The Financial Adviser Magazine | Vol 27. Issue 2.

Vol 27 | Issue Two | June 2022

Official magazine for members of the AFA

Advocating for Advice with the new Assistant Treasurer and Minister for Financial Services ADVICE STRATEGY A noble profession: The future of financial advice in Australia

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BUSINESS GROWTH How to attract, hire and retain high performing staff

INNOVATION The four major problems facing financial advisers

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Key dates for 2022 Make sure you pencil in the below dates and keep an eye out for more information coming soon!

11 July: NQ & FNQ Combined Roadshow, Cairns 12 July: NQ & FNQ Combined Roadshow, Townsville 13 July: NQ & FNQ Combined Roadshow, Mackay

JULY

14 July: Annual AFA Quiz night, SA

28-30 July: Financial Adviser Exam – Sitting 18

AUGUST

1 August: Financial Adviser Exam – Sitting 18 (cont)

21-23 September: AFA Conference at RACV Royal Pines QLD

SEPTEMBER 30 September: Final exam deadline for advisers who are eligible for the extension

NOVEMBER

3 November: Financial Adviser Exam – Sitting 19

DECEMBER

16 December: Review of the QAR report to be provided to Government

For up-coming AFA events and webinars visit afa.asn.au.

If you have any suggestions please email events@afa.asn.au

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Contents Candice Spence

Professionalism

Advice Strategy

AFA General Manager, Marketing

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AFA President’s report

9

7

CEO’s report

Structuring IP in an inflationary environment

14

Policy and Advocacy

11

Every journey is unique, and requires personalised care

28

The value of Mentoring

13

The importance of advisers’ knowledge at claim time

That’s why our upcoming Conference in September is entitled ‘Thrive’. We’re developing a Conference program that supports this theme – helping advisers with practical business solutions covering the spectrum of people, technology and advice frameworks.

19

A noble profession: The future of financial advice in Australia

25

Work test changes are coming

And we thank everyone who has recently provided valuable suggestions toward our Conference program.

Our Early Bird pricing has just been released and we’d love to see you on 21-23 September at the RACV Royal Pines.

29

Demand for industrial property continues to grow

31

Changes to income protection and what they mean for advisers

33

When the regulatory storm passes, investment in talent must be top priority for large and small providers

Dear Members, At the AFA, we’re keen to say nay to the trials of the past few years and look forward to a time when our Advice profession can prosper and flourish.

Thanks also to everyone who attended our recent National Roadshow. With peers and friends getting together after a long break, the positive vibe could be felt in every city. Another big piece of work has been our QAR submission to which many of you provided input. Our CEO, Phil Anderson, has worked tirelessly on the AFA’s submission to reflect our members’ views, with an overall objective of reducing the excessive red tape of recent years.

Shortly, we’ll be inviting nominations for our AFA Awards 2022. These will include Zurich sponsored ‘Adviser of the Year’, and TAL sponsored, ‘Female Excellence in Advice’. This is a great way to acknowledge and showcase those leading the way in Advice. Winners will be announced at the Gala Dinner at Conference, so keep a look out in the coming weeks for more on the Awards.

A final note of appreciation to everyone who helps advocate for our profession. Renato Mota, CEO of Insignia Financial, and a long-term advocate for Advice, writes in his article on page 19, “… there are few professions in which practitioners can have such a direct and measurable impact on improving people’s lives.” Well said – Advice really is a noble profession indeed.

As always, please keep the feedback and suggestions coming in to our AFA Marketing team.

We look forward to seeing you in September.

Best wishes, Candice

Communities of Practice

Community & Marketplace

30

The evolution of the adviser role in a technological age

36

32

Keeping and attracting staff through the Great Resignation

How do you make a difference? By harnessing the collective generosity and community spirit of the AFA!

39

Improving financial literacy and community connection

38

Pro bono advice – how does it work?

Business Growth

Events

40

4

AFA recognises two greats of the AFA community

34

AFA National Roadshow 2022

How to attract, hire and retain high performing staff

Innovation 21

Addressing a gap in life insurance

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The four major problems facing financial advisers – time, cost, quality & trust

The Financial Adviser | June 2022

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Roadshow

AFA recognises two greats of the AFA community Appreciation Award – Nathan Morgan At our recent Perth Roadshow on 24 May, AFA WA Director, Stephen Knight, awarded long-standing AFA Member, Nathan Morgan, with an Appreciation Award.

“Nathan’s contribution since joining the AFA back in 2008, has been nothing short of outstanding, and he is also such a great human being,” commented Stephen.

Nathan was originally part of the Gen Next and AFA Mentoring communities and then became WA State Chair in 2016. He has recently handed the WA State Chair role to another highly valued AFA member, Luke Grundy, but will continue to stay on and run the AFA Mentoring program.

Congratulations and thank you Nathan – and welcome Luke!

AFA Life Membership Award – Darryl Seccombe OAM At our recent Brisbane Roadshow on 31 May, Phil Anderson, AFA CEO, awarded an AFA Life Membership to Darryl Seccombe OAM for his longstanding and incredible contribution to the Advice profession and the AFA. Daryl served as QLD State Chair and was an active state committee member for over 30 years, involved in National Conference planning and other community events.

He also served as the QLD Trustee for the AFA Investment Fund from 2006 to 2012 and as Director of the AFA Investment Fund from 2012 to 2017.

In addition, Darryl served on the AFA QLD Foundation Committee helping to raise funds for Make a Wish at multiple events over many years.

In 2011, Darryl was awarded the Medal of the Order of Australia (OAM) for his outstanding community work.

Congratulations and thank you Darryl.

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Professionalism

AFA President’s report Sam Perera AFA National President

The AFA’s series of roadshows concluded in Melbourne on 2nd June, and having attended the Sydney and Melbourne events the need and importance of getting our community back together to foster learning and share with like minded professionals was abundantly clear. Furthermore, my challenge to the attendees was to enlist their assistance with the collective change of focus that the sector so desperately needs. We need to move beyond the challenges we have faced and the obstacles in our way, to the opportunities that lie ahead for professional, educated and experienced Financial Advisers in Australia.

It is worth reiterating that the Quality of Advice Review presents a significant opportunity for the AFA to proactively make recommendations that will improve the sector. It is our intention to highlight and offer solutions relating to the Annual Renewal Regime, Best Interests Duty, Life Insurance and Statements of Advice.

Whilst the AFA will be calling for process improvements through a regulatory lens, I am of the belief that our sector also needs to examine the role it plays in adding complexity to the advice process. Whilst the market has not had the confidence needed to create and bring forth innovative solutions, the greater the problem, the greater the opportunity for market led solutions to alleviate some of the problems facing the advice sector.

During various discussions relating to the regulatory impost and the compliance burden, the profession has to contend with, the concept of principles based regulation often arises. Julia Black1 tells us that ‘principles - based regulation means moving away from reliance on detailed, prescriptive rules and relying more on high-level, broadly stated rules or principles to set the standards by which regulated firms must conduct business.’ Unfortunately, the structure and history of our sector may not lend itself to this utopian state. The Best Interests Duty is a perfect example. The sector called for the Safe Harbour steps, fast forward some years and compliance with the Safe Harbour steps has taken a life of its own, with onerous requirements from licensees relating to documenting compliance with the steps. Ironically, the sector is now debating the removal of the Safe Harbour steps.

The counter argument could be that the steps on their own does not create a problem. Rather, ASIC’s enforcement approach and agenda reduce the risk appetite of licensees and compliance managers.

Whatever the merits of this counter argument, it cannot be ignored that these onerous requirements add considerable time and cost to serving clients.

A compliance and licensing regime that is driven by fear and structured to address the issues which may arise from the highest risk adviser within an adviser cohort will continue to require further guidance and certainty from regulators. This insatiable need for ‘certainty’ and guard rails is at complete odds with the concepts of self – responsibility and exercising individual judgment that ought to accompany a principles based regulatory

regime for Financial Advisers in Australia. As such, I fear that the sector will make little progress toward a principles based regulatory regime unless there is structural change that addresses personal responsibility and accountability of Financial Advisers. The AFA and other stakeholders ought to advance these discussions, the concepts of which may be a source of long lasting and meaningful change.

Having been part of the AFA Board since October 2019, it is becoming increasingly clear that Associations can often be in a no-win position. The challenges the sector has faced over the last few years has meant we frequently found ourselves in a position where we struggled to keep all members satisfied with our work.

Presumably, it is failure to meet the expectations of our members which creates some elements of discontent.

Often criticisms are about the AFA not fighting hard enough or pushing back against the Government with our advocacy and lobbying efforts. My personal assessment is that this cannot be further from the truth.

Our team, led by Phil Anderson, is always discussing unintended consequences, ramifications for clients and the burden of unrelenting compliance in every engagement with regulators and politicians.

At times, I question if we go too far in pushing back to the point where, given the extent to which we dissent, we may not be heard when we wish to prioritise a request. Our team drafts submissions, attends private events and official meetings, conducts round tables and utilises various other tools to exert influence, highlighting the plight of our sector and the changes we need to see.

We are not the loudest voice publicly, however, I have no doubt that we are the strongest voice in the arenas that matter. We do not get many wins and the broader sector has been trampled on since before the Royal Commission. The political reality has been that there is no mileage in supporting the financial advice sector and that doing so will result in political capital being burnt.

Thankfully this sentiment is turning, which presents a much less hostile environment for us to litigate our case. In conclusion, I would like to reaffirm our team’s commitment to our members and the broader sector in fiercely advocating for policy settings that will enable you to thrive. Thank you for your support.

It is worth reiterating that the Quality of Advice review presents a significant opportunity for the AFA to proactively make recommendations that will improve the sector.

1 Principles based regulation: risk, challenges and opportunities (2007)

The Financial Adviser | June 2022

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The Financial Adviser | June 2022

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Professionalism

CEO’s report Phil Anderson AFA CEO

As we approach the middle of 2022, it is interesting to reflect on what a different year it has been.

Firstly, there has been no new legislation this year that has impacted financial advice, although many of us are still coming to terms with the legislation that was passed last year and the year before. Secondly, much of our way of life has gone back to normal in terms of COVID-19 and I was excited recently to make my first trip to Western Australia in well over two years for the Roadshow. Thirdly, the tone and momentum have changed. The media are now openly talking about the consequences of adviser numbers declining, and Australians losing access to financial advice when they need it the most. Finally, many of us are now very focused on the Quality of Advice Review, which we hope will go a long way to fixing the regulatory and structural mess that financial advice has been placed into.

