Financial Planning

In the same boat

07 October 2019

Jayson Forrest

Jayson Forrest is the managing editor of Money & Life Magazine.

The answers and solutions to problems are all around us, says Phil Billingham CFP®. All it takes is for you to open up your mind to endless possibilities.

If there is one message Phil Billingham CFP®would like to impart with practitioners from his 40 years working in the U.K. financial services industry, is that when it comes to change, you’re not alone.

 “It’s easy to be dismissive about the regulation and change here in Australia, compared to the rest of the world. But guess what? You’re not alone. We’re all facing the same challenges, and we’re all in the same boat.”

 Instead of reinventing the wheel, Phil believes planners need to open up their minds and talk to each other, regardless of where they may be located, about the changes and challenges facing the profession. “The answers and solutions are out there. All we have to do is learn from each other.”

 Phil will be appearing on a panel discussion of global planning experts at this year’s FPA Professionals Congress, which includes Mitch Anthony (USA), Janet Hugo CFP®(South Africa) and Andrew Talbot CFP®(Singapore). They will share their insights about the challenges from their part of the world, and how they are navigating change to develop deeper and more sustainable business models.

 “Despite the regulatory and cultural differences around the world, the one common denominator are our clients,” Phil says. “Clients want to protect their families, they want to build their businesses, they want to grow their wealth and enjoy a comfortable retirement. The needs of our clients never change. So, talking to planners from other countries allows you to discuss similar problems, share your experiences and learn about other solutions to tackle problems.”

Retail Distribution Review

 When it comes to adapting to change, Phil reckons he knows a thing or two, having steered his practice, Perceptive Planning, through the rigours of the Retail Distribution Review (RDR) – a U.K. examination into the sale of investment products to retail customers by financial planners.

 Occurring at the same time as Australia’s Future of Financial Advice (FoFA) reforms, the RDR was launched by the Financial Services Authority (FSA) in 2006, with the new rules coming into force on 1 January 2013.

 These rules included: new training, accreditation and CPD requirements for planners; a new distinction between ‘restricted’ and ‘independent’ financial advice; a ban on receiving commissions from product providers; and a requirement to disclose planner charges to consumers up-front.

 “The aim of the RDR was to make the retail investment market in the UK work better for consumers, by raising the minimum level of planner qualifications, improving the transparency of charges and services, and removing commission payments from product providers,” Phil says.

 “These changes have been a massive undertaking for the U.K. financial planning industry, but six years on, they have also helped make us a stronger and more trusted profession.”

 It’s a view shared by University of Northampton lecturer in financial services, Gillian Cardy. Speaking at a recent Netwealth U.K. Study Tour, Gillian revealed that retail investment revenue in the U.K. increased by approximately 25 percent in the three years following the new RDR rules in 2013, with the number of advice firms also increasing by 8 percent within the same period.

 However, the RDR didn’t come without its challenges. According to Phil, if there was one mistake from the review that other countries should avoid making, it is introducing higher planner qualification requirements at the same time as introducing changes to existing advice business models.

 “This created the perfect storm, resulting in significantly higher planner attrition in the U.K. than we should have had,” he says. In fact, Phil believes the convergence of these two changes accounted for an additional reduction in adviser numbers, bringing the total attrition since 1988 to as much as 75 percent of the U.K. adviser population.

 It’s a staggering number but he qualifies this by adding that U.K. advice models dependent on selling products have suffered the most from the RDR changes.

 “It still makes no sense to me why it should cost 10 percent upfront to sell somebody a product through a complicated sales process, when in theory, it could just as easily be bought at the supermarket checkout for five basis points,” Phil says.

 “And whilst it’s true that a supermarket in the U.K. could in theory sell you term insurance or a savings plan, what it can’t do is understand the effect that may have on a person’s individual situation. Only planners with a close relationship with their clients have the expertise to understand the unique personal circumstances of their clients. That’s our value proposition.”

 However, seven years on, looking back at the RDR and all the changes it brought to the U.K. market, Phil says the reforms have actually been liberating for planners, by freeing them from a system that was heavily reliant on selling product.

 “Our advice business models had to change to be more focused on solving our clients’ real problems, rather than selling them a product, and that’s been a wonderful step for planners to take.” 

Lessons to be learnt

 Phil is acutely mindful of the current changes facing the Australian planning profession, including higher education and professional requirements. But he believes there are similarities between what the U.K. industry has recently been through and what the Australian market is currently working its way through.

 He is confident there are many lessons Aussie planners can learn from their British colleagues to help them better adapt to the challenges and change ahead for the profession. And top of the list is to ensure the “client always comes first”.

 “During the time of the RDR, there were dire predictions that planners would become tied agents of the product manufacturers because it would be most cost-effective for them, but this turned out not to be the case,” Phil says.

 “At the time, about 90 percent of planners were already independent and non-aligned. Clients liked the fact their planner was independent and were happy to pay fees for unbiased advice that was in their best interest. They did not want to pay fees to be sold a product.”

