New roles, new departments, even new institutes are being created by planning businesses keen to be on the front foot when the 1 July 2012 start date arrives.
Reporting boom times are consulting businesses and those involved in training and education, while in demand are compliance professionals, practice development managers and support services.
But staffing levels are not the only area receiving special attention.
Dealer groups and industry associations are focussing their energies on two main tasks - building strong businesses that can be successful in the new environment as well as learning how to sell advice.
Key messages delivered through internalised practice management tools and structures are forming a vital part of Future of Financial Advice (FOFA) preparations and are reinforcing the urgency of the countdown to FOFA.
This is a real 'roll-your-sleeves-up' revolution as FOFA pushes the envelope on change and forces many planners to take their businesses into the future.
Stepping up for FOFA
For over two years the financial planning industry has been involved in industry inquiries, responding to discussion papers and listening to reform announcements.
Patience is perhaps wearing thin on just how much longer they must wait for some detail on the specifics of FOFA. Little wonder then that planners are feeling the pressure.
"There is certainly nervousness around what FOFA may deliver," Colonial First State (CFS) general manager of advice Marianne Perkovic says. "It's not really about growing the business but how to embrace change."
Announced in April 2010 by the then Minister of Human Services and the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, many businesses have been forced to make assumptions on what might become reality.
Stories of dealer groups preparing for a couple of scenarios are not uncommon.
"Planners generally think most reforms will be implemented but are keen to know the exact detail," BT Financial Group national manager dealer groups Adrian De Silva says. "The possibility of opt-in and the ability to administer are going through planners' minds."
There is certainly a spectrum of action being taken in the financial planning industry towards preparing for life under FOFA. Those on the front-foot are certainly perceived to have an advantage.
"There will be people who have embraced change early on and they will be the winners," Perkovic says. These planners have been on a two-year journey. Perkovic says while rebates and opt-in still need clarity, planners are really positive on the significant changes FOFA will introduce.
However Kenyon Prendeville principal Alan Kenyon says there is a bottom end of planners who have had their head in the sand and have not done much at all, and for this group, he says preparing for FOFA will be a "big leap".
The firm is in the business of helping advisers buy and sell their practices. Over the past seven years, the business has assisted with 150 transactions.
"There is a proportion of the industry that is saying it will be right on the night," Kenyon says. "They're the ones that have been always reluctant to change." Association of Financial Advisers (AFA) chief executive Richard Klipin agrees: "The market is fairly segmented. There are practices who have been FOFA ready before it hit the radar with pricing and segmentation. They are already ready."
It is fair to say for those businesses that have not embraced practice management 101's such as segmenting their client base and delivering different services to these segments, FOFA will be a big step. "They will find the change a lot easier if they have gone down the path," Kenyon says.
BT is finding first hand there are some businesses that need to do more work than others. Through its fee-for-advice transition model program it offers planning businesses in its group a flexible ten-step program which allows the businesses to pick out the practice management elements they need.
The group's De Silva says this process is offering planners the opportunity to understand the true costs it takes to service clients and gives them a greater appreciation of all the work they do to service one client. This makes them even more confident about the service they are providing.
"They can then talk with absolute passion," he says. "Their confidence levels have gone up."
Ramming up resources
Recruiters are reporting a significant pick-up in recruitment activity in the planning industry and much of it is being attributed directly to preparing for FOFA.
"Wealth management is in recovery so obviously we are going to see a pick up anyway, but I think it's more significant," Hays senior regional director Jane McNeill says.
She says planning businesses who do not already have skilled practice development managers (PDMs) are now actively recruiting in this area while demand for compliance and support services is strong.
Support services such as client services, and adviser support, are being beefed up to help planners transition to the new regime, while para planner roles and financial planning assistants are also on the rise.
Business Health says in the six months to February this year, it has experienced a 50 per cent increase in enquiries from dealer groups looking to roll out practice development programs in their networks.
Already this year the firm had rolled out practice management programs for Sentry Financial Group, Consultum Financial Advisers, Bridges Financial Services, Outlook Financial Solutions and Western Pacific Financial Group.
Meanwhile the major banks are busily recruiting qualified financial planners.
"When we are talking to the big national organisations, their concern is recruiting adequately qualified people," McNeill says.
New practice management structures are also being developed to give planners the support they will need going into the FOFA environment. Dealer groups are creating strong internal connections, drawing all the pieces of the business management puzzle together for planners to give them a great start to FOFA.
CFS has recruited 25 extra staff to establish the CFS Institute of Advice. This includes specialists in training, technical services, investment and portfolio construction. The head count also includes practice development managers and business coaches.
CFS has also recruited advice coaches to assist paraplanners. These coaches are out to enhance the quality of advice and take paraplanners through the statement of advice. The business will recruit another five coaches by the end of the year. Meanwhile BT has created a specialist FOFA-inspired new role - a national capability manager. This role will be responsible for ensuring practice development managers and practice development implementation managers meet industry benchmarks.
BT has also appointed a new national risk and recruitment manager Marcus O' Sullivan.
Planner's head space
Research conducted by AFA 'The Tides of Change' January 2010 whitepaper gave a telling insight into planners' attitudes to change. It found adviser sentiment about FOFA was negative.
In particular, three in five practice principals, or 62.2 per cent of respondents, said they were anticipating the prospective ban on commissions would have a negative impact on their businesses. One in five, or 22.3 per cent, expected this reform would have a strong negative impact.
In such an environment, it could be fair to assume that the more senior and experienced planners may choose to leave the industry. Klipin says in this way, it is currently trying to reassure and transition advisers rather than allowing planners to walk away. "It is not good for the Australian community to reduce advisers," he says.