The last six months have not been an easy time for many Australians, whether that is due to COVID, floods or a range of other challenges, including a significant growth in mental health factors. This time has also been very challenging for many financial advisers who have been forced to hang up their shingle as a result of a range of factors, particularly the Financial Adviser exam. There are also a sizable number of financial advisers who have not yet passed the exam, however were eligible for the extension until 30 September, as a result of having attempted the exam at least twice before the end of 2021. There are three exams before the 30 September 2022 deadline, however the exam results from February demonstrated a disappointing outcome. With 882 advisers in this position, it is important to understand that these advisers are not on their own. We also wish to make the point that often the challenge has been with mindset and exam technique, rather than knowledge. We ran a webinar, to help address this point, and will continue to do what we can to support these advisers.

2022 Federal Election The last couple of months have seen a Federal election play out. This has drawn out a lot of commentaries, as advisers have reflected upon the tough time that they have experienced since the 2019 election. What is very evident is that there has been a substantial change in the political preferences of many financial advisers. The polling had indicated that the Government were in trouble, and that has certainly proven to be the case. We now have an ALP Government, however the parliament will be very different with many more independents. This will pose a very different dynamic, that we will need to take into account, as we work out our advocacy strategy going forward. We look forward to working with the new ALP Government.

It was disappointing that the Government did not finalise the changes that they had proposed to make to the education standard before the election. Whilst this has been a divisive issue, there is no question that FASEA got the recognition of prior learning (RPL) and experience wrong, and we remain committed to seeing this changed to provide greater recognition for RPL. Fixing this will be an important factor to ensure that we retain as many of the experienced advisers that might be considering leaving the profession, rather than doing the additional study that might be required. We look forward to working with the new ALP Government to finalise this issue as soon as possible.

Financial advice policy was not a big consideration in the Federal election, with both parties proposing to make changes to the education standard and both committing to the Quality of Advice Review. With much of the future policy dependent upon the results of the Quality of Advice Review, there was not much policy difference between the two sides of politics.

Moving Forward – The Remainder of 2022 As we look forward to the remainder of 2022, we are committed to advocating for better outcomes for the financial advice profession and getting back to face-to-face events. The Quality of Advice Review, which is being run in 2022, will be a great opportunity to argue for fundamental changes to improve access and affordability of financial advice, but also make it more efficient to run a financial advice practice and to reduce the excessive level of compliance complexity.

The Quality of Advice Review will be an important priority for the AFA in 2022.

National Roadshow and Conference in-person in 2022 The AFA held the first National Roadshow since early 2020 in late May and early June. It was well attended, with important sessions on the IDII changes, ethical dilemmas, policy developments and an economic update. We are also particularly excited to be holding a face-to-face National Conference at the RACV Royal Pines on the Gold Coast from 21 to 23 September 2022.

It will be great to get back to a face-to-face Conference at a venue that is so well known by the AFA Community.

I look forward to catching up with as many of you as possible at the Conference.

The Financial Adviser | June 2022

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Professionalism

RYAN SAVED $637 ON * HIS PREMIUMS By splitting his Priority Protection $300,000 sum insured across a Crisis Recovery and Crisis Extension policy, rather than a straight $300,000 in Crisis Recovery.

All without losing any of the existing AIA Crisis Recovery benefits.

Learn more about this flexible strategic approach that you can design to best suit you client’s needs. * Ryan is a hypothetical customer based on a 50-year-old Male, non-smoker, occupation A1 without any loadings, taking out Crisis Recovery, Crisis Extension and Crisis Reinstatement as quoted March 2022. The $300,000 sum insured is split equally with $150,000 Crisis Recovery and $150,000 Crisis Extension. This is an illustrative example only and the premium difference between Crisis Recovery and Crisis Extension will vary depending on the individual circumstances of the insured.

Copyright © 2022 AIA Australia Limited (ABN 79 004 837 861 AFSL 230043). All rights reserved. The life insurance policies relating to Priority Protection and Priority Protection for Platform Investors are issued by AIA Australia. This publication has been prepared for distribution to financial advisers only and is not for wider distribution. This information is current at the date of this publication and is subject to change. This provides general information only, without taking into account the objectives, financial situation, needs or personal circumstances of any individual and is not intended to be financial, legal, tax, or other advice. You should consider the appropriateness of this information in the context of such factors and refer to the PDS and Policy Document for further information. AIA Australia has adopted the FSC Life Insurance Code of Practice, which contains minimum standards of service that customers can expect from insurers. The Code can be found at fsc.org.au.

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*

Advice Strategy

Structuring IP in an inflationary environment Damian Revell Technical Manager, AIA Australia

Many clients understand the importance of ensuring a continuity of their personal exertion income in the event of a temporary illness and thus recognise the importance of income protection (IP) cover.

When it comes to structuring IP cover, advisers will rightfully prefer IP to be personally owned. The client personally pays the premiums each year, which in turn gives rise to a personal tax deduction at their marginal rate of tax.

Traditionally, most IP policies have been structured with terms that replace a proportion of their income right through to their 65th birthday. This is despite the underlying need that is typically identified, which is to protect against an unforeseen illness or injury that temporarily prevents the client from engaging in gainful employment.

Looking ahead, with household budgets expected to come under pressure from cost-of-living increases and the prospect of further interest rate hikes, a more costeffective premium on the IP policy may be warranted for some clients.

One way to secure a sharper premium on IP cover is to structure it on terms that cover a proportion of the client’s income should they become temporarily ill for a period of 5 years, rather than through to their 65th birthday. When the IP is subsequently bundled alongside Permanent Disablement cover, which is usually housed inside super and funded from retirement savings, we’re in a position where we can provide clients with not only cost-effective IP cover (see illustration below), but also safeguards in the form of TPD cover that would seek to protect the client in the event that the initial temporary illness evolves into more of an enduring, or permanent, disablement.

This is where claim statistics come into consideration.

APRA data indicates that the retail IP claims frequency ratio is 1.19% pa (as of October 2021).

In AIA’s experience, what we’ve seen is that of this small cohort of policyholders that actually go on to claim on their IP cover, around 85% come off claim within the first 24 months, usually with a successful return to work. Intuitively, you’d expect that given the purpose of the cover is to protect against temporary illnesses.

We then tracked the remaining 15% or so of the original claimants remaining on claim at the 24-month mark and traced them to identify what proportion still remained on claim after 5 years. Of those still on claim after 5 years, back testing indicates that on average 7 out of 10 of these claimants are deemed unable to ever return to work in their own occupation. So, if that client also had the TPD cover in place, then that could provide the seed and investable capital for a long term income stream going forward.

The illustration below shows that an AIA IP CORE policy with a 5-year benefit period provides a $1,600, or a 55% saving, in Year 1 when compared with the alternative of an AIA IP CORE policy ‘To Age 65’ Benefit Period.

Those savings likewise accrue over a cumulative 10 year period.

This provides meaningful insurance premium savings for clients experiencing cash flow pressures, and indeed may be the only option, and ultimately the difference between having comprehensive IP cover or not, in the current inflationary environment.

IP – To Age 65 (Flat 70%) ($)

IP – 5-year Benefit Period Flat 70% own occ ($)

Year 1

2,906

1,313

Cumulative – 10 years

42,450

20,107

Occupation A1 White Collar Professional, 43 Age Next Birthday Male Non-Smoker, $200k income, NSW, 30 day wait

Copyright © 2022 AIA Australia Limited (ABN 79 004 837 861 AFSL 230043).

This is general information only, without taking into account factors like the objectives, financial situation, needs or personal circumstances of any individual and is not intended to be financial, legal, tax, medical, nutritional, health, fitness or other advice.

AIA Australia has prepared a Target Market Determination which describes the class of consumers that comprise the target market for this product.

The Target Market Determination can be sourced at aia.com.au/tmds

The Financial Adviser | June 2022

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Rebuild with confidence In 2021 Zurich paid over $354 million in life insurance claims

“We share a commitment to be there for your clients at every point of their health journey” Dr Sally Phillips Head of Health Services, Zurich Australia

Take a look at the claims we paid in 2021 and discover the stories behind the numbers. zurich.com.au/claims/lifeclaims

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The Financial Adviser | June 2022

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This general information does not take into account the personal circumstances, financial situation or needs of any person. This is intended for the general information of licensed financial advisers only and is dated May 2022. The information collected is given in good faith and is derived from sources believed to be accurate as at this date, which may be subject to change. It should not be considered to be a comprehensive statement on any matter and should not be relied on as such. You should consider these factors, the appropriateness of the information and the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD), if applicable, before making any decisions or recommendations. You can find these on our websites at zurich.com.au. Zurich Australia Limited ABN 92 000 010 195, AFSL 232510

12/5/22 11:46 22/06/2022 09:21 am

:46 am

Advice Strategy

Dr Sally Phillips Head of Health Services, Zurich Australia

Every journey is unique, and requires personalised care Health is core to everything when it comes to life insurance. As partners, we share a commitment to be there for your clients at every point in their health journey and in turn, drive the fundamental values of our broader claims philosophy.

A life insurer’s moment of truth comes should your client’s health take a turn for the worst, and they need to make a claim. We know our actions make a significant difference during these times of need, whether it be a fast claim payment or personalised care designed to support your clients back to their best health.

Providing both, financial and health support in these critical moments is more than a job for us. We care about the lives, families and communities of the Australians we insure and their dependence on us in their time of need keeps us focused on delivering an empathetic and caring claims experience for all.

In fact, in 2021 Zurich and OnePath Life combined paid out $1.28 billion in claims to 12,125 customers and their families across all our retail and group life insurance policies and accepted 91% of all claims received.

As advisers, the significant role you play in the health journey of your clients cannot be understated. With the global pandemic affecting so many Australians, now is the time to partner closely to deliver better experiences of health that can be impactful across the physical, mental, social and financial aspects of your clients’ lives. Protecting your client’s financial health is a great step towards health prevention, and you play a vital role in working with us in this space.

With the global pandemic affecting so many Australians, now is the time to partner closely to deliver better experiences of health that can be impactful across the physical, mental, social and financial aspects of your clients’ lives.

However, you are also in a trusted position to remind your clients about the importance of preventative screening tests and encourage regular visits to their GP. An unintended consequence of COVID-19 has been that health prevention has taken a back seat and the statistics are concerning. In Australia, 74,000 breast screening tests were conducted in April 2018 vs 1,100 in April 20201. With your guidance and encouragement, hopefully conditions can potentially be picked up earlier, knowing we will be here should your clients need to submit a claim. We are also here to support their health through leading programs that provide proactive coaching and support for chronic health conditions through our partnership with Remedy Health.

