Your IndustryOct 31 2013

‘Paraplanners are pivotal for success’

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This rose from 65 per cent of respondents in 2012 who saw it as important or very important, to a massive 82 per cent this year. We cannot know for sure what was behind this huge increase, although it is likely that RDR changes have got something to do with it. However I believe that the most likely explanation is that introducing a paraplanning function simply makes good business sense.

But can your business justify the additional cost of engaging a paraplanner? There are of course direct costs to consider, but these need to be taken in context and I would suggest that firms carry out a thorough cost/benefit analysis. At the heart of the financial planning process are the needs of the client. Since RDR clients need to see the value of the service you provide otherwise they will not be prepared to pay ongoing fees and build long-term relationships with you.

We know that clients place a very high value on the time that they spend with their financial planner, discussing important aspects of their lives, goals and priorities and getting a clear picture of where they are heading in life. Because of this it makes logical sense that the more time that a planner or adviser can spend dealing directly with their clients, the more the quality of those relationships will improve. Clients are happier with the service they are getting and are less likely to leave, complain or argue about the cost. Retaining your clients for the long term is essential if your business is going to survive, let alone thrive. Many firms pay more attention to bringing new clients on board only to find that they are losing existing clients because they are not getting the ongoing service that they need. It is a balancing act, but successful firms which operate a team approach to business have got a much greater chance of building a strong client bank which can be retained.

Using a paraplanner means that time previously spent on capturing data, building the financial plan, due diligence on research and analysis around products and ensuring the client file is kept up to date compliantly can now be used to engage with clients as these services can be delegated. It improves scalability for the business as well as reducing risk. Having a second point of contact within the firm for clients to contact can be a real asset. Paraplanners are fully aware of the clients’ financial plan and can discuss points with them in the absence of the adviser. This bonds the client to the business again making it less likely they will get disenchanted with the service and leave.

When it comes to integrating a paraplanning function into the business, advisers have a choice between employing an in-house paraplanner or using one of the many outsourced paraplanning services. The main difference between these is the employment status. Using an in-house paraplanner means you have got complete control over what work is done and how it is done. For small firms which may be worried about whether they can justify the cost of an in-house paraplanner, using an outsourced paraplanner is a useful option. They will bear the cost of training, provide their own tools and resources and will help you to delegate

Whichever route you choose, the services that paraplanners provide are based on the information that you, as the adviser, have collated and given to them. You need to ensure that your factfinding and documentation processes are very thorough and capture all salient points. Some paraplanners are directly authorised to give advice but most are not so you will need to employ appropriate checks and controls. While you can delegate the work itself, as the adviser you will bear responsibility for any advice given and so you need to ensure that you spend time checking it properly to ensure you are completely happy with it.

It is now almost 10 months since RDR took effect. For many firms who are looking at what changes they can implement in 2014 to make their business more robust, I would suggest that 82 per cent of IFP members are unlikely to be wrong. The figures speak for themselves. It will be interesting to see how that figure changes in 2014 but I would expect it to have risen further.

Sue Whitbread is communications director of the Institute of Financial Planning