Vol 10, No 4 - Financial Planning Association of Malaysia

Revenue Model
The measure of success in any business
is ultimately the ability to bring in more
revenue than it costs to deliver a product or
service. With financial planning, a common
dilemma is to determine what is the best
revenue model. Do you charge a fee for
advice, receive a commission from your
product sales, charge a retainer fee, receive a
commission from a percentage of your asset
under management or perhaps charge
an annual service fee Unfortunately, the
answer to this question is not the same for
every circumstance or for every market. To
find the right answer for your organisation
you would have to consider what your
service and product offering is. What level of
planning service would you provide to your
clients Is it modular or comprehensive
Do you also help the client to implement
the plan by providing products and other
related services
When a financial planner goes through
the six-step financial planning process
with a client, they naturally achieve a
high level of trust and rapport. This means
the client would often want the planner
to assist them in implementing the plan.
The questions is, is the financial planner
ready with the products that are needed
to implement the plan for the client such
as insurance, investments, wills, loan
financing or even a funeral package
Choosing the right revenue model for
your organisation is critical. If you just give
advice and earn a fee, and leave the client
to implement the plan with someone else,
you are often leaving revenue on the table
for someone else. In this situation, the
client is also at the mercy of other advisers
who may not adhere to the plan you have
crafted for the client but instead sell what
they want to the client.
A key challenge in some organisations,
where plan implementation products are
limited, is revenue leaks. To address this
problem, some financial planners work
with other firms to access products or
services not available in-house. This could
provide clients a wider array of choices
of investment and protection products.
However, banks and other firms with
corporate unit trust adviser (CUTA) and
financial advisory (FA) licenses who have
a wide range of in-house products and
solutions for plan implementation are
in a better position to provide financial
planning services that generate strong
revenue streams for the organisation.
Expense Model
One of the key components in the expense
model is the compensation structure for the
sales force/ financial planners. Some of the
most common compensation structures
include salary, salary plus commission,
profit sharing and commission only.
Ultimately, the compensation structure
has to be a ‘win-win’ model so that the
organisation and the sales force feel their
compensation is fair for the work they do.
The good news is that your business
model can evolve over time.
In the more mature markets like United
States and Canada, the financial planning
industry has gone through many changes.
In the initial stages, it was highly weighted
to commission sales with a gradual shift to
fees on asset under management and for
comprehensive planners more towards fee
for service. Because you can fine-tune your
model over time, it is more important to
stop trying to transition all at once and just
start practising. Once the fundamentals are
established, you can continually update
and revisit your business model to ensure
it is appropriate to the constantly evolving
conditions in the marketplace.
“The measure of success
in any business is
ultimately the ability to
bring in more revenue
than it costs to deliver a
product or service.”
After being in practice for six years,
and more recently spending time
working with financial institutions and
independent financial planning firms, I
have had the unique opportunity to
observe the gaps that often exist. Based
on this experience, what follow are some
constructive feedback for building a
successful financial planning practice.
Recruitment & Selection
From my observations, organisations can
be very aggressive in their campaigns
to recruit financial planners. A lot of
effort and resources are invested in the
recruiting process but unfortunately the
dropout rate several months later is high.
The reason, often given by the dropouts,
for leaving the industry is that financial
planning is a long and tedious process
and they are unable to cari makan (earn a
living). Is this the real reason for dropping
out or is there something else to blame
There are two key criteria in recruiting
the right people to join the sales force
as financial planners. The first and most
common criterion used by recruiters is
eligibility. But the second and less often
considered criterion is the candidate’s
suitability. Eligibility refers to someone’s
education, knowledge, skills, and
experience – abilities that are typically
listed on a resumé. Suitability refers to
their attitudes, motivations, interpersonal
and decision-making skills, task and
work environment preferences as well as
personality balance. Eligibility normally
indicates if a candidate can do a job, while
suitability is a measure of how likely it is
that they will do the job and enjoy doing it.
An eligible person may not necessarily be
a suitable person to become a successful
financial planner. It requires more time
to develop a less suitable person when
compared to a more eligible person.
However, it is possible with proper coaching.
According to Dr Dan Harrison, who
developed the Harrison Assessments (HA),
there are 10 essential traits or required
behaviours (in order of importance) to
be a successful financial planner. (HA is
a state-of-the-art assessment tool that
enables employers to predict the job success
of candidates with 80 to 90 percent accuracy,
compared to most personality tests that
only produce about 55 percent accuracy)
The recommended traits are:
1. Persistent – The tendency to be
tenacious despite encountering
significant obstacles
2. Finance/Business – The interest in
commerce or fiscal management
3. Optimistic – The tendency to believe
the future will be positive
4. Self-Improvement – The tendency to
develop or better oneself
5. Teaching – The enjoyment of
instructing, training, or educating
others
6. Outgoing – The tendency to
be socially extroverted and the
enjoyment of meeting new people
7. Takes Initiatives – The tendency to
perceive what is necessary to be
accomplished and to proceed doing
it accordingly
8. Wants challenge – The willingness to
attempt difficult tasks or goals
9. Influence – The tendency and ability
to persuade and convince others
10. Self-acceptance – The tendency to
like and accept oneself
By understanding the required
behavioural competencies for a
successful financial planner, it is easier
for organisations to develop financial
planners who would perform well. This
would also result in better retention so
that the recruiting resources and training
efforts are not wasted.
The 4E Journal 37