As per previous years, cancer remains one of the leading claims causes for 2021 across Zurich and OnePath Life Insurance products, which is not surprising given cancer is a major cause of illness and death in Australia.

Although life insurers cannot pay for treatment, we play a key role in the healthcare ecosystem in Australia. By providing valuable benefits including Death, Trauma, TPD and Income Protection we can work together to support the holistic health of many Australians much earlier in the journey.

Mental health condition claims also continue to be a leading cause of disability claims, both across Income Protection and TPD benefits. We understand the challenges that customers with mental health conditions face and have highly skilled and professional claims teams to partner with you in supporting your clients to feel healthier.

We are in a constant state of innovation and growth, always looking at ways we can better support you and your clients. Our team is made up of many caring, skilled and dedicated individuals across claims administration, claims assessment and rehabilitation services, ensuring that we have a personalised approach to every claimant.

The work we all do, whether as an insurer or adviser is critical and fundamental - we protect the health of people. We are proud to partner with you in creating healthier lives for your clients and you can count on us to be there when it matters most.

1 aihw.gov.au/reports/cancer-screening/cancer-screening-and-covid-19-in-australia/contents/did-fewer-people-screen-for-cancerduring-the-covid-19-pandemic

The Financial Adviser | June 2022

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Supporting our customers and their families through the claims we pay is the most important thing we can do

Last financial year we paid

$2.7 billion in claims to 39,628 customers¹.

Visit adviser.tal.com.au/claims to learn more

1. Claims statistics based on total claims paid under TAL Life Limited insurance products between 1 April 2021 and 31 March 2022.

For more information, visit tal.com.au.

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The Financial Adviser | June 2022

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Advice Strategy

Warwick Beard Retail Claims Liaison Manager, TAL

The importance of advisers’ knowledge at claim time When people have their lives disrupted by a significant event and are in the unfortunate position of having to make a claim on their life insurance policy, they want an expert on their side.

There is nobody else in the claims experience that offers the same service that financial advisers do, and advisers are in the unique position of deeply understanding their clients’ financial affairs and having the opportunity to make an invaluable impact during their hardest times.

While it is incumbent on advisers to have a strong level of knowledge when it comes to life insurance product definitions, indemnity requirements, financial structures, and ongoing income clauses, having good working relationships with insurers often gives the greatest opportunity to ensure they can play a role in facilitating a smooth claims experience for their clients.

The human interaction between advisers and clients can’t be underestimated There is no doubt that a key priority for the financial advice industry is to build trusting and long-lasting relationships with clients. Within that, the ability of an adviser to offer emotional guidance through direct communication is extremely valuable to a client navigating an insurance claim.

Providing a human touch and expressing empathy during the course of navigating a claim will go a long way in building a longer-term supportive relationship, and there is an opportunity for advisers to foster a relationship with their clients which is more akin to a partnership through constant and relevant dialogue.

When people are navigating the claims experience, they are often looking to their advisers for care, sensitivity and objectivity, and want to be understood – this is what makes that human touch and an already established level of adviser-client trust so important.

Simple keeping-in-touch practices like updating clients around timings for their next review, letting them know how their claims are progressing, and even setting expectations in initial conversations around how frequently they will be communicating, can help clients enjoy the interaction and advice that comes with oneon-one dealings with an adviser.

Education is paramount during claim time Advisers’ knowledge and expertise around the claims process means they can assist clients on the claims journey so they are able to focus on their personal matters, such as returning to better health or looking after their families.

At TAL we broaden our support to advisers dealing with claims by providing them with direct contact to our claims consultants. In recent times, when advisers need information or answers, speed is highly valued.

Providing this direct access allows for the potential to build relationships and for advisers to feel better supported so that they can fulfil their promises and obligations to clients.

This open communication is a priority for us. By working closely with advisers, we know that quick responses and an accessible claims team are a crucial part of the claims experience. We believe that direct access can only lead to more efficient claims processes and, ultimately, improve client outcomes.

There is also a role for life insurers to support advisers through their education journey. Our education program, TAL Risk Academy, is a significant opportunity for us to contribute to and enhance advisers’ knowledge around claims. Since 2018, 1,875 advisers have participated in our TAL Risk Academy claims education. These courses are continually evolving, and some include real examples and case studies to help advisers enhance their ability to relate and communicate with clients on a deeper level, subsequently helping form trusted relationships for the long-term.

While knowledge is power, it doesn’t mean advisers are expected to do it all themselves. Drawing on the expertise of life insurers and their various specialists will help advisers provide an outstanding claims experience for their clients, while also creating operational efficiencies.

Using knowledge and strong communication to build trust Advisers can offer invaluable support to their clients by navigating the medical and financial complexities of a claim while also offering emotional support.

Those advisers who understand the product offering and the claims process intimately will deliver the best value to their clients and foster stronger relationships.

By working together in the best interests of clients, advisers and their life insurance partners can make a formidable team, adding exponential value over the life of the client relationship, particularly during clients’ most difficult times.

The Financial Adviser | June 2022

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Professionalism

Policy and Advocacy Policy and Advocacy summary Phil Anderson AFA CEO

The first half of 2022 has been dominated by the debate on the Education Standard, the Quality of Advice Review and the Federal Election. The start of the year has also been marked by the passing of the first deadline on the Financial Adviser exam, and the loss of a significant number of financial advisers, with the number on the Financial Adviser Register (FAR) falling below 17,000 during May. Another key development in the first quarter of 2022 was the decision by APRA to defer the Individual Disability Income Insurance (IDII) Tranche 3 measure requiring that IDII policies be refreshed every five years. We had identified a range of potential consumer detriment issues in this measure and we met with APRA and ASIC (jointly with the FPA) to highlight these issues for them. We were pleased to see this measure deferred, which at least takes one challenge off the plate of financial advisers and their clients.

With the education standard being a reform that can be enacted by the Minister, without the need for a debate in the Parliament, we had hoped that this would be addressed by the Government before the election, however disappointing this was not the case.

Financial Adviser Numbers 31 December 2021 was a major transition point for the advice profession, with all of those advisers who had not passed the exam, nor attempted it at least twice before the end of 2021, needing to come off the FAR. On our own analysis, we had anticipated that the number would fall below 17,000 by early 2022. This was not the case, as seemingly the register had not been updated for all those who did not meet the criteria for continuing in 2022. That is clearly being progressively addressed and adviser numbers have now fallen below 17,000. It is likely that they will drift lower over the coming months before taking another major drop down following the expiration of the 30 September 2022 exam extension deadline. We know through answers to Questions on Notice from the February 2022 Senate Estimates hearing that there are 882 who qualified for the extension. The February 2022 exam results were disappointing with only 108 of the 333 candidates who attempted the exam passing, with seemingly a higher pass rate for the 90 new entrants sitting the exam. We still have the results of the May exam and the July exam outcome to take into account, however we anticipate that a large number of advisers will exit the FAR following the 30 September 2022 deadline. We held a webinar in April with Dr Katherine Hunt, who is a former adviser and Griffith University lecturer, in advance of the May exam, to help advisers prepare, including considering applying for extra time, the mindset required for the exam and exam technique. This webinar is available on the AFA website and well worth watching for any of the July candidates who have not already seen it or who would benefit from a refresher. We encourage advisers sitting the exam to reach out for help, including one-on-one tutoring options that are available. We will continue to support our members who are working through the exam challenge.

The AFA supports a significantly increased recognition of prior learning and experience, and we will continue to advocate strongly for a speedy resolution of this matter so that advisers know what they need to do and can go ahead and do it.

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Professionalism

Government Proposal on the Education Standard Having had announcements by both the opposition and the Government in December 2021, and with submissions in response to the Government’s proposal paper due on 1 February 2022, we had hoped that the Government would take action before the election was called. Both the ALP and the Coalition were talking about an experience pathway for those who had completed 10 years of experience and had an unblemished record. Despite this similarity in political policy, there was an intense debate amongst the advice profession as to whether a change of this scale would undermine the recognition of financial advice as a profession. We had sought to lay out a compromise position, which we had hoped would facilitate a solution being reached in a timely manner.

Unfortunately, the Government did not take any further action and has not said anything publicly since the consultation process closed. This was a very disappointing outcome as we are aware that many advisers have put their studies on hold whilst they await an outcome.

We note that Stephen Jones, Minister for Financial Services had made comments just prior to the election that suggested he remains committed to the proposal that he made back in December 2021 and is aware of the need to move on this matter quickly. The AFA supports a significantly increased recognition of prior learning and experience, and we will continue to advocate strongly for a speedy resolution of this matter so that advisers know what they need to do and can go ahead and do it.

Quality of Advice Review On 11 March 2022, the Government released the final Terms of Reference for the Quality of Advice Review and also announced that the Review would be led by Michelle Levy, who is a financial services partner at the legal firm Allens.

The Treasury also released an issues paper on 25 March 2022, with submissions due by 3 June 2022. We have been working on our submission, to identify what we think are the best solutions to fix the issues of cost and complexity in financial advice.

We have been consulting with other associations on this, along with our licensee partners and members, through a webinar and other forums. We believe that the Quality of Advice Review is a great opportunity to deliver significant positive reform that will help to address the excessive red tape that has been put in place over recent years.

Single Disciplinary Body and Tax Advice Transition Model On 14 February 2022, Minister Hume announced the appointment of 31 parttime members to the Financial Services and Credit Panel (FSCP). ASIC has also consulted on the operation of the FSCP, including a proposal that ASIC would make media releases with respect to all disciplinary outcomes from the FSCP. We strongly opposed this, suggesting that media releases should be limited to more serious matters and the recording of the outcome on the FAR was sufficient consequence for more minor and moderate matters. We are yet to hear the outcome

of any FSCP matters, however it needs to be noted that the FSCP will only address matters where the misconduct arises after 1 January 2022, so it would be natural to expect some delay in matters being reported.

One outstanding issue with the Better Advice Bill and the transition arrangements with the oversight of the TPB was the implications for financial advisers who were not on the FAR on 31 December 2021.

Those advisers who were registered with the TPB were directly and immediately transitioned to Qualified Tax Relevant Providers (QTRP), without the need to do any further study. Those who were not registered with the TPB, however were on the FAR as at 31 December 2021, were given four years to complete Diploma level courses in Taxation Law and Commercial Law. Advisers who were not on the FAR as of 31 December 2021, due to either a career break (i.e. maternity leave) or transitioning between licensees, were seemingly required to complete these courses before they commence practicing again. This seemed like an unfair outcome.

