2008 calls for new thinking

Wow, what a start to a new year.

We’re nearly at the end of the first quarter of calendar 2008 and we seem to be in whole new territory.

Perpetual Investments tell us we had the worst start to a stock market calendar trading year in more than 130 years (“Warning After Market’s Worst Start” Danny John – Sydney Morning Herald 6/2/08). They also predict sharemarket returns as low as 5%.

The boundaries within which last year’s stock picking, superstar pay rates for investment specialists existed are certainly shifting as Goldman Sachs JBWere lose swags of talent from among their retail advisory staff in Brisbane and Melbourne. The firm acknowledges that “simply brokering stocks will not meet all the wealth management needs of our private clients” (Craig Drummond, Chief Executive Goldman Sachs JBWere – Weekend Australian 9/2/08).

This trend runs in parallel to the talent turnovers befalling local offices of Suncorp Investment Management, UBS Global Asset Management, and Invesco Australia.

On another front, the National Australia Bank (NAB) chose January to announce it is banning commissions from more than 400 salaried financial planners to ensure “more customers will come to the NAB for advice because our planners have a relationship with the clients, not with the product manufacturer” (“NAB Opts For Fees, Bans Commissions” Leng Yeow – Australian Financial Review 21/01/08).

Along similar lines, advice products were announced by Westpac’s Sally Herman, with a new $199 Super Health Check for customers seeking superannuation only advice with $5,000 – $100,000 in assets (“Super Advice for $199” www.financialstandard.com.au – Financial Standard 15/1/08).

And who would’ve thought that basis points make great headlines?

The Commonwealth Bank (CBA) found itself caught on front pages for using wrong reasons to lift lending rates five points higher than the recent Reserve Bank 25 point increase in interest rates. New Treasurer Swan and Finance Minister Tanner both wanted everyone to know that the new government thought people should vote with their feet if they were unhappy with this greedy grab.

Where does all this leave us, as financial planners aiming to build valuable advice firms?

Firstly, I’d suggest a re-assessment of our 2008 revenue projections.

This year isn’t going to be another 2007.  Last year’s biggest influences were demand pressures, namely lack of resources, over-stretched systems, and lack of time to properly plan.

This year’s dynamics are going to be:

  • lack of a steady stream of quality new clients;
  • lack of confidence in international markets;
  • a strong but restrained Australian economy; and
  • a generation of aging 50+ financial planners increasingly wondering about their own financial plans.

In 2008, the institutions will use their marketing dollars to attract customers to old products and services, but with new names.

The new government will exercise its right of ascension in its first twelve months as the newly elected champion for giving all Australians a real fair go. Watch what happens to trail fees on mandated superannuation, or what happens to helping consumers switch financial institutions, or what happens with greater transparency on amounts paid by consumers to financial institutions.  Heaven forbid, they may even get some sense and rethink the four pillars banking policy.

There’s never been a more pressing time for the financial planning industry to reflect upon the success of last few years (benchmarks from our Dashboard Reports show year on year revenue growth to 30/06/07 of 22% – not bad.  The Dashboard Reports™ are a trademark of Strategic Consulting and Training. www.scat.com.au).

If you expect to keep doing everything just like last year, good luck.

This year calls for new thinking.

  • How can you grow income as markets stall?
  • How can you de-link the hard work and quality of your advice from a payment method attached to the product?
  • How are you going to attract essential talent to work and build something significant for them and you within your firm?
  • How are you going to reduce your dependency on just one market focus (i.e. superannuation or investments), like Goldman Sachs JBWere?
  • How are you going to position your expertise for good or bad economic times?
  • How are you going to attract new quality prospects that aren’t reliant upon your personal network or selling ability?

The wind has been at our back for the last few years.  As the wind inevitably turns to be on our bow, we need new tactics.

In 2008, consumers will better understand basis points, new governments will exercise new muscles, institutions will do everything to protect shareholder returns, and talent will seek new leadership.

As a financial planner you have to make adjustments. These are the best times and best of conditions to build a quality, market independent, and person independent financial advice firm.  If you’re been thinking of quietly exiting in next few years, you might like to advance those thoughts.  If you’re in it for a while yet, the next few years will be challenging, exciting and scary.

Out of 2008, we are building a new profession – the profession of advice.

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