How to prepare your financial planning practice for a stellar 2019

How to prepare your financial planning practice for a stellar 2019

January and February has traditionally been a relatively quiet period for financial planners. But this year, there is no shortage of issues to occupy the minds of planners.

After the Christmas school holidays, it often takes clients some time to get back into the swing of things.

But this year, there is no shortage of issues to occupy the minds of planners: the findings of the royal commission, changes to fee models, becoming FASEA compliant, developing an approach to robo-advice, the likelihood of a change of federal government and increased financial market volatility are but a few.

This year will be far from business as usual. It’s very difficult to see what’s coming. The only certainty will be change.

In this article we provide some tips on how to best prepare for what may be a tumultuous year ahead.

Consider what the findings of the royal commission mean for you and your clients


The surgical dissection of the financial planning arms of the big four banks and AMP, as well as ASIC, during last year’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry gave a clear indication that there will likely be wholesale change ahead.

Kenneth Hayne’s final report is due on 1 February. Royal commissions themselves do not have powers to change laws, but their recommendations in this regard are taken quite seriously by governments, since they call the commissions in the first place.

There are likely to be recommendations for tighter regulation of the financial planning industry, including stricter enforcement of rules; and a revision of commission structures, including grandfathered trailing commissions.

Expect a surge in legal action by ASIC as it seeks to make amends for its criticism by the royal commission for lack of action against misdeeds by financial institutions.

It’s very difficult to pre-empt all of the royal commission’s findings. The big banks have certainly tried to cushion the blow through the changes they have already implemented such as those to their commission structures.

Analyse internal processes

Given that regulators are likely to tighten compliance and governance requirements for financial planners in the wake of the royal commission, now is an opportune time to be proactive with regard to internal processes rather than waiting to be reactive.

Get on the front foot and scrutinise your internal processes and systems. Are they robust and comprehensive enough to be compliant under a tighter regulatory regime?

Review fee models

In light of the coming changes, it is prudent to review your client service package. It is more critical than ever that you can demonstrate that your clients are getting value for money. Despite the royal commission headlines, my experience with advisers indicates that most advisers don’t charge their clients anywhere near enough for the time, effort and service provided. So, just as important is to ensure that your service agreements are commercial and that you are not promising too much for too little and as a result not living up to what you have promised because it is unrealistic. Therefore, you should be reviewing your service arrangement for each client. If the documented agreement is not what is actually occurring then you need to redefine this with your clients. The cost of delivering advice is going up and non-fee for service revenue will reduce or disappear, therefore you need to ensure that you don’t have “loss leading clients” in your business unless there is a good reason for it.

Optimise client engagement

Clients are the lifeblood of your business – both through the ongoing revenue they generate and as valuable sources of leads.

Clients in general are becoming more financially literate and expecting more from their financial planner as a result. Therefore, client engagement has never been more relevant. Thankfully, technology can help optimise the time spent on client engagement.

January is a great time to review your CRM software to ensure you are extracting the full benefit from it. A good CRM system will improve the client/planner relationship, increase revenue and reduce the number of mundane tasks in the business such as data entry. It should be set up to:

  • Manage leads.
  • Generate regular reports on each client and schedule touchpoints such as meetings, birthdays and anniversaries. It should also include touchpoints for milestones that often trigger clients to revaluate their financial situation such as children starting or finishing school, or 65th
  • Create client insights through the use of segmentation and the like.
  • Generate checklists for regular activity such as annual reviews, renewal dates and sending EDMs.

Getting your balance sheet in order

The expectation of a global economic slowdown this year means that it is prudent to have a financial buffer in place to ensure working capital is always available. Lowering debt levels also helps strengthen the balance sheet against any economic downturn.

Understand the possible impacts of a Shorten Labor government

The polls are indicating that a change of government is on the cards this year. Business lobby groups have already begun wining and dining Labor’s shadow ministers in anticipation of the win.

Gaining an understanding of the likely changes arising from a Shorten Labor government coming to power after the 2019 federal election means that your clients and your business are better prepared. At this point, Labor has:

  • Been highly critical of the Morrison government’s corporate tax cuts.
  • Said it wants to close tax loopholes and the use of family trusts to minimise tax.
  • Indicated it would decrease the rate of dividend imputation.
  • Flagged wholesale industrial relations reform.
  • Supported tax cuts for low and middle-income earners.
  • Said it wants to speed up the transition to renewable energy and to meet the goal of 50 per cent of baseload energy generated by renewables by 2030.

Develop a strategy to address the impacts of FASEA

The introduction of the FASEA regime has certainly created upheaval in the financial planning industry as practitioners seek to understand what the reforms will actually mean for their livelihoods. FASEA has attracted considerable criticism within the industry for its delays in releasing its education requirements and code of ethics. Now is the time to consider your approach to the FASEA regime.

Financial planners essentially have three options:

  1. For those wanting to continue in the industry long term, undertake the necessary study to become qualified under the FASEA requirements. The preparation of an individual study plan is essential at this time, noting that some advisers will need to undertake more study than others.
  2. Accept that they do not intend to undertake the required additional study and either seek to employ a suitably qualified planner at a time in the near future or alternatively prepare their business for sale.
  3. Retrain in an associated field where being authorised under an AFSL is not required, such as financial coaching. 

Developing an approach to robo advice

The relentless march of robo advice has the industry scrambling to determine which model is likely to emerge as the gold standard. As with most technological innovation, there is a degree of mystification and perception of a threat around robo advice. However, the key consideration when assessing any technology is how it can add value to your client offering. If it adds value, great; if it doesn’t, walk away. It’s as simple as that.

It’s not necessary to take a wholesale approach to robo advice. The fact is that many planning firms in the US that have focused solely on robo are now struggling.

The nature of your current client base and preferred future clients will have a large impact on your decisions in this area.  Millennials have an appetite for all things technology, while Baby Boomers are more likely to identify with traditional advice models. 

Regardless of where individual advice practices are in their businesses cycle, there is no doubt that 2019 will be a year of change for everyone. Taking the time to examine and plan for a response to these major disruptors at this point in time is both prudent and necessary.

Eugene Ardino, chief executive, Lifespan Financial Planning

Adrian Flores

Adrian Flores

Adrian Flores is a features editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].

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