Our efforts to lobby the Government on this issue in late 2021 did not prove fruitful.

Compensation Scheme of Last Resort The Senate Economics Legislation Committee held an inquiry into the CSLR legislation, and the AFA presented alongside the FPA and CPA Australia at a hearing held on 27 January 2022. At that hearing, we argued for the inclusion of Managed Investment Schemes (MISs) and a fairer allocation of the operating costs of the scheme. Despite the Committee’s report (released on 15 February 2022) recommending the Parliament proceed

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Policy and Advocacy continued with the Bill in its current form, the Government did not choose to debate the Bill in either the House of Representatives or the Senate. In the SEC report, the ALP provided additional comments supporting the inclusion of MISs. We will need to wait to see what the ALP chooses to do with this legislation, however seemingly the commencement date will need to be pushed back. The previous Government had proposed that it would be the Government that picked up the cost in the first year, which in combination with a delay in the starting date, might push back the cost impact on financial advisers for two years.

APRA Intervention in the Income Protection market The APRA intervention in the Individual Disability Income Insurance (IDII) product has been staged, with the initial tranche on 31 March 2020, being the banning of Agreed Value policies.

The most significant Tranche commenced on 1 October 2021, which led to some very substantial changes to the IDII products.

There are now significant differences in the products in terms of income replacement ratio, length of own occupation versus any occupation and benefit offsets, amongst other key terms and features.

The Tranche 2 changes to IDII products from 1 October 2021, have had a significant carryover impact into the early part of 2022, as financial advisers assess the new products and consider their application. The reality is that whilst existing clients will continue to have the option of staying in their current products, new clients do not have this choice, and can only access the new products.

The final tranche was the implementation of the five-year contract term measure, which was initially delayed in May 2021 from 1 October 2021 until 1 October 2022. This measure would require that policies be refreshed every five years to reflect the terms and conditions of the open product, and also that financials, occupation and pastimes (but not health) be underwritten again at the time of refresh.

AFA Member discounts from Education providers

Discounts apply to all current AFA members but maybe subject to change.

Provider

RRP per subject

Discounted price per subject

Deakin $3,525 per subject (when completing a full qualification) $3,937 per subject (for single subject enrolments) $2,996.25 (full qualification) $3,346.45 (single subject)

UNE

$3,338

$2,670.40

Postgraduate courses and single subject enrolments (including Intensive Study Option for the FASEA Bridging Course subjects) offered within the Faculty of Business and Law

Graduate Diploma in Financial Planning (including single unit enrolments and the FASEA Bridging Course subjects)

All

All

Existing Students

Yes

Yes

New Students

Yes

Yes

Yes

Yes

To enrol, contact Deakin at financial-planning@deakin.edu.au 03 9251 7969

To enrol, contact Cynthia Shannon cshanno5@une.edu.au

Eligible courses for discount (FASEA approved courses) Eligible AFA membership categories (Membership must be current)

Discount can be applied to:

Students using FEE HELP (NB: FEE Help only applies to enrolments in a full qualification, not single subject enrolments)

Contact and enrolment details

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G

We have been concerned about the implications of this for clients who are not gainfully employed at the five-year point (i.e. maternity leave). We arranged a meeting with APRA and ASIC in February (jointly with the FPA), to discuss our concerns about how this measure could be disadvantageous to a range of clients and how we thought that some of the implementations of this measure remained unclear. We were pleased to see that on 24 March 2022, APRA announced that they would defer the commencement of this measure for at least a further two years.

We believe that the other measures have already achieved the objectives that APRA commenced with and that in the context of the risk of client detriment, this further measure was not necessary.

Times of Change With the new Government in place, our focus will remain on finding a solution for the education standard, working with the Government on a solution to the CSLR issue and advocating

strongly for fundamental and decisive change as part of the Quality of Advice Review to significantly reduce the cost and complexity involved in the provision of financial advice.

Importantly, we will also continue to advocate for fixes to other important FASEA issues such as the Code of Ethics (particularly Standards 3 and 6), the Professional Year and elements of the CPD requirements.

We are hopeful that the Quality of Advice Review will carefully and deeply analyse the problems in the financial advice market and through a broad and open consultation process take on board a range of important reforms that will allow us to once more be positive about a vibrant future for the financial advice profession.

As always, we welcome your feedback and input on policy matters by emailing us at policy@afa.asn.au.

TAFE NSW

Kaplan Professional

Queensland University of Technology

$2,200

$2,500

N/A

$1,980

$1,800

$1,700

Graduate Diploma in Financial Planning (including single unit enrolments and the FASEA Bridging Course subjects)

Master of Financial Planning; Graduate Certificate in Financial Planning; Graduate Diploma in Financial Planning (including single unit enrolments and the FASEA Bridging Course subjects)

Ethics and Professional Relationships’ bridging course

All

All

All

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

To enrol, contact campusafa@afa.asn.au for the discount code.

Kaplan Course Advisers studentadvice@kaplan.edu.au

To enrol contact: Theresa Waye.

Phone 07 3138 1089 Email gsz458enq@qut.edu.au

No (NB: When using FEE Help, discount does not apply)

To enrol, contact Diana Bugarcic (Course Coordinator) DianaBugarcic1@tafensw.edu.au 02 9598 6280

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We’re supporting the work only you can do Your expert guidance is helping everyday Australians experience financial wellbeing in a time of constant change.

It’s work that matters. We’re here to support you with ways to make advice more accessible, to help create an Australia that’s good with money. insigniafinancial.com.au

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Advice Strategy

Renato Mota CEO, Insignia Financial

A noble profession: The future of financial advice in Australia

The financial advice sector needs to evolve, and adopt new technology and business models to help to improve the financial wellbeing of more Australians.

Quality financial advice has the power to enhance financial wellbeing, which in turn, can transform people’s lives. With uncertainty in the economy and many Australians reassessing their priorities due to the COVID-19 pandemic, the role of financial advisers has never been more important.

Australia needs more financial advisers to address the societal needs, however, consumer perceptions also act as a barrier to people seeking advice. Our research found nearly two thirds of people do not think they have enough assets or wealth to warrant advice and about half believe they cannot afford it.

There are around 17,000 financial advisers listed on the Australian Securities and Investment Commission’s Financial Advisers Register. Regulatory upheaval over the past few years has seen many experienced practitioners leave the sector, while increased education requirements have lifted the bar but also created barriers to entry into the profession.

Recent KPMG modelling4 for the Financial Services Council has demonstrated that the cost per client of the current advice process within the existing regulatory regime is $5,334.

Compliance burdens, due diligence processes and time required to demonstrate satisfaction of best interest duty all feed into the price.

With a smaller pool of advisers and a growing need for advice in the community, many people are unable to access the service.

But not everyone needs a comprehensive service. Financial advice should span the spectrum from financial literacy, tips and hints, to episodic help and coaching, through to holistic advice.

Only 27 per cent of Australians have received financial advice, according to the Australian Securities and Investments Commission’s report1, ‘Financial advice: what consumers really think’. Our own research, ‘The True Value of Advice’,2 shows that nearly half of people who are unadvised are open to seeking advice.

This gap presents both a challenge and opportunity for the financial advice industry.

Value of advice Our goal at Insignia Financial is to help all Australians to improve their financial wellbeing. The role of financial advice in that process is clear.

Our research, ‘The True Value of Advice’3 report found 90 per cent of people who have a financial adviser feel that accessing advice has left them in a better position financially and 89 per cent report that receiving advice allowed them to live their desired lifestyle. Other research participants reported that advice had led to improved mental health, less worry and stress, and better relationships with family and friends.

It’s no bold claim to say there are few professions in which practitioners can have such a direct and measurable impact on improving people’s lives.

Part of the challenge will be to break the nexus between product and advice.

Insignia Financial’s ClientFirst ethos is that financial advice is about understanding the needs of and designing the best solution for the client – not about product recommendations.

New directions The future of advice will involve helping clients to experience financial wellbeing at all stages of life – not just at retirement.

It will involve investing in and building business models that help improve people’s financial literacy through coaching, guidance and improving confidence and understanding of their financial affairs.

Technology has a role to play in reaching people at a reasonable cost, in an efficient and scalable way – while preserving the integrity and quality of advice.

Our extensive network of financial advisers, including Bridges and Shadforth groups, and self-employed advice businesses under licensees such as RI Advice, Millennium3, Lonsdale, Godfrey Pembroke and Consultum, means that clients from all walks of life can find within the Insignia Financial Group an advice proposition that will suit them.

As the financial advice sector enters a new phase, there will be opportunities to provide a wider range of advice to a larger number of people. This will bring us closer to the ultimate goal of helping to improve the financial wellbeing of all Australians.

1 2 3 4

asic.gov.au/regulatory-resources/find-a-document/reports/rep-627-financial-advice-what-consumers-really-think/ IOOF The True Value of Advice December 2020 Available at: ioof.com.au/financial-advice/the-true-value-of-advice Financial Services Council (FSC) 2021, White Paper on Financial Advice, p 3, fsc.org.au/policy/advice/white-paper-advice (FSC White Paper).

The Financial Adviser | June 2022

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Innovation

David Sarkis CEO, iExtend

Addressing a gap in life insurance There is an uneasy contradiction and gap in life insurance, that when clients need it the most, it is generally at a time when they afford it the least.

For example, an older client who may have developed some health challenges and is on reduced disposable income may find it virtually impossible to get any life insurance cover.

Secured Business Equity’s (Principal and Financial Adviser), Brian Perrin, recently surmised this reality at an industry roundtable hosted by RiskInfo, “At some point in our lives, we are uninsurable”.

It is a stark reality but something many Australian retirees will face in the light of reduced disposable incomes and increased insurance premiums, which can typically rise 10-15% per annum. According to KPMG, over the past 12 months to 31 December 2021, the average premium increase per policy for risk products was 12% per annum, 24% over the past two years.1 According to Diamond Blue Financial Services Financial Adviser Dianna Pecherczyk, clients are either reducing their cover because their income is not enough to cover their family’s financial commitments, in some cases cancelling it outright. Unfortunately, she said they might decide to do this without knowing their exact financial and medical circumstances.

“Many people are cancelling their insurance without knowing what their current health situation is, so a discussion on their options is important.”

Against this backdrop, iExtend is seeking to address a gap in the life insurance market by providing life insurance policyholders who are committed to cancelling their policies with another option.

