Cowboys & Salespeople – the reason I left Financial Planning

I joined the financial planning industry in 1997.

I was fortunate to have a role with a small, boutique financial planning practice which had its own licence.  The firm had an ethos and philosophy based on the Founder’s belief system, which resonated with me.

I grew to understand and value the impact financial advice can have on the lives of ordinary Australians – from the wealthiest to those with the simplest needs.   I was tutored in the importance of building core and satellite portfolios, the significance of cashflow management to strategic outcomes, and the benefits of investing directly.  Each client was treated as an individual, and the care taken to develop the strategies reflected this.

I spent 18 months with that firm.  In my time there, I learned 90-95% of the industry knowledge I ever needed for years to come.  The time came where it was necessary for me to move on and broaden my professional experience.

My next stop was one of the Big Four Banks.  I entered as a Paraplanner to one of the top ranked financial planners.   This was in the heady days of financial planning where a Planner was only as good as the revenue they generated last month.  Every Planner’s performance was tracked monthly and results published as an EXCEL spreadsheet blu-tacked on the wall above the only photocopier station on the floor.  The point being made was clear – everyone knew how everyone was doing.  There was nowhere to hide.  It was the time of the “Cowboys”.

The Golden Rule of “Ten firsts; five seconds”

It was the days of 2% entry fees; 10% commissions on structured products whose offer period was a matter of weeks; where advice was provided on a CAR (Customer Advice Record), and it truly was a numbers game.  The Golden Rule was “Ten firsts; five seconds a week” – that meant, ten appointments with new clients, and five second (sign-up) appointments. 

In fact, it was not uncommon for the CAR, which was one double-sided A4 piece of paper with predefined questions and space below for responses, to be filled in by the Planner prior to the second appointment with the client only having to sign it.  Sometimes, the CAR was filled in and presented at the first appointment for the client to sign if the Planner had spoken with them over the phone.

Bonus structures – you get what you reward

The incentive structure was obscene.  Once you were able to “validate” your salary, a scaled bonus structure would apply with bonuses of between 10% and 50% of your base, payable monthly.  That’s right, a MONTHLY bonus structure.  Talk about SHORT-TERMISM at its best.

Some Financial Advisers, mainly in the Private Client area, could earn between $40-60,000 in a month.  Not a common event, but possible once or twice a year when structured product were released.  Some of us who have been around for a while may remember the MAN-OMIP product series, or the various unlisted property trusts prevalent at the time.  

Finding clients was easy

Remember, this was the late 1990s.  The Sharemarket was booming.  Every man and his dog wanted to get returns on their investment that the “guy next door” was making.  PS146 (later to become RG146), the FSRA, and FOFA did not exist.

Financial Planners were supported with a Branch referral network based on geographical areas.  Branch staff were incentivised to “refer up” to Financial Planners.  Financial Planners had full access to the Branch also.  It was not unusual for a Financial Planner to go into a branch and ask the Branch Manager to print off the “Maturity List”. 

Terms Deposits – the fields of green

The Maturity List was a list of all Term Deposits that were due to mature, when they would mature, and the amount that would be available at maturity.  In the late 1990s, the interest rate payable on terms deposit was around 5%.  In contrast, the Australian Share market returns were:

  • 1995 20.2%
  • 1996 14.0%
  • 1997 11.4%
  • 1998 8.5%
  • 1999 19.3%

I think you can see where I’m going!

A financial planner might attend a branch and ask for the Maturity List, ask it be filtered to only include deposits due for maturity in the next month, and where the amount maturing was $50,000 or $100,000 or $200,000 and so on.

A series of phone calls by the financial planner to deposit holders would be made with the aim of filling the diary with “ten firsts” per week for the next month.  The first half of the Golden Rule had been achieved.

We were all learning

There is no doubt a lot of good, quality advice was provided to many ordinary Australians because of the proactive efforts made.  Adherence to the rules was a key trait amongst most planners.  The real challenges were the reward and bonus structures, and the competitive peer pressure exerted by the monthly publication of results in the photocopy room.  A lack of coherent direction by Senior Management, at times, didn’t help.

*****

I believed in the value of financial advice (and still do) and the benefits it can provide to ordinary Australians.  PS146 was on the horizon and I could see positive changes beginning to occur in the industry.  In the end, however, I began to feel the environment “sucking my soul”.  I struggled to reconcile what I was doing, with my values.   I decided I was young enough to leave the industry, try something else, and always felt I would return in some capacity.

Looking back, I am grateful to the financial planning industry for all the lessons it has taught me, and for the value it has brought to so many. 

Why now is the best time ever to become a Financial Planner

The financial planning industry is going through a once-in-a-lifetime evolution.  It is almost the perfect storm in terms of industry renewal – increased regulation, higher education, resistance from incumbents, and the challenges of recession. 

Established financial planners are leaving the industry in their droves.  The magnitude of change is significant, and the opportunities abundant for “new blood” to prosper as the next generation of Financial Planners.

Financial planning is still very much the “unknown profession”.  With the raft of regulatory and legislative changes thrust upon the industry, there has never been a better time for High School students and University Graduates to consider a career in financial planning.  The number of Graduates relative to industry demand significantly favours those pursuing this career.

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