The move from Viridian and CFS to provide personal advice in a scaled manner highlights a growing willingness within the industry to fix its own problems in lieu of waiting for the government.
Private markets are worth around $14 trillion globally, ASIC believes. It’s not sure, and that uncertainty hints at the wider problem – private markets, and their effect on public ones, is still largely a mystery.
Paraplanners are changing, but they still don’t want to be advisers
The paraplanning cohort is rapidly falling out of love with the idea of becoming a financial adviser according to new research from networking co-operative The Paraplanning Hub.
Only 20.5 per cent of paraplanners intend to become a financial adviser according to the hub’s Australian Paraplanning Survey 2022, which asked the group’s roughly 1,700 members a series of questions designed to paint a picture of the paraplanning demographic in Australia.
The figure represents a 7.5 per cent drop from the 28 per cent of paraplanners who indicated a desire to become advisers in a similar survey the hub conducted last year.
Melanie Drago (pictured), who runs the hub as well as her paraplanner marketplace platform Tanngo, says the dramatic fall in paraplanners wanting to become advisers due to both the changing nature of the job and paraplanners being intrinsically different people than advisers.
“They’re just different personalities,” Drago tells The Inside Adviser. “They like doing the strategy work, they’re technical people and they really do see themselves as distinct from advisers. The advisers build the relationships while the paraplanners get down to the numbers, doing strategy work and building projections.”
Asked why they don’t plan on becoming an adviser, paraplanners noted the greater flexibility that comes with the role. This is especially valued by female paraplanners with families. The typical paraplanner, revealed in the survey, is a woman between 30 and 40 who has children and works from home.
The percentage of paraplanners that identify as female increased from 69 per cent last year to 74 per cent today.
Paraplanners are also increasingly reluctant to take on the extra education, including a professional year, that needs to be completed before advisers can register with ASIC. “After so many years in the industry, I just don’t want to go back and do more education,” one participant noted.
“There are some paraplanners that would be great as advisers,” Drago adds, “But they’re a bit scared because of the education mandate and they do see advisers struggling with the compliance and the responsibility, which can be daunting. They see it all.”
SoAs not the primary function
With the Quality of Advice Review’s final recommendations still being assessed by the government, the paraplanning industry is waiting to find out whether review lead Michelle Levy’s proposal to abolish Statements of Advice will come to fruition.
Drago says the proposal caused some initial consternation among the fraternity, with some paraplanners worried their role would become marginalised – a concern she believes is largely unfounded.
“At first paraplanners were all saying… ‘Oh my god, we’re going to be redundant’,” she says. “I had to have a session saying ‘look.. is that all you do?’ SoAs are not the primary function of a paraplanner, it’s the development of advice, the research and strategy development.”
Even if written SoAs are phased out in favour of video recordings or client portals, Drago believes, advisers will still rely on paraplanners as much as they ever have. Her hunch, though, is that SoAs will remain a big factor in the advice process.
“I think a lot of prescriptive things in the SoA will be removed, but I don’t think [professional indemnity] insurers and licensees will let advisers give advice without something being handed over to the client,” she says. “I suspect advisers are going to have to give something to the client even if it’s not regulated.”
Regulating paraplanners
Just as advisers have moved closer to being considered professionals in recent years with the introduction of ethics and education standards, Drago believes policymakers, regulators and the industry itself needs to start looking at the developments required to codify the role of paraplanning.
Advisers are registered with ASIC, have professional associations, are rated on aggregator websites and will soon have to sign up to be monitored by a new disciplinary body, yet there remains no centralised mechanism to register paraplanners or mark their level of expertise.
“If I’ve got to determine if a paraplanner is indeed a paraplanner to make sure they’ve got the skills for my business the only way I can check that is to get them to write a financial plan,” Drago says, explaining that registration and skill benchmarks could increase efficiency and engender more trust.
“Everyone is concentrating on adviser professionalism, but what about auditors, compliance people and paraplanners? There’s a whole raft of participants that don’t have requirements to have qualifications.”