Unfortunately, many clients feel they don’t have options regarding their life insurance, and up until now, there really hasn’t been one.

According to Brian and Dianna, this type of offer has a real role to play in addressing some uncomfortable truths in the life insurance industry. It extends life insurance, so it is there when people need it most, but it also provides a great option for clients who have assets which are not immediately liquid.

“It’s especially great for clients whose assets are locked up in property,” said Dianna. “These clients believe they have their bases covered but do they want to sell when the market is down to supply their loved ones with the money they need? Or could they keep a bit of the cover with iExtend and give them that buffer that they might not have had if they cancelled their policy.”

Brian said he used iExtend with business professionals who have been able to capitalise on their life insurance to create a succession plan or donate a portion of their life insurance to charity.

“If you have an iExtend policy, you are automatically establishing an estate plan,” said Brian. “It has implications for incredible service.” iExtend estimates it will return approximately $25-$50 million in life insurance claim benefits over the next twenty years to ordinary Australians who would otherwise have been forfeited due to a reluctant cancellation.

The journey for us starts when someone decides to cancel. We believe that the policy has zero value at that point in time, and we aim to create value back for the policyholders who need it most.

For more information on the iExend offer, please see the recent RiskInfo roundtable riskinfo.com.au/roundtable/2021-income-protectioninsurance-virtual-round-table/# or get in touch with info@i-extend.com.au.

iExtend partners with life insurance owners to share co-ownership of the life policy, paying ongoing premiums on the cover which would have otherwise been cancelled.

By co-owning a life policy with iExtend, policyholders eliminate future premium payments from the portion of the policy that was to be cancelled, providing a share of any claim for the policyholder’s family and greater financial certainty for them at the time when they may need it most.

Many people are cancelling their insurance without knowing what their current health situation is, so a discussion on their options is important.

1 KPMG Life Insurance Insights 2021

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Advice Strategy

Fabian Bussoletti Product Technical & Regulatory Change Manager, MLC Life Insurance

Work test changes are coming As we approach the start of a new financial year, we find ourselves grappling with yet another change to superannuation’s contribution rules. Thankfully, the latest changes continue a recent trend of being positive ones insofar as creating advice opportunities are concerned.

While there are a raft of legislated changes relevant to super contributions that commence on 1 July 2022, arguably the biggest change is the removal of the work test requirement for individuals aged 67 – 74.

This change means that from 1 July 2022 any individual will be able to make personal super contributions, or receive employer and/or spouse contributions, regardless of whether they are working or not, up to age 751.

However, it’s too soon to completely erase the work test requirements from our memories. Why? Because an individual’s ability to meet the work test or work test exemption, will remain a critical requirement for those aged 67 – 74 who intend to claim a tax deduction for their personal super contributions.

In one sense, this could be viewed as a continuation of the current requirements for people in this cohort who, under the existing rules, must already meet a work test, or work test exemption.

However, because the requirement to meet either the work test, or work test exemption, is no longer a pre-cursor to making a super contribution, this change may result in some individuals making a personal super contribution during the year, only to find out at the end of the year that they are ineligible to claim the contributed amount as a tax deduction because they have failed to meet the work test.

Where this occurs, the contribution will instead be treated as a personal contribution and counted toward the members non-concessional contribution cap.

What is the work test?

The work test broadly requires an individual to be gainfully employed for at least 40 hours during any 30 consecutive day period in the financial year that they make the contribution(s).

Previously, this work test had to be met before a contribution could be made. From 1 July 2022, it can be met at any time during the financial year.

Where an individual has recently retired, is aged 67 to 74 and had a Total Super Balance2 of less than $300,000, a work test exemption may enable them to claim a tax deduction for personal super contributions.

However, the work test exemption is only available in the first financial year in which the individual doesn’t meet the work test.

Reminder – Notice of intent Individuals who intend to claim a tax deduction for personal super contributions will still need to provide their fund with a valid Notice of intent (NOI) form within the relevant timeframes. Further, the NOI form will need to be acknowledged by their fund before being eligible to claim the tax deduction through their tax return.

Note: The ATO has indicated that it will assume responsibility for monitoring work test requirements for deductible super contributions.

Looking forward As we look forward to kicking off a new financial year with more changes to superannuation’s contribution rules, given the positive nature of these changes, the year ahead promises to be one which will yield additional advice opportunities for a broad range of individuals.

1 Voluntary contributions can be accepted by a fund until 28 days following the end of the month in which an individual turns age 75.

2 Total Super Balance (TSB): An individual’s TSB for a financial year is the value, at 30 June of the previous financial year, of all of their accumulation or pre-retirement phase accounts, retirement phase accounts, such as account based pensions, and funds in the process of being transferred from one super account to another.

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Innovation

Matt Esler Co-Founder, Padua

The four major problems facing financial advisers – time, cost, quality & trust

In this article, Padua Co-Founder Matt Esler discusses the first two (1&2) of the four major problems facing financial advisers today.

In Part 2 of this series, he will discuss the second two (3&4).

Late adopters beware! Soon advisers will be basing their decision on which dealer group to join (or leave) based on their access to software that produces high-quality advice in a timely manner.

The four major problems facing advisers 1.

2.

3.

4.

Cost of producing advice

Time taken to produce advice Cost of producing advice Quality of advice; and Trusted or engaged advice.

By solving these problems, the industry will find the oxygen it has so desperately been gasping for since strangulation by regulation became too much to endure.

Time taken to produce advice Depending on what market research you trust, the time taken to produce ROAs ranges from 2-6 hours, simple SOAs range from 4-10 hours and complex SOAs range from 14-30 hours. We would argue that once the fact find is completed, if you are taking longer than 15 minutes for an ROA, 30 minutes for a simple SOA and 1 hour for a complex SOA, you’re probably using the wrong solution.

According to Wealth Data, there are 17,044 financial advisers (as of 12th May 2022). Approximately 2.6m Australians pay for advice. This equates to roughly 150 clients per adviser on average. On average within an advice practice, we have found that approximately 80% of advice documents are ROAs and 20% are SOAs. Assuming a 50/50 mix of simple and complex SOAs (15/15) and the average times taken to produce advice above, this equates to 855 hours or 114 days to produce advice for the average client base (see “Traditional advice generation methods” in the table below).

Compare this to the “Next-generation advice software”. The same 150 documents are generated in 116.25 hours or 15.5 days. The difference is so great - 738.75 hours and 98.50 days - it beggars belief! The question is: why aren’t all dealer groups using nextgeneration advice software? As with any innovation there’s a lifecycle - early adopters, early to late majority, then laggards.

Since it’s inception in 2014 we’ve been striving to reduce the cost of high-quality advice. We built a Services business to help advisers produce quality advice, and Software to create efficiency at each stage of the advice process. By “drinking our own champagne” our advice experts inform our Software, and our Software creates efficiency for our advice experts. It’s a virtuous cycle.

There is no doubt the cost of producing advice has skyrocketed through increased regulatory pressure. The FSC White Paper on Financial Advice released in October 2021 suggests the average cost of producing financial advice per client is currently $5,334.

However, this suggests that the cost of advice is overstated, or financial advisers are probably using the wrong software again.

Our advisers access ROAs for $125 and simple SOAs for $250 through our DIY capability. Complex SOAs average $575 through our services. This is 5% to 10% of the average cost suggested by the FSC. We have integrated with market-leading technology like Iress Xplan, which has deep CRM, portfolio management and remuneration capability. Leveraging this combination reduces the cost of advice considerably.

Accessibility and affordability The major problems of time and cost of producing advice are extremely important to solve. It’s the key reason why the Quality of Advice Review is in full swing. Whilst 10% of Australians pay for advice, around 41% want it. The 31% difference is due to affordability. By reducing the cost of advice and the time taken to generate advice, we make advice affordable for anyone who wants to access it. Sounds simple –change never is – but we need to change to make up the difference we’ve lost.

Traditional advice generation methods

Next-generation advice software

Difference – Time saved for your practice

Advice Document Type

Avg No. of Advice Documents

Total hours

Total days

Total hours

Total days

Total hours

Total days

ROAs

120

420.00

56.00

90.00

12.00

330.00

44.00

Basic SOA

15

105.00

14.00

11.25

1.50

93.75

12.50

Complex SOA

15

330.00

44.00

15.00

2.00

315.00

42.00

TOTAL

150

855.00

114.00

116.25

15.50

738.75

98.50

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Professionalism

The value of Mentoring Nicole Ott AFA Mentoring Program Contact – QLD and NT

The AFA National Mentoring Program has officially kicked off for another year!

I’ve been involved in the coordination of this program for the past two years as I strongly believe in the value that mentoring can provide. During this time, I’ve had the pleasure of working with many aspirants and mentors, and I’m delighted to reflect on the value and benefits of the program as told through their experiences and insights.

What is the AFA National Mentoring Program?

The AFA National Mentoring Program aims to provide aspirants, who are typically new financial advisers, with the opportunity to connect with an experienced AFA adviser as their professional mentor. Aspirants and mentors are carefully matched based on their skillsets and desired learning outcomes – so you know you’ll be matched with the right person.

The program runs for six months and requires the mentor and aspirant to meet face to face or virtually for one hour each month.

It provides a significant advantage to new advisers, with access to insights, practical knowledge and another perspective that can broaden their experience base and contribute to their development. We’re always on the lookout for new participants, so I’d encourage anyone that’s interested to reach out and learn more.

What do some of the program participants think?

Aspirant – Adam Dight One of last year’s aspirants was Adam Dight, a paraplanner with Profectus Financial Partners. Adam took part in the program as he felt like a “duck out of water” following his return to study after spending his whole career in funds management.

Mentor – Morgan Hayward Morgan Hayward, Director – Financial Advisory with Yield Advisory, has participated in the program as a mentor for the past 2 years.

Having benefitted from having an experienced mentor at the beginning of her own career, Morgan understands the value of mentorship firsthand. She joined the program to give back and assist others entering the world of financial advising.

“When I first started out (as a financial adviser), I was in a small practice and unfortunately didn’t receive a large degree of training, support, or guidance. So, I sought an external network,” Morgan said.

“At my first AFA conference, I met a gentleman who was kind enough to act as my mentor-figure. With his guidance and support, I have thrived in my profession, and I want to see others do the same. The mentoring program is a great initiative to achieve this.”

Reflecting on the past two years, Morgan says that by knowing she was making a difference to her peers, the program has also benefitted her as a mentor.

“It’s rewarding to know I’m helping provide a strong support network for those in our advice community through the program. Whilst it can feel like you are alone at times in the advice industry, it’s made easier when you have a trusted external network,” she said.