Yet industry players say planners are not planning to leave the industry and are in fact upbeat about the future and the changes they must prepare for. Further, the good businesses are now in their preparations and making the adjustments they need for the future. "They are streamlining their processes to adapt to the changes we expect," De Silva says. "The process we are encouraging advisers to go through, if they build strong businesses, will allow you to adapt to change now and to the future changes."
Even plans to sell businesses are being put on the backburner while planners evolve their businesses. The AFA survey found the short term propensity for planning businesses to sell or leave the industry was low.
Specifically, three in four practice principals or 77.8 per cent of respondents said they were likely to grow their business within the next two years and more than one third or 37.0 per cent were very likely to do so.
The majority of the industry is in the process of transition and they are addressing the issue of who are the ideal clients and the cost of servicing those client. For them, getting FOFA-ready is a work in progress. Certainly those planners that are part of dealer groups are looking to them for guidance on how to prepare.
Most of them have been down this path before. Close to ten years ago, the Financial Services Reform Act (FSRA), with its focus on licensing, introduced a raft of changes which many expected would cause a major planner departure from the industry.
"It's similar to FSRA," Kenyon says. "For a lot of people it's the straw that broke the camel's back, not the reason."
He adds: "There's no great exodus. People are either looking at the market now or are making a decision to do work on their business to take it forward."
It some ways, FOFA is much more ambitious than FSRA.
"FSR did a great job in licensing," Perkovic says. "FOFA is addressing the main issues that stopped us being a profession - the payment of commissions, rebates and not reviewing clients."
Preparation work being done
The specific programs in place and preparation work being done to get FOFA-ready have a common theme - make change your friend and get ready to articulate your value proposition.
The banning of commissions means planning networks are looking to streamline their investment procedures. According to Perkovic, using platform providers and making sure advisers are using wraps where they can dial in an advice fee has been important. Further, over the past 12-18 months CFS has been encouraging advisers to change how remuneration is coming into them. Preparations have also included doing work around value propositions and articulating them more than before.
This is similar to activity in BT's distribution network. It has been streamlining their processes so they can adapt to the changes as well as making clients understand the value of advice.
Further, its fee-for-advice transition model provides a key platform for preparing for change. Rather than a one-size fits all approach, BT is using diagnostic and gap analysis to help businesses achieve business segmentation and correct pricing.
"We then agree on a business plan based on our analysis and document the business plan," De Silva says. "They have to own this."
BT then partners with the business for the implementation and review of the plan. According to De Silva this program was FOFA inspired. "We were already doing the fundamentals," he says. "FOFA gave us a clear focus, an end-to-end approach that we can measure."
Perkovic agrees. She says while many of CFS's planning businesses are already fee-for-service, FOFA has given those businesses that are not a real deadline to work towards.
Establishing the CFS Institute of Advice has been a central element preparation to this networks preparation for FOFA.
The Institute, which will be officially launched this month, is designed to raise the education standards of planners and continue their development. It has a 15-day induction program and 12-month ongoing competency and development requirements. The product and sales process has been stripped out. Ten advisers are currently going through the pilot program with 25 advisers planned to go through each month.
For existing advisers, the focus is on identifying weaknesses and putting the resources in place to address this. BT has been running this program since October 2010. So far five pilot groups have gone through the program which has involved 25 practices.
"We are offering the program to all of our financial planning network but not everyone will do all of our program," De Silva says.
Adviser willingness to change
Planners are used to change, but how do they feel about doing it again and networks taking such a leadership role in FOFA preparations? "They have been really positive," Perkovic says. "If we want to be a profession, we need to increase these standards instead of just talking about it."
She adds: "FOFA has helped position that. It may have been seen as an education burden but it's putting people in a mindset of change."
De Silva agrees. He says the feedback from advisers about its fee-for-advice transition model has been fantastic.
But not all planners are willing to change. Kenyon says over the past six months, it has become a different market. That is, those planners that are selling their businesses are selling with a longer exit period in mind as distinct from succession planning and having a younger adviser buy the business over time. "Some are also bringing forward their retirement and then there is a group who have struggled coming up on the right side of the GFC," Kenyon says.
Key messages to planners
Building strong businesses will enable planning businesses to adapt to the changes both now and into the future.
This is the key message BT distribution is delivering to planners. "Change creates opportunities," De Silva says. "Utilise the proposed changes to review your business model. You're not on the journey alone."
The value of advice and their role is critical in helping deliver advice is a key message CFS is looking to reinforce. Advice has got to be sound and structured and to meet the needs of the standards. Product is a by-product of this.
In this way, the key message to planners it to prepare for change.
"We focus a lot on regulation," Perkovic says. "There is no question there is going to be change and clients are going to need advice. That is the continual opportunity and a lot of people lose sight of that. It's probably going to increase the cost of advice but if we can reach more people and increase the confidence then that's a good thing".
Opt-in is expected to be the most difficult change in the new operating environment. BT believes the biggest defence against this is strong and sustainable businesses.
"If you have a strong service model that the client buys into, it's not going to be an issue," De Silva says.
The administrative burden that reforms such as the opt-in initiative will involve will increase the cost of advice.
As a result, Perkovic says, there will be pressure on platforms to deliver cost efficiencies and help deliver cost-effective advice, and for this reason it is supporting FirstChoice.
Interestingly, one of the most difficult changes FOFA will entail will be getting planners to sell advice.
In the new operating environment, planners will have to articulate much better what it is they have on offer, what they are charging, and their value-add.
