Financial planners on the brink of opportunity or disaster?

By Hans Egger | June 6, 2018 Financial planners on the brink of opportunity or disaster?

What’s the exit strategy for Financial Planners if they decide not to go back to school?

As a young army reserve officer in the early 90’s I was in awe of the veteran sergeants and warrant officers that had served in the Vietnam war. Having been in combat they could impress upon us the importance and terrifying reality of the skills we needed to learn and perhaps use one day.

The financial planning industry is about to lose an entire generation of experienced veteran planners, forged by many thousands of client meetings. The caretakers of sales skills honed over decades of client engagement.

A recent adviser ratings report suggested that as many as 14,000 financial planners are expected to leave the industry over the next five years rather than spend the time and effort to complete a relevant degree. Who can blame them? It’s like asking an army veteran with 30 years service to go and complete their recruit selection course again.

The planning industry has a narrow and shrinking window of opportunity to transfer these skills from old to young or risk the loss forever of the important knowledge these veterans possess.

Matching young inexperienced planners with older planners makes sense on many levels with enormous benefits available to both parties.

Older planners should accept that their businesses could attract fire-sale valuations as they approach the 2024 education deadline. Even a Buyer of Last Resort option may be difficult to achieve with the Buyer inundated with sellers and looking for a way out of their obligations.

Younger planners should consider that buying a cheap client book off a frustrated and disappointed exiting planner is also not ideal as there will be little incentive for a proper handover of clients and no time to develop a real relationship with them. Buying a list of names with a revenue stream attached is not the same as buying a healthy business.

Dealer groups and industry bodies should be looking to match older (exiting) planners with younger planners wanting to purchase a business and assist them with developing viable succession plans. There needs to be a facilitation of this process with legal agreements and funding arrangements that provide both parties with benefits and obligations to ensure a smooth transition.

Younger planners will then have time to introduce a more modern advice process using technology to better engage with, educate and provide advice to their new clients. Client’s will feel they have been guided through the transition by their trusted mentor rather than forced into a new advice model.

For those Financial Planners that take on the challenge early, their clients will be thankful for the smooth transition and both parties will receive value for money in the transaction.

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