Mentor – Mitch Hood Director and Financial Planner at Business Depot, Mitch Hood, is also returning to the program for his second year as a mentor.

Mitch says having a small part to play in an aspirant’s career development is incredibly rewarding and encourages anyone considering the program to find out how they can get involved.

“Going back to study in your late 40s and completing twelve 13-week subjects was daunting enough, but I knew that simply attaining the relevant qualifications was only half the battle,” Adam said.

“The AFA has created a meaningful program that assists the next generation of advisers seeking help and guidance on their careers. So, it was an easy decision for me to say yes to the mentoring program,” Mitch said.

“The AFA National Mentoring Program filled a huge part of the known unknowns, given I had no professional experience in the world of Financial Planning. I’m still in regular contact with my mentor post the official end of the program.”

“I highly recommend more mentors make themselves available to assist. The process to apply and participate was easy and the aspirants are eager to learn from your insight, knowledge and direction that can take their careers to the next level,” he said.

Interested in joining the AFA mentoring program as a mentor or aspirant?

Visit afa.asn.au/membership/afa-mentoring for more information.

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Advice Strategy

Nicole Ott National Adviser Services Manager, Trilogy Funds Management Limited

Demand for industrial property continues to grow Despite its simple exterior, industrial property’s solid foundations, rooted in essential trades such as manufacturing, logistics and mining, have seen it through trying times. The accelerated growth of e-commerce and restructuring of supply chains that resulted from COVID-19 lockdowns have caused demand for warehouse and logistics space across Australia to soar, making industrial property one of today’s most attractive asset classes.

The challenge for investors is that unless they have significant upfront capital, direct industrial property investment is increasingly more difficult. That’s where property trusts come in as an alternate way to gain exposure to the asset class and sector. Incorporating an industrial property trust, like the Trilogy Industrial Property Trust, into your clients’ portfolios is one way you can diversify their portfolios and enable them to gain exposure to this sought-after asset class.

Demand for this sector has been strong and is expected to continue, with CBRE forecasting an additional 2.5 million square metres of industrial space will be required in Australia over the next five years to support the growth of online shopping alone.

Since its launch in 2018, the Trilogy Industrial Property Trust has grown to over $166million* in assets under management and includes a diversified range of assets by type and tenant sector across regional and metro areas throughout Australia. While past performance is not a reliable indicator of future performance, to date the Trust has provided investors with competitive returns and offers the opportunity for capital growth.

* As at 31 March 2022. Issued by Trilogy Funds Management Limited ABN 59 080 383 679 AFSL 261425. Visit trilogyfunds.com.au for the PDS and TMD for Trilogy Industrial Property Trust ARSN 623 096 944 including further information and risks such as loss of part or all of your capital or diminished returns. Past performance is not a reliable indicator of future performance. Payment and amount of distributions not guaranteed, and subject to terms of the Product Disclosure Statement (PDS).

Diversify your clients’ portfolios with the Trilogy Industrial Property Trust

Current yield 6.98% PA* *For April 2022, the Trilogy Industrial Property Trust paid investors 7.60 CPU p.a.^ annualised.

This is equivalent to a yield of 6.98% p.a. annualised based on the unit price of $1.0886 as at 1 April 2022.

Speak to our team today to learn more 1800 230 099 trilogyfunds.com.au

Issued by Trilogy Funds Management Limited ABN 59 080 383 679 AFSL 261425. Visit trilogyfunds.com.au for the Trilogy Industrial Property Trust ARSN 623 096 944 PDS, TMD, distribution rate and risks. Performance, payment of returns and return of capital are not guaranteed. Past performance is not a reliable indicator of future performance.

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Communities of Practice

Ashley Mahadeea AFA Gen Next National Chair

The evolution of the adviser role in a technological age There are three main factors shaping the future of financial advice – ever changing regulation, an increased focus on customer experience and technology.

Very few industries are unaffected by technology.

Financial advisers that embrace a new era of technology rather than fighting it are in the front seat to retain existing clients and win new business. These advisers are providing the best of both worlds to their clients in a highly competitive landscape.

There is a non-debate in financial advice whether the industry is moving towards a digital adviser model or not-Robo advice as it has been called for years. There is never ever going to be a substitute for human emotion and relationship. The true magic of financial advice resides in the human element as clients tend to focus on the emotional over the practical.

Technology in advice represents an extension of human capabilities and certainly does not mean replacing the adviser. How much better are we as humans with a smartphone in our hands? The relationship between AdviceTech and advisers is fusional. Each element supports the other to create an efficient, smart, and sustainable advice model designed around the client experience. We are now talking about a hybrid advice model.

This new hybrid advice model settles the debate between human advisers vs digital advisers.

While technology can help to automate and simplify advice processes, it cannot replace the role of a financial adviser, nor can it trigger the emotional side of financial advice which is crucial in determining clients’ needs and understanding their behaviours.

Instead, we are seeing the emergence of new technology solutions powering advisers to offer an automated, human, and digital advice experience to their clients. It also delivers advice in the way today’s client interacts while creating significant efficiencies within the advice process.

Those efficiencies are often reflected in the reduction of manual, repetitive and time-consuming tasks such as data entry and fact finding. Advisers are able to focus on goal prioritisation, understanding their clients’ emotional triggers and tailor strategies to enhance their clients’ chance of achieving their life aspirations. Smart AdviceTech helps advisers simulate real-life situations,

goals, and objectives, like ‘what if’ scenarios that illustrate how certain decisions will impact a client’s ability to achieve their wealth objectives. Behind the scenes, sophisticated multi-dimensional modelling of client data helps advisers to have deep conversations around wealth creation, management, and the value of advice.

Technological advancements regarding, in-depth data & analysis, live modelling of optimal strategies & actions towards the client’s goal achievability, will help financial advisers evolve towards a life coach and financial mentor role, with technology supporting the client-adviser conversation. This ‘life coaching’ style of advisory is what is making headway, helping to build strong and long-lasting client relationships, demonstrating the true value of advice. By understanding client behaviours through psychological profiling, as well as reviewing spending, saving, and investing habits, advisers can provide life changing advice built on emotions, values, and life goals.

Financial advisers are showing more and more interest in life coaching and human behavioural elements.

Knowing clients more intimately helps to strengthen client relationships and deliver more value in the advice provided. By integrating the financial advice process with behavioural money coaching, advisers are seeing clients excel in ways that can be extremely rewarding.

Advisers are able to guide their clients towards making more conscious money choices by improving their financial knowledge and money behaviours. Financial advisers are seeking new AdviceTech solutions that can handle complex data flow, algorithms and calculations with a human-centric approach that focuses on their clients’ money beliefs, behaviours, and values.

Gen Next will continue to develop the adviser of the future- through forward-thinking and bravery, we harness the power of education and technological innovation to create meaningful change. Join me in a tech-driven community of advice professionals to create a sustainable new world of advice.

Catch our Gen Next podcast series on the AFA website: afa.asn.au/about-us/communities-of-practice/gen-next

This new hybrid advice model settles the debate between human advisers vs digital advisers.

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Advice Strategy

Sarah Congdon State Manager Victoria/Tasmania, Synchron

Phil Osborne General Manager – Compliance, Synchron

Changes to income protection and what they mean for advisers The first round of income protection changes took place on 01/04/20, with the removal of Agreed Value contracts. On 01/10/21, changes to the indemnity definition meant that most clients’ pre-disability income will be the 12 months immediately prior to a claim, allowing the flexibility of choosing a 12-month period in the previous two to three years. Income replacement ratios have also been reduced, hence there is greater scrutiny of longer benefit periods to age 65, and some ancillary benefits are no longer available.

The changes to income protection insurance have vast implications for advisers, who will need to weigh up when cost becomes more important to clients than continuing to maintain their existing (legacy) policies.

When premiums start to become unaffordable, a conversation needs to be had. Should the clients take ‘haircuts’ to their existing policy, or should they move to an income protection policy in the new world, even though it will mean losing benefits?

Effective 24/03/22, APRA announced a two-year suspension of any discussion around the five-year policy construct (re-underwriting of occupational and financials at five years).

This is a clear example of where best interests’ comes into play. If ancillary benefits and an Agreed Value contract are more in the client’s best interests, and they can continue to meet payments, there is good reason for them to stay with their current policy.

Due to continuous changes, we are seeing some holistic style advisers choosing to step out of the insurance advice space. As a result, risk-only advisers are beginning to re-emerge.

Although the changes are significant, and the implications will need careful consideration, they do mean that income protection remains sustainable – a good outcome for clients.

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MetLife offers Day 1 Partial for all occupations. metlife.com.au/advisers

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Communities of Practice

Keeping and attracting staff through the Great Resignation Dawn Thomas AFA Inspire National Chair

The financial planning profession has gone through a significant shift in the last few years. In 2018, Adviser Ratings reported the peak of financial advisers numbers of 28,000. As of May 2022, there are 16,783 advisers registered, with adviser numbers projected to fall to 12,000 by 2026. The pandemic has brought about the ‘Great Resignation’. According to the Australian Bureau of Statistics (ABS), 10% or 1.3 million Australians quit their jobs last year. This is the biggest number of employees changing jobs since 2012. The recent rise in job mobility was more pronounced for women, jumping to 10 per cent from 7.6 per cent. It signals a worrying consequence for the community because more Australians will be impacted by a shrinking number of advisers to service their financial needs. Businesses, already devoting much of their time to adapting to regulatory changes, are under mounting pressure to retain and attract staff.

The Great Resignation: It is an economic phenomenon where employees have voluntarily resigned from their jobs in large numbers, beginning in early 2021. Some reasons for this have been a lack of wage increases in an increased cost of living environment, job dissatisfaction and a desire to work at more supportive companies. It has been likened to a general strike, by some economists.

The future of the boosting numbers in the financial planning profession could lay in attracting and retaining young people and women. Randstad’s Workmonitor study polled 35,000 Australians across 34 industries in Australia. The results showed the shift of the power dynamic between talent and employers. 41% polled said that they wouldn’t accept a job with an employer unwilling to make efforts to improve their diversity and equity record. Young people had the strongest desire to align work with their personal desires. 48% of young people said they wouldn’t accept a job with an organization whose values didn’t align with theirs on social and environmental issues. Financy Women’s Index reported in March 2022, it will still take 59 years for gender equality to be achieved, 22 years for the gender pay gap to equalise and 59 years for equality in unpaid work.