 Phil says at the core of ensuring that the client comes first, is the need to “really get to know your client”.

 “Clients want to work with somebody who understands them and their life stages. For them, they’ve never sold a business before, they’ve never retired before or worked in three countries before. But they want to work with somebody who understands these things, and who has the expertise and experience to help them with their life stages,” he says.

 “The more planners we have who can offer that advice expertise, the better. Clients are after advice and guidance, which means products really don’t matter; instead, they’re a commodity that can be sourced from anywhere.”

 Phil adds that at the heart of knowing your client and focusing on their needs is being able to articulate your client value proposition, which means creating compelling propositions that clients will pay for.

 “Be confident in the value you provide to your clients by charging fees accordingly,” he says. “People will readily pay fees to get good advice. In fact, post-RDR, planners in the U.K. have on average doubled their profitability through client retention models, not client attraction models. Today’s advice model is centered on high service levels for clients, which is something clients are generally happy to pay for.”

It’s about the individual

 When it comes to rebuilding trust that has eroded over recent years due to industry misconduct, Phil believes what really matters is the trust of a planner’s client base.

 “There is a lot of evidence that shows that clients don’t trust financial services but they do trust their financial planner. Trust is all about the brand of the individual.

 “So, instead of worrying about rebuilding trust with the general public, let’s first build and retain trust where it matters the most – at an individual client level. From there, we can build on that. Having a good reputation with your clients has a ripple effect, which spreads out to the wider community.”

 Phil also believes a key to rebuilding trust is for professional industry bodies to be more proactive in retaking the moral and ethical high ground by clearly differentiating themselves and what they stand for from product providers.

 “Financial planner and adviser professional bodies need to have a clear ‘arm’s length’ relationship with product providers. As part of their duty of care, professional bodies need to stand by their members and consumers, which is fundamental to being a profession. And the FPA is a great example of that happening in Australia.”

 In fact, since the RDR, Phil says there are more positives today in the U.K. media about the need for consumers to seek independent advice, rather than buying a product directly that may be unsuitable for their needs. He admits that as stressful as it was to go through the RDR, the reform changes have injected greater confidence and trust in the profession, which he believes will also happen here.

 “The changes ahead may seem onerous, but the profession will emerge much stronger and more defined in the years ahead. You can’t avoid change. It’s happening. So, embrace it, learn from it and thrive.”

Change is a constant

 When chatting to Phil, it doesn’t take you long to realise there’s one thing he’s not short on, and that’s having an opinion. So, when it comes to looking into his crystal ball to see how the profession will change and evolve over the next 10 years, he sees plenty of opportunities ahead.

 Side-stepping the obvious, like the integration of technology and aligned services, such as accounting and law, into financial planning models, Phil identifies a rapidly emerging trend in the U.K., which he believes will eventually play out in Australia – new product manufacture and distribution channels.

 “Non-traditional financial services players, like supermarkets, will increasingly move into financial services product manufacture and distribution. Why? Because consumers are increasingly looking to go elsewhere, other than banks, for their financial services products.”

 As a part of this move away from traditional product manufacturers, Phil believes products will become simpler. However, he cautions for that to happen, the Government will need to provide greater certainty by stop tinkering with rules and regulation, particularly in relation to areas

like superannuation.

 As for the future, well, this CFP®practitioner remains very upbeat, particularly in respect of the current cohort of planners handing over the baton to the next generation of professionals. “We will see more generational succession within the profession, and probably from father to daughter. In the U.K., we are seeing many more young women joining the profession, which is fantastic to see,” Phil says.

 “In fact, I’m very optimistic about the next 10 years. Right now is a great time to be a financial planner, particularly if we take the time to learn from each other. And the next 10 years could be even better!”

 Phil Billingham CFP®will be part of a panel discussion of global planning experts at the 2019 FPA Professionals Congress in Melbourne (27-29 November). For more information on the Congress program or to register your attendance, click here.


About your speaker

Phil Billingham CFP®has been a planner, author, trainer and consultant since 1982. He is passionate about bringing his considerable international experience to support financial planners around the world to cope with regulatory change, mainly in the U.K. and South Africa.

 His past roles have included: working in the U.S. with the National Association of Financial Advisers and Consumer Federation of America; former Director and Vice-Chairman of the Society of Financial Advisers in the U.K.; former Director of the Institute of Financial Planning (2007-2012) and Chair of the Ethics and Practice Standards Committee (U.K.); and member of the Financial Planning Standards Board’s (FPSB) Regulatory Advisory Panel (2009-2014).

 Phil has worked with planners and regulators around the world, including India, Canada, U.S., South Africa and Australia.

He remains an active planner and Director at Perceptive Planning, an independent Chartered Financial Planning firm he owns and runs with his wife. The U.K. business was nominated ‘Top 100’ status in 2014, 2015, 2016 and 2017 by Citywire.