Saturday 20 June 2020

My financial planning 'start up' is 18 months old and still no clients

As readers may recall, I completed my Diploma of Financial Planning in late 2018 in order to get 'registered' as an 'existing' Financial Planner (aka Financial Adviser) in Australia before the rules changed on 1 Jan 2019 (which required all 'new' Financial Advisers do a year of supervised training/experience). I'd been studying for my DFP qualification on and off for several years (just out of interest), and the rule change prompted me to get my butt into gear and get 'registered'. As I still have a full time 'day job' that has nothing to do with financial planning, having to quit a relatively well-paid job in order to get an entry-level Financial Planner position just to meet the 'training' requirement would not have been feasible. Since getting 'registered' in late 2018 I've been doing a bit of local advertising (dropping free booklets into local letter boxes) and set up my 'business' website with an online appointment booking tool.

The result? So far, only two 'serious' enquiries (made a booking for a complimentary introductory meeting) that resulted in one meeting (that didn't work out as they had minimal income, no significant savings, and the person I met with wasn't really interested - their partner had booked the meeting but didn't attend) and a last minute cancellation.

I'm currently paying around $1,500 per month fee to my 'dealer group' (I have to be an authorised representative of an AFSL holder to be a Financial Planner here in Australia, or have my own AFSL which would cost a lot more) just to stay 'in business'. I had hoped to get a couple of clients in my first year (2019) and to get enough clients by the end of this year to at least cover the fixed costs of remaining registered (and a member of the FPA and AFA, which each charge around $500pa). Now I'm just hanging out to get my first client...

Oh well, I plan on staying in my full-time paid work for several more years (unless I get laid off), and in the meantime will complete my Master of Financial Planning degree next year and (hopefully) then enrol in a PhD. The Masters degree is costing me $3,500 per subject (there are 12 subjects in total for the degree), but fortunately if/when I enrol in the PhD course next year I shouldn't need to pay any more uni fees as this is generally covered by the Commonwealth-funded RTS (Research Training Scheme).

Once the Covid-19 restrictions are lifted I might start offering free lunchtime seminars for the staff of local business. And I'll start doing some 'cold calling' of locals.

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mOOm said...

$1500 per month?! said...

Yep, the regulatory financial burden on Financial Planners is insane. This is about the lowest authorised rep AFSL fee available - many charge $40,000+ pa! I pay $1,150 per month fee to the AFSL company (which covers the PI insurance premium, CPD training/reporting, annual compliance audits etc) and a couple of hundred dollars per month for the basic subscription package for the mandatory CRM/advice software 'Midwinter' that my AFSL requires I use. In addition to this fixed cost, I will also have to pay around $400 to get each Statement of Advice document created by an approved paraplanner service. As I'm "only" charging around $650 for a basic SOA (which will involve about 10 hours time spent on client meetings, plan strategy/research, admin, presenting the SOA) I'll need a lot of clients just to cover running costs (let alone get paid anything). If a client decides to get me to implement the recommended investments and provide ongoing advice/service then I'd actually make some money (although my fee schedule is set at the bottom end of what is typical). I'm definitely doing this for 'fun' rather than as a source of income!

In theory I could apply to get my own AFSL (the application cost is around $2,000), but there would be a huge administrative overhead ensuring all the regulatory requirements are met (financial reports, audits, complaints process etc. etc.). Apparently having your own AFSL costs around $50,000 pa (so is only economical for FP firms with multiple advisors and some admin staff).

The chances of this 'business' ever making enough profit to even cover the costs of my DFP/ADFP qualifications and the Master of Financial Planning I'm currently doing are remote. said...

If anyone is interest in the costs and regulations involved in being a registered 'Financial Planner', this is a pretty good overview: