ve got to replace them in four weeks!’
“Otherwise, hiring decisions can be compromised, and you may end up with the wrong person in your business…get in front of people today,” Zanetti said.
Planning to succeed
The same forward planning is required in preparing for business succession, with Zanetti referring to the example of one Brisbane-based financial planning practice he was consulting with.
“[The principal] made the comment, ‘There’s this 40 year old, we think this person is right, but they have a mortgage, two kids at private school’…He used the term ‘succession hope’ instead of ‘succession plan’,” Zanetti said.
Dennis Perry, principal of Advice First, a Gold Coast, Queensland-based practice licensed by AMP Financial Planning, outlined his own experience as part of a five-year succession plan.
He and his former business partners – and close friends – created a documented succession plan in 2007, which was ultimately enacted in 2012.
This included clear expectations around the partners’ hours of work, productivity, client development role and mentoring of young practitioners in the business.
“Because once someone gets a sense of a retirement date coming, we didn’t want to have our key rainmakers and foundation partners with their feet up on the desk waiting for the finish line to arrive,” Perry said.
While Perry said he had no difficulty communicating the succession plan to his staff, he was initially concerned about sharing the news with clients, many who had been with the firm for 20 to 30 years.
“I had a fear that if they knew our foundation partners were going to retire…they might use that as a catalyst…to change adviser.
“But it was a mentor’s discussion which reversed that thinking,” he said, with the consultant saying that instead of being scared off, ‘Your clients should be immensely impressed that you’re planning and you’ve got a five year documented plan, you’re bringing people through, and that the good and the care of the client is at the heart of all this.'”
Perry said that ultimately, sharing the information about the succession strategy with its corporate and private clients and alliance partners was among the best things they did.
Fostering of young talent was also built into the succession strategy, with a clear recognition that young practitioners were needed to transition client relationships over a long period of time.
Over the final two year period before the partners were due to retire, a policy was enforced that meant neither were allowed to meet with a client without the participation of a younger practitioner.
At the first meeting, the older practitioner would run proceedings, with the young planner observing. By the second meeting, the more junior planner would actively participate, progressing to managing the process by the third meeting.
“By the fourth meeting, the senior partner was down the hallway. This gave [the client] that comfort factor that they’re still around, they’re still involved in the firm, but the relationship handover was done over a two year period.”
