Diploma of Financial Planning Copyright TAFE 2014 Diploma of Financial Planning

Copyright TAFE 2014 INTRODUCTION This Presentation provides a brief introduction to the contemporary financial planning environment It goes on to review some fundamentals concepts of practice management and typical structures that are utilized in financial planning practices in Australia

Diploma of Financial Planning Copyright TAFE 2014 Birdseye view of the Industry The Australian market comprises of: the big 4 banks, large financial services companies and smaller players The industry is “concentrated” – i.e. Big 4 banks + AMP = more than 60% of Market! AMP Financial Planning is the largest, with almost 2,000 advisers It has its own academy (AMP Horizon at St Leonards, Sydney) and a large team of specialist recruiters

Diploma of Financial Planning Copyright TAFE 2014 Birdseye view of the Industry Each of the big four banks has one or more large financial planning divisions (aka dealer groups) that figure in the top ten (in relation to total adviser numbers) The large institutions compete on basis of their reputation and their ability to cross “sell” financial planning services and products to existing clients The rest is made up of independent advisers and non-bank owned dealer groups

Diploma of Financial Planning Copyright TAFE 2014 Birdseye view of the Industry When you join a “dealer group” as a financial adviser, you will be acting in the capacity of an “Authorised Representative” of that institution John Smith (Qualifications etc) Authorized Representative – CommonWealth Bank Financial Planning (Contact Details etc) Licence Number So, for instance, if John Smith joins the Dealer Group for Commonwealth Bank – i.e. Commonwealth Bank Financial Planning, then his business card would be as follows

Diploma of Financial Planning Copyright TAFE 2014 Currently, there are about 18,000 advisers in Australia and about 160 Dealer Groups …and just 3,000 of the 18,000 advisers are NOT aligned with any product manufacturer But….the top 20 groups have more than half of the market share! As a consequence, ASIC, the industry regulator, is particularly concerned that advisers with a dealer group aligned to a product manufacturer (i.e. AMP, NAB, Westpac or CBA etc), do not recommend their manufacturer’s product merely for the sake of convenience, sales targets or higher revenues. There is a perception therefore, that most financial advisers are not “independent” and therefore, do not provide unbiased advice…

Diploma of Financial Planning Copyright TAFE 2014 The Structure of a dealer group varies widely……. From AMP and CBA that have several thousand licenced advisers…. …… to a financial planning practice having just one adviser or Authorized Representative

Diploma of Financial Planning Copyright TAFE 2014 In General, financial advisers can be either: 1. Salaried – i.e. employed by a principal or a large financial services house under this structure, they do not usually own a share of the business and do not own the client relationship – i.e. if they leave the company or the practice, the clients remain with the company or practice Companies and Practices enforce this very strictly and it is not uncommon to read a former adviser being taken to court for allegedly “poaching” - i.e. contacting some of his/her former clients and “persuading” them to follow him/her to the new practice

Diploma of Financial Planning Copyright TAFE 2014 Or Alternatively, 2. They can own their own book and be licensed by a dealer group or have their own AFSL (Australian Financial Services Licence) In this structure, they could be either be a sole trader or be a director of their own company If they are the director of their own company, then the company would be a Corporate Authorized Representative of the Dealer Group

Diploma of Financial Planning Copyright TAFE 2014 In conclusion, the financial planning landscape is constantly evolving and Change Is the only Constant. It is a fast paced, high-stress and challenging environment and advisers need to be able to handle stress, pressure and the ability to multi-task Proper work practices and work structures and disciplines are therefore essential – or else the client’s best interests could be compromised or the practice could be in breach of the law The old saying “a chain is only as strong as its weakest link” is very relevant for this industry, as a mistake by a relatively junior staff member (i.e. you!!) could potentially have significant ramifications for the entire dealer group!

Diploma of Financial Planning Copyright TAFE 2014 As subsequent sections of this and other units will illustrate, the financial planning landscape is continuing to change, quite dramatically, even as we speak Proper work practices and work structures and disciplines are therefore essential – or else the client’s best interests could be compromised or the practice could be in breach of the law The old saying “a chain is only as strong as its weakest link” is very relevant for this industry, as a mistake by a relatively junior staff member (i.e. you!!) could potentially have significant ramifications for the entire dealer group!