It’s fair to say that there will be a good deal of soul searching, mirror gazing and earth moving in the world of financial advice over the next few+ months in Australia. And advisers, practices and licensees alike will be thinking very carefully about their options going forward – this is certainly their ‘where to from here’ time. The recently announced purchase of MLC by the IOOF Group is the latest in the long list of disruptions causing many to ask (and hopefully answer) the really hard, sometimes uncomfortable but absolutely necessary questions.

Do I:

  • Stay with my current licensee?
  • Move to another licensee?
  • Apply for my own AFSL?
  • Exit financial planning?

The principals of Business Health have been down the disruption road on numerous occasions over the past 20 years and we’ve been able to observe firsthand what’s worked and what hasn’t. Here are some of the biggest mistakes we’ve seen over these years – to be avoided at all costs.

1. Being rushed into making a decision

Sounds obvious I know but the fact is that we’ve seen too many decisions made because of an externally imposed timetable.  While it’s not always easy/possible to influence someone else’s timing, the sooner you start the process (and allow yourself more time) the better. And if you’re still struggling to decide, don’t hesitate to ask for an extension. As the proverb goes – more haste less speed.

2. Not deciding your end game first

The biggie. It’s difficult (impossible really) to make a decision about your future direction, without having a crystal clear picture of where you want to be in say 3-5 years’ time. And that should address your personal/family life as well as your professional/business one.

Sensible, logical and what everyone should be doing, right? Unfortunately this doesn’t appear to be the case – Business Health’s research over the years, has continually highlighted ‘planning for the business’ as a major weakness in Australian advice firms. Consider, only 34% of firms have documented their plans for the ensuing 12 months, while just 29% have formulated a 36 month view.

3. Not paying sufficient attention to the potential impact on your most valuable assets – your clients and staff

Any of the options outlined above, will invariably impact your clients and staff. ‘Change’ can very quickly convert into concern for clients and staff. A reality which has borne out time and time again through our various surveys (clients and staff). As such, we believe that a carefully thought out communication strategy and program is called for. Frequent, meaningful and positive communications, will go a long way to allaying these concerns.

4. Thinking that there will be no unforeseen cost

Changes such as these are often accompanied by additional costs. These could impact your financials, other resources and time management for example. And often overlooked – there will undoubtedly be a personal cost in one form or another. Recognise and budget accordingly.

5. Not focussing on the nouns, instead being seduced by the verbs

Simply put – is the licensee able and willing to support your future plans. For example, if you view aged care as an important element of your service offer going forward, how can your licensee assist you? If your concern is market reputation – what’s been the track record of the licensee?

In our experience, it’s not what is said (or promised) that’s important, but it’s what’s actually being done. How does the licensee deliver on the words that appear on its website, in its promotional material or are mouthed by its own managers? Returning to our aged care example – what’s the proof that the licensee can deliver this capability. Perhaps there’s an arrangement in place with a recognised third party aged care expert or maybe a qualified aged care expert has been appointed to the licensee’s management team.

6. Being distracted by the cost, not appreciating the value

Licensee fee levels/structures are relatively easy to compare and contrast and it’s a natural thing to do. But we urge you to consider, not the quantum of the fee, but the value your licensee will be able to deliver to your practice.

This has been a consistent finding from our client survey work – the fee an adviser charges clients, seems to only ever to become an issue when clients perceive an absence of value.

If the licensee could prove that through their various practice development initiatives its practices had lifted profitability by say 20%, would it really matter that its fees were slightly higher than its competitors?

7. Not fully acknowledging that operating a financial advice practice is not the same as running a license

When faced with the need to change licensee, one of the alternatives invariably thrown into the discussion is – obtaining your own AFSL. I won’t ever again be subject to an external owner; I’ll have complete control over how I run my practice and so on.

This line of rationale can be very appealing and for some, it can indeed be the most appropriate course of action. But the mistake often made is to treat the licensee operation as simply an adjunct, supplemental to the planning side. Nothing can be further from the reality. What will be your compliance framework for example? Will it be administered – manually or through technology? How many file reviews do you anticipate in the first year? And so it goes.

Operating an AFSL is a serious business in its own right and will require significant commitment, resources and capability. The question for any adviser contemplating this action – assuming I have the skill required, how will it impact my advisory practice?

8. Delaying your exit planning

This is a very personal decision for most and to call ‘time’, isn’t easy. But retirement will come to everyone and just as the adviser has during the course of their career advised and counselled clients to plan for retirement, they obviously will need to do the same for themselves.

Use the recently announced extension to qualifications wisely – to prepare your practice for sale or transition. Just as the house owner puts a fresh coat of paint on their home, tidies up the garden and completes all those odd jobs that have been put off over the years, the practice owner should do likewise – before they start talking to the market. Determine just what it is exactly that you’re looking to sell – is it a client book or stand alone business for example?

Have any compliance glitches been addressed? Is every client now being serviced through a fixed term agreement? Does the CRM contain up to date and comprehensive data for every client? When was the last satisfaction survey conducted?  And so on…

Our latest data clearly indicates that there’s plenty of work ahead for many – just 10% of firms currently have an effective exit plan in place.

9. Underestimating the time involved

Irrespective of the road chosen, it seems to us that Murphy’s Law is ever present and lurking – even the simplest of tasks seems to take forever. Plan accordingly and always build in a time buffer.

10. Acting alone, without external input

As the 17th century English poet John Donne observed – ‘No man is an island’. For each mistake canvassed here, we strongly believe that an external voice (or voices) is needed – to ask the hard questions, point out the cold facts and to offer support, guidance and advice. Thereby helping you to avoid making the mistake.

Let the soul searching begin!