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On the brink: Generalist planners told they'll become extinct

A growing number of industry commentators say the days of the all-round financial planner are numbered, amid predictions market conditions will change rapidly. We speak to Sean Graham of Mills Oakley Lawyers and Terry Slattery of DFK Laurence Varnay for their thoughts on why specialisation will be the key to success in the future.

Video transcript below:

Donna Sawyer, Wealth Professional
Donna Sawyer:
 As FOFA fast approaches a growing number of industry commentators have declared  the days of the generalist financial advisor are over.  Sean Graham of Mills Oakley Lawyers says financial planners will have a hard time staying on top of things, once the new regulations become mandatory.

Sean Graham, Mills Oakley Lawyers
Sean Graham:  I think there are some compelling reasons why there is going to be a major structural change in advice and I think that’s going to be seen most fundamentally at the authorised rep level, particularly at the individual practitioner.  So you have got a whole shift in terms of liabilities for advisors, you’ve got increasing training and accreditation requirements, you’ve got a whole host of new standards and compliance burdens which are going to hit the authorised reps.  You have also got an obligation for an authorised rep not to give advice in areas that they are not confident, but to refer somebody on.  So you could imagine the challenge for an individual advisor sitting out in an office by themselves to stay on top of all these things,  to keep uptodate with absolute requirements for what is professional advice is going to be very very difficult.
Terry Slattery, DFK Laurence Varnay
Terry Slattery:  I think it’s going to be very very difficult in the financial planning area for someone to be across a whole bunch of specialisations and so I think what you are going to tend to find, is that there will be firms that are very very deep in one specific area.
Donna Sawyer:  Terry Slattery of DFK Laurence Varnay says more planners will have to specialise as time goes on and those wanting to tap into the trillion dollar self managed super market will likely need to change their approach.
Terry Slattery:  To me there is a market, there is an incredibly large market there for the financial planning industry, but it’s going to be tapped by the financial planning industry aligning their goals with the goals of the self managed superannuant.  At the moment there is a little bit of a disconnect and that’s why the financial planners are finding it hard to sell their services to them.  But I think that is a real growth area, I mean there is potentially going to be just trillions of dollars in that area which is largely untapped for this profession at the moment.  So I mean to me that’s the big place that I would be looking.
Donna Sawyer:  So what business model is likely to adapt best to the post FOFA world?
Sean Graham:  The old multi disciplinary practice and we have talked about this for years and years and years and I think it was almost 10 years ago that I talked about the need for advice to move down that model and there has been a great deal of resistance because it’s been very easy to be able to just keep things turning over and carry on your business in the way you always used to do it. I think the shift in the civil penalty provisions, I think the shift in liability and the increased control that’s been given to licensees, at the same time but when there is pressure on remuneration I think it’s now almost bringing this perfect storm for this type of structural change.
Terry Slattery:  The type of financial planning firms that you will see going forward in the industry will tend to be the ones that still are generalists in the sense that they are going to have to work at the pretty low levels.  Once you start moving up in those specific sort of areas, you are not going to have a lot of choice but to specialise and so you will tend to see specialist firms that are working say  just on lending, borrowing side.  There will be other financial practices that will be very specific in investing sides and say for instance there will be ones that specialise solely say in self managed super funds and then there will be others that will be covering maybe one of or two of those areas that will also say have a risk or an insurance element to their practice, but they will be pretty heavily concentrated in specific areas where they can get a depth of expertise.
Donna Sawyer:  This is Donna Sawyer reporting for Wealth Professional.