Randstad has suggested focusing on these five essential areas for companies to stand out in a competitive labour market: fitting work around people’s lives, aligning values, strengthening attraction strategies, offering job flexibility, and accelerating professional development.

Businesses that can deliver on all five areas stand to attract the best people. Financy has launched the 2030 Economic Equality Pact that businesses can sign up to, as part of their commitment to closing the gender gap.

Interviewed by Gen Next Chair Ashley Mahadeea on the recent Gen Next podcast, Aspire Planning owner Tim Henry and AFA Group Wealth owner, John Cachia, shared their approach to supporting women in their business. John says that learning from other women in the advice profession about their experiences helps open his view on challenges he may not be aware of, which allows him to continuously improve his offering to staff and clients. Deline Jacovides, owner of Mazi Wealth, says this is a community effort, “Such an important conversation for everyone to be having- not just women. The majority of our profession is made up of males, so we need them to be sponsors for the future of financial advice.” Tim agrees and encourages his male counterparts to step in and have these important conversations about supporting women and their family units in the advice profession. Tim’s practice has signed Financy’s Economic Equality Pact and is aligning his business to the outcomes of the pact.

It is evident to have longevity and thrive in financial planning, businesses will have to rise to the expectations of their future and current employees. Businesses that don’t adapt to the needs of the workforce, will not only lose out on exceptional talent but also face longer hiring times and higher recruitment costs.

Financy Economic Equality Pact 1. Closing the Education gender gap Encourage equal participation of men and women in education and mentor programs that support career development.

2. Closing the Employment gender gap Provide flexible or remote work arrangements for all staff. Documented policy to support zero tolerance for gender discrimination or violence against women in the workplace.

3. Closing the Superannuation gender gap Provide Super Guarantee payments on parental leave regardless of gender. Provide information or workplace incentives to help female employees contribute more to their balances to help close the gender gap.

4. Closing the Leadership gender gap Ensure equal representation of at least 40% of women in leadership positions within the organisation. Proactive internal policy in place to improve gender diversity in leadership.

5. Closing the Unpaid Work gender gap Offer non-gendered and equal paid parental leave to all parents.

6. Closing the Gender pay gap Proactive and documented policy to support reducing gender pay gaps where they exist within our organisation.

Links: Financy Index Equality Pact: financy.com.au/economic-equality-pact/ Ranstad WorkMonitor Report 2022: rscom-cms1-prod.prd.randstadbluex.com/s3fs-media/rscom/public/2022-04/Randstad_Workmonitor_2022.pdf AFA Gen Next Podcast on Supporting Women in Advice: afa.asn.au/about-us/communities-of-practice/gen-next

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Advice Strategy

Matt Brown Executive General Manager, Advice Australian Unity

When the regulatory storm passes, investment in talent must be top priority for large and small providers

The end of financial year is well-known by the advice industry as the beginning of a busy period for advisers and clients. It is a time for advice providers to close off the year, provide counsel to clients on tax-related decisions, and plan for the year ahead.

Unfortunately, in recent years, the industry has come to dread the date for a new reason: it is the most common time for advisers to resign.

Sadly, our industry is rapidly shedding talent. In 2018, there were 28,000 advisers across Australia. Fast forward four years, adviser numbers are set to drop below 17,000 for the first time by July 2022, according to The Australian. What’s worse is that inflows of new talent are almost non-existent. Despite adviser numbers dropping by more than 10,000, a tiny 82 newly qualified advisers have joined the industry this calendar year.

But even if regulatory conditions ease, advice providers large and small have a new challenge. They must then address the large gap left by major banks and institutions, which prior to the Royal Commission, invested at-scale in graduate and training programs.

With their departure came a notable gap in the development pathway.

In today’s complex conditions, investment in training graduates at-scale is not possible for most small and large providers; they simply do not have the bandwidth. But when the storm does pass and the financial advice model is simplified, my plea is that all providers, large and small, do their part to invest in the next generation of talent. With this commitment, we will ensure financial advice in Australia remains strong in the decades ahead, for the benefit of all Australians.

Many underlying challenges are responsible for this shrinking talent pool, including increasing regulatory complexity, stricter education requirements, COVID-19 disruption and burnout. Some of these challenges are already being assessed, with the Quality of Advice Review due for delivery in December 2022.

Hydrate with the AFA Community Join the AFA Community at Conference on the evening of Thursday 22 September for a social gathering from 10pm!

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Roadshow

AFA National Roadshow 2022 From May 24 to June 2 we travelled around Australia for the AFA National Roadshow 2022 to meet with our AFA community for the first time in two years. A big thank you to our roadshow partners and presenters for making these events an overwhelming success.

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Roadshow

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Community & Marketplace

Olivia SarahLe Lacheur AFA Foundation National Chair

How do you make a difference? By harnessing the collective generosity and community spirit of the AFA! With the excitement of the first face-to-face events for 2022, the AFA Roadshow presented an opportunity for us to connect with charity partners in each state. Raising money and raising awareness of the incredible work they do in 5-10 minutes at roadshow requires a lot of preparation. Thanks to Tanya Woolnough (QLD), Jasmin Loke (NSW), Emily Cossignani and Lucy Gaff (VIC), Robyn Faber (SA) and Steve Salvia (WA) for everything they do for the AFA Foundation.

Over $11,000 will be donated to these five local charity partners.

Dandelions WA Spreading Kindness – Growing Hope. As a registered charity run 100% by volunteers, Dandelions look for ways of assisting anyone impacted by homelessness, domestic/ family violence, ill-health, natural disaster and/or financial hardship.

Baby Give Back QLD Baby Give Back helps families in crisis because they believe every baby deserves an equal start. They provide donations via social service agencies and social workers who are qualified to assess a family’s need.

Lighthouse Foundation VIC With 11 homes in Melbourne, Lighthouse provides therapeutic care to children and young people impacted by long-term neglect, abuse and homelessness. By creating a caring community, Lighthouse gives homeless kids and foster families a place to belong, heal and ultimately thrive.

Top Blokes NSW Top Blokes Foundation is on a mission to improve young male health and well-being.

They work with groups of boys and young men to increase their resilience, empathy and respect for self and others, to reduce the rates of suicide, mental health issues, antisocial and risk-taking behaviours.

COTA SA COTA (Council on the Ageing) SA is an older people’s movement and the peak body that represents the rights, interests and futures of the more than 633,000 South Australians aged 50+.

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Community & Marketplace

NSW: Top Blokes

SA: COTA South Australia

The committee has also been working hard on AFA Foundation Grants 2022. There were 31 grant applications submitted. Of these:

WA: Dandelion WA

Here are the 10 charity partners selected for grants in 2022.

Thank you to the advisers who nominated them!

AFA member who submitted the application

State

Charity Partner name

Kate Piddington

NSW

Pink Angels

• 12 applications were from NSW

Terry Johnson

NSW

WestCare Community Service

• Nine applications were from QLD

Toby Winten

QLD

RideWest

•F ive were not eligible as they were submitted by past AFA members, not current AFA members

Steve Nielsen

QLD

DV Safe Phone Public Fund

• 10 were selected for grants totalling $22,000

Rochelle Leese

SA

•T wo were selected for support at the AFA Roadshow held in May/June 2022.

Isolated Children’s Parents’ Association South Australian Branch

Cassandra Sorby-Adams

SA

Second Chances in SA

Jasmine Tocock

TAS

Print Radio Tasmania

John Cachia

VIC

Friend in Me

Donelle Parkin

WA

The Underground Collaborative

Cara Graham

WA

Lionheart Camp for Kids Inc.

• Four applications were from WA • Two applications were from SA • Two applications were from VIC • One application was from TAS

And to wrap up our fundraising and donations for the last half of this financial year, I invite you to watch this very short video showing the impact our donations had for the Waalitj Foundation. Thanks to Steve Salvia for meeting with the board of the Waalitj Foundation and delivering the big cheque. youtube.com/watch?v=WW-931KUFC8&t=13s

If at any time you have $2 or more to spare, please go to afafoundationdonation.com.au and make a tax-deductible donation. Every dollar makes a life changing impact to the communities we live and work in.

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Community & Marketplace

Nicola Beswick Chair Pro Bono Financial Advice Network

Pro bono advice - how does it work?

Our vision is to ensure that Australians living with a personal health crisis who need access to financial advice but are unable to afford it, can obtain it through the Pro Bono Financial Advice Network (PFAN). To achieve this vision we work with the fantastic financial advisers in our network to connect them to the individuals in need who are experiencing significant financial hardship, specifically as a result of serious illness or disability, and require financial advice assistance.

Two questions we are often asked is how does the PFAN referral process work? and what is expected of PFAN advisers?

How does the PFAN referral process work?

For advisers who want to join PFAN Advisers who wish to join PFAN complete an application form that identifies their areas of advice expertise.

The application must then be signed by the adviser’s licensee to provide approval to deliver pro bono advice.

Once the application is processed, the adviser is added to our PFAN adviser register and receives their welcome and onboarding information.

For Clients who want advice PFAN clients are referred to us by the Multiple Sclerosis (MS) Australia network which promote the availability of pro bono financial advice via advertising and informational webinars.

On referral to PFAN, individuals complete an application form that details their personal circumstances, and financials. This information is processed through a simple algorithm that determines client eligibility for pro bono assistance.

The adviser and client matching process As PFAN clients are identified within a particular region, the PFAN support team emails all advisers within the region with high level details of the advice assistance required and to seek willingness (and availability) to assist with the pro-bono case. The support team confirms adviser approval to take on the case and then connects the adviser with the client via an introduction email.

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What is expected of PFAN advisers?

Advisers are expected to make contact with the client within two working days of the case being assigned and then progress with the relevant advice delivery process. The advice or financial guidance required

by PFAN clients varies greatly – it may be as simple as assistance with the completion of forms or more complex cases such as identifying insurance benefits in super. In our experience to date, we have found the vast majority of cases to be relatively simple requirements and only a one-off advice consultation is required.

From time to time, clients who receive financial advice may as a result of this, no longer be in financial hardship and be able to fund any ongoing advice requirements. This is a negotiation between the adviser and client and any revised arrangement is then put into place. PFAN is clear in setting expectations with the MS Network referrers and clients who use the service that the pro bono financial advice only applies where financial hardship is evidenced and ongoing.

Once advice has been successfully delivered, the PFAN Support team gets in touch with both adviser and client to discuss satisfaction with the process and obtain (optional) testimonials which are extremely valuable in marketing and promoting the PFAN service more widely in the community.

On behalf of our clients, we thank you We thank all of the wonderful PFAN advisers who have provided invaluable and often, life-changing assistance to our PFAN clients.

