The 'financial plan' plan

Just shy of 42 per cent believed many would do just that in the next five years, while 78 per cent agreed this sort of integration was a boon for client relations.

As attractive as the financial planning route sounds, and as much as it’s advocated by the industry as a whole, two things ring true.

One: it’s not always the easy cross-sell it’s reported to be. Two: the whole idea of what actually is financial planning remains a grey area. Is it an easy sell like, say, income protection insurance? Or more complicated stuff like advising clients on derivatives, super or shares?

One brokerage that decided financial planning was the diversification route for them is Melbourne’s Full Circle Financial Group.

The group’s CEO, Michael Pesochinsky, hit the books, got the qualifications and started offering financial planning around the time of the GFC.

But, he admits, the complexities – particularly around compliance – meant what he learned in the classroom “couldn’t be further removed from what you actually need to know in the real world”.

“I didn’t have the experience, I didn’t work for a financial planning practice,” admits Mr Pesochinsky, “and having limited knowledge in the area made it very hard for us to operate in that space.”

Full Circle’s solution was to bring a full-time planner into the business, and since 2010 the firm has added that, broking, accountancy and property services to its list of services.

“Once we actually knew what we were doing and what we wanted, it was a very seamless introduction into the business,” he says.

“Our customers are already in a good financial position and want to take the next step in life but aren’t sure what to do,” Mr Pesochinsky adds.

“We go after the 30 to 50 year-olds as they’re the ones who need the guidance to build a financial future.”

My Mortgage Freedom was another Melbourne brokerage keen on adding planning to its offering. But rather than up-skill or recruit, it decided that a proficient contractor or adviser, who sat with the team, was the best course of action.

However, company CEO Anthony Alabakov admits finding the right person wasn’t easy.

“It took us a great deal of trial and error,” he says. “It’s all about finding a planner who understands your business and how you operate. We follow up clients within 24 hours so we wanted to ensure our planner does the same.”

Mr Alabakov admits that whether you do it yourself, recruit or contract you need to be prepared that they will take time to get established and arguably won’t bring in any revenues for at least the first six months.

“Obviously that depends on the size of your business and your cash flows,” Mr Alabakov admits. “Getting the whole process right costs money: there’s the three to six months of wages to take into account, the extra marketing to advise clients, the cost to train and develop staff to learn about the benefits, and how to explain it to clients too.”

Perth’s Purely Finance has offered its clients financial planning services for eight of its 12 years in business, initially referring it externally before bringing it in-house.

The firm's director and credit adviser, Richard Aves, admits they’d “lost control of it” when referring it to a third party – clients not being contacted or planners trying to steal clients.

Since bringing it in-house, Mr Aves says the take-up has been high, with around “70 per cent of clients who come in for a loan taking up the service.

“Many of our clients have taken on substantial debt,” Mr Aves says, singling out home and commercial loans and car leasing in particular.

“It’s the perfect time to review all their finances and see what they need from a compliance point of view.”

However, Mr Aves stresses financial planning’s not the pot of gold it’s frequently made out to be. He admits the mortgage side of the business still subsidies the financial planning side and stresses it’s about ethics not profits.

“It’s about doing the right thing about clients; providing a full service, proper advice,” he says. “If you’re thinking about getting into financial planning for this healthy new income stream for yourself, then you need to think again.”

GETTING STARTED: TIPS FOR FINANCIAL PLANNING

Top advice from the experts for adding financial planning to your business

1. Get educated

Start by asking yourself, ‘do my clients even want financial planning?’ It could be a lot of work for little return if the answer is no. CEO of Full Circle Financial Group Michael Pesochinsky agrees the study is not difficult to become a financial planner but putting it into practice can be an entirely different thing.

“From a theory perspective it’s pretty easy,” he says, “but from a compliance perspective it can be very difficult and the compliance is getting more stringent all the time.”

2. Get a mentor

Mr Pesochinsky recommends newcomers may need their hands held when getting started.

“A mentor can definitely help you with the compliance side of things. Remember you can be dealing with customers with millions of dollars, so I would not recommend anybody going in blind. You really need to be apprenticed before going out on your own,” he says.

3. Baby out with the bathwater

Brokers who are brilliant at writing home loans aren’t necessarily going to be great financial planners and could damage one for the other. As Richard Aves, director of Purely Financ, says: “Ask yourself what’s the core of your business, what you’re good at. You don’t want to dilute that. If you’re great at home loans don’t simply dump that to take up financial planning. Stick to your core and find ways to complement. That would be my advice.”

4. Involve your aggregator

Most of the top aggregator groups offer a wealth service and that’s probably a broker’s best starting point.

“It’s all down to the size of your business,” Mr Aves says. “For a single operator I think a referral system is likely to be your only option, but for sure, for a group of brokers it’s definitely something you can consider bringing in-house.”

5. The need for patience

By the time you do the study, advertise your new found services to clients and train up existing staff or bring in new staff , it could well be 12-18 months before you see any return on your investment.

“Financial planning is mostly about duty of care,” says Anthony Alabakov, CEO of My Mortgage Freedom. “It’s more about offering a service that protects clients’ wealth and income in case of the worst; it’s not all about huge new revenue streams.”