And if you would like to consider pro bono advice, remember that just taking on one case a year will make that life-changing difference to a person in need.

Join us and our mission to improve the financial wellbeing of Australians living with MS through providing pro bono financial advice. The more advisers we have as part of PFAN, the more communities we will be able to serve. This ultimately makes our profession stronger through building awareness of the benefits that financial advice can bring to all of us.

Visit probonoadvice.com.au to find out more

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Communities of Practice

John Cachia

Improving financial literacy and community connection

AFA Practitioner National Chair

As practitioners, we are aware that the basic building blocks of education that help everyday Australians increase their wealth is missing from many people’s education thus increasing the gap between educated, advised Australians and those who miss out on the benefits of financial advice. As financial advisers, we know that financial literacy is the key to building wealth and this is why it is so important to get fundamental financial knowledge into the hands of regular Australians of all ages.

People at every stage of their lives can improve their financial literacy through education. It is our role, as financial advisers, to empower our clients with knowledge, sadly, we know that, as the cost of delivering advice increases, professional financial advice is simply out of reach for many Australians.

Looking at the legal profession as an example, I saw parallels between their role as leaders in information sharing and education on the law and the justice system, and our role, as financial advisers, to educate the community to make sound financial decisions. I believe that as financial advisers we have a role and a responsibility to improve the financial literacy of all Australians.

By increasing the financial literacy of all Australians from school kids to older Australians, we can help our nation be prosperous for many years to come and help create a brighter financial future for generations.

To fill this gap, I am working with our National Vice-Chair, Deline Jacovides, and our fellow committee members to start a framework for a program for us to work with the AFA community to help build financial literacy across Australia. The aim of this program is to build the knowledge of all Australians and it is our role to deliver this knowledge to our communities.

I know that one of the barriers to financial advice for regular Australians is cost and I think that this low-cost financial literacy program will go a long way to assisting those who cannot afford financial advice in a 1:1 capacity, to have a level of financial literacy that will help them weather the financial storms that may come

their way by making sensible financial decisions as well as enabling them to capitalise on situations that may be advantageous to their financial wellbeing for the short- and long-term.

As a committee, we are working at a grassroots level to see how we can position these financial literacy programs so that they are accessible to all community members from primary school students through to higher education and beyond. To enable this program to have the greatest impact, we are looking for ways to empower financial advisers across the country to roll this program out.

Not only will this program improve the financial literacy of Australians but also improve the profile of financial advisers who deliver this program as well as increase the awareness of the value of financial advisers. I hope you are as excited as I am to support the roll-out of this program nationally.

Another project I have been working on with my fellow committee members is the XY Community launch. The goal of the platform is to create a safe space for advisers to interact, give and receive support and provide feedback so that I can advocate to make positive changes on their behalf to the boards, governments and other levels of governance that operate within our profession.

Reflecting on the complex regulatory changes and increased burden of administration and education requirements the industry has experienced, I feel there is a need to go deeper in how we support our members throughout these industry-wide changes so we can promote positive change and collectively help our profession to flourish into the future, and I see the development of the XY Community as a key part of that.

As a final note, I am excited about the AFA National Conference which is happening in September. The Conference gives us an opportunity to come together as peers, and I am looking forward to get to know fellow practitioners and develop a deeper understanding of your wants, needs and concerns, as well as sharing our collective passion for the industry we love to see it thrive into the future.

Join the online AFA Community today! xyadviser.com The Financial Adviser | June 2022

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Business Growth

Vanessa Bennett Performance Mastery Coach, Next Evolution Performance (NEP).

She helps leaders and teams to master their mental energy for increased energy, productivity, staff retention and profitability.

How to attract, hire and retain high performing staff Why is it so hard to attract, hire and retain high performing staff?

Optimistic – seeing opportunities rather than obstacles.

As if it wasn’t hard enough to attract, hire and retain good staff before the pandemic, it seems the degree of difficulty has definitely come up a few notches of late.

With energy levels generally at an all-time low, and people re-evaluating what’s important to them, people really are rethinking the way they are willing to engage with their employers.

Performance excellence – doing and being their best will be one of their top values.

Even regardless of the pandemic, the main issue is quite a simple one…..there just aren’t that many high performers. The brain is wired for survival – not to do amazing things. High performers are typically classed as the top 10 per cent in terms of performance. So by the time you compete with big corporates with cash and other incentives to splash, it can be a small subset of people left for you to find and, to find you.

The good news is that with some good leadership and putting some thought into how you attract, hire and retain your staff, you can access more of these high performing people, and you can bring out high performing characteristics of people who are outside that top 10%.

So what are these characteristics of high performing staff?

It’s very hard to attract high performing staff if you aren’t crystal clear on what high performance characteristics are important to you and your culture.

These are more than just high level values. These are the characteristics you want to see everyone exhibit every day. At Next Evolution Performance we call them Key BAM (Behaviour, Activities and Mindset) Indicators, and these should be something you set in your business.

They should be visible to everyone as these will form the foundation of your culture.

Every business is different so there is no one set of BAMs that work for every business, but here are some ideas that are generally a good place to start...

Energy – They have it and take responsibility to maximise that energy, as they realise that energy is the foundation of performance.

Accountability – Deliver what they promised in the time they promised it. No excuses.

Helpful thinking – Believing that there is a solution and making every effort to find it – even when things go awry.

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Curiosity and willingness to learn - They are more likely to question the way things have been and come up with better ways of doing things.

Outcomes focused - They want to be rewarded for achieving outcomes and not just for “looking busy” by working in old school ways.

Role clarity – they love knowing what’s expected of them.

Strengths – they know what they are, they love to use them and find more of them.

Benefits of high performing staff This may seem like a no-brainer but given the number of businesses that tolerate average performers, it’s probably worth a revisit.

Broadly, they will increase the energy, productivity, staff retention, and therefore ultimately the profitability of the business. They get more done in less time with less effort and will probably even smile in the process.

And the really popular benefit for advisers is that they will free up time for you to spend your energy on revenue producing activities for the business. Basically, you can spend less time leading and more time advising. Just don’t confuse “less time leading” with “leadership not required”.

When should high performing staff be a priority?

Short answer – Always. It takes one person who isn’t up to scratch to drag down the energy and culture of your entire business. High performers want to work with other high performers.

Research from the ADP Institute confirms that high performers want to work with others who share their values.

So given that performance excellence is generally one of their top 5 values, if you are tolerating average performers, you will drive away your high performers.

Why? Because they are highly employable and they will happily move somewhere else to be with others who share their values.

I see too many advisers keep average or sub-par staff because they think it’s better to have someone doing the work than no one. In every case, when that person moves on, everyone else realises how much energy that person was draining and how they are far more profitable without that person.

The Financial Adviser | June 2022

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Business Growth

So, what do we do to attract high performers?

So, what do we do to retain high performers?

Have the culture clearly articulated and have other high performers already there.

Remember we said earlier they need minimal leadership – not zero leadership.

Word will get out that you’re running a place where high performers enjoy working (especially as high performers often know other high performers) and they will hear about you rather than you have to search high and low for them.

Your leadership is imperative to manage these people well.

The ADP Research Institute has some great research into the leadership outcomes high performers want to experience to make them stay in their roles. There are eight key outcomes, but if you get only two right, get these two right...

You might even meet some of these people before you are ready to hire them.

So what do we do to hire high performers?

1 They always feel like they know what’s expected of them – remember role clarity – yep it’s a big one!

2 They want to use their strengths every day.

Once you’ve attracted them, you need to actually hire them.

Having a job description that is very clear about the role (remember they love role clarity) is super important.

How you achieve these outcomes will be different for everyone, and some good leadership coaching can help you with that, but it’s super important that you know what their strengths are, what they love to work on and give them the opportunity to do more of that.

So don’t sugar coat the job description. Tell it exactly how it is. Someone will love to do the tasks you, and others in your business, dislike doing.

By doing all of the above, retention of high performers is a lot easier – and of course, whatever you do, don’t make them work with sub-par people! No good will come of that.

Also, make sure you include your BAMs in the job description.

If these are in the job description you will be speaking to high performing applicants. Again don’t sugar coat it, if they don’t have those high performance qualities you explicitly want, you don’t want them to waste your time applying for the role.

At Next Evolution Performance, we have helped hundreds of advisers gain clarity about what high performance means to their business, and how to clearly articulate it for the purposes of attracting, hiring and retaining great staff. During the process, they all give the same feedback – they had fewer applicants but higher quality applicants and realised what a big difference high performing staff made to their bottom line.

This way you will get fewer but higher quality applicants.

And yes, depending on the role you will most likely need to offer flexibility in terms of location or time, so be specific about how flexibility works in your high performance culture. Research is now showing that people value flexibility more than salary so this is where smaller businesses can really win over high performing talent if they do it right.

Another incentive working well for small businesses to offer is a fifth week of annual leave for free when you take four weeks in 12 months. It keeps your staff fresh and more productive, and your annual leave liability low – good times!

And don’t worry – you will easily recoup that extra week back in productivity and reduced sick leave.

It is incredibly important, and not as hard as you think, to get this right. It just takes some useful science-based frameworks to help you.

Enjoy a $100 discount at our next open workshop series If you are interested in learning more about increasing profitability, energy and leading high performing teams, NEP’s workshop series on October 13 and 27 is for you.

For more information and to register, go to nextevolutionperformance.com/events-2/ and use the code AFA100 before September 29 for $100 off the advertised price when booking both workshops together.

Vanessa Bennett is a Performance Mastery Coach with Next Evolution Performance (NEP). She helps leaders and teams build mental fitness to perform at their best without burnout for more productivity, profitability, energy and staff retention.

She has completed her Masters in Psychology and Neuroscience of Mental Health – with Distinction – at King’s College London.

The Financial Adviser | June 2022

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The Financial Adviser | June 2022

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Who's who at the AFA Our vision

AFA Directors

We empower financial advice professionals to transform the lives of Australians through quality financial advice.

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AFA National Office Level 5, 257 Clarence Street Sydney NSW 2000 P (02) 92674003 Members 1800 656 009 afa.asn.au Editor Candice Spence P (02) 8036 8173 E candice.spence@afa.asn.au Advertising (02) 8036 8173 Design, Print and Distribution Agile Print Media P 0413 159 109 E john@agileprintmedia.com.au Distribution The AFA Ltd and the Editor do not necessarily agree with comments and views expressed in this publication, and do not accept responsibility for any personal opinions stated herein.

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