How advice firms can tackle the challenges of PY advisers

The current system for running a professional year comes with a range of challenges for advice firms looking to add a young adviser to their ranks, including a concern that they may leave the firm before the considerable investment has been recouped.

Speaking with ifa, Kaplan Professional chief executive Brian Knight said it can be a tough ask for many firms to handle the requirements of bringing on a PY adviser.

“By the time you get all the activities done, you’ve got to have the resources to be able to have somebody [who] can properly supervise them, you need to know all the requirements of supervision, and it’s not easy. You’ve got to budget for 12 months for an employee really not earning any income for the practice,” Knight said.

“Graduate salaries are as high as paraplanners and customer service officers, and they’re immediately adding value or adding to the income of business. Whereas your graduate having to do a PY who doesn’t do any other role, and then you face the prospect that they don’t stay around.”

Indeed, a PY adviser not sticking around once they have completed their training is at the forefront of many firm’s concerns about taking them on.

Speaking at a media briefing in Sydney on Wednesday, Financial Advice Association Australia (FAAA) general manager of education Anne Palmer said that the concern over other firms poaching advisers once their PY is complete may be a bit overblown.

“I haven’t heard of that happening, but I have had quite a few people come to me worried that it might happen and that they have been perhaps reluctant to invest in the program,” Palmer said.

She added: “I really encourage the profession to move on and not worry so much about that, but obviously, the more we build the pipeline, the less of a concern that is and the more the issue goes away.”

However, some firms have opted to incentivise PY advisers to stay on with clearly defined pathways within the business, such as recently launched firm Esencia Wealth.

A merger of four firms, Esencia created career pathways that would allow staff an opportunity to progress and become a partner in the business.

Speaking with ifa, Esencia chief executive Matthew Fenning said that while the exit of banks has ushered in a “more fragmented market” and small firms may not have the resources to handle PY advisers, there still needs to be some way for them to enter the profession.

“I understand that reluctance, but for us, we see that as a real point of difference and an opportunity for us to take a leadership role in what the future looks like,” Fenning said.

“I know it’s both with our existing team and we’ve just hired someone in the middle of their professional year as well, who presumably was pretty attracted to the idea of there a clear and long-term path in the business.

“It’s a viable investment, because ultimately, our intellectual property is the people here and we need to be investing in them and providing them with the opportunities, the support, and the development to keep them here, doing what they’re doing already, but to play on their strengths and allow them to progress and be impactful in the business over the long term.”

Knight agreed that advice firms with reservations about the financial commitment should look to incentive structures to increase the chances that they stick around.

“If you’re a young, ambitious person coming out of the degree, you want to know what your pathway is. I think it’s a great idea,” he said.

“Any entitlements to bonuses or anything like that, you could put either the bonus or part payment of the bonus aside to help them purchase their share of the practice.

“You could guarantee them access to a group of existing clients so they can hit the ground running and they’ve got some clients or some share of those clients after they’ve finished their PY.”

Not all candidates are driven by the same incentives, Knight added, with many younger professionals looking for greater work-life balance, so getting creative in the mix that’s right for your firm is key.

“We have got to start to think creatively if we want to take these young people and build them into a long-term asset when they become the future of your practice,” he added.

“You’ve got to do what you’re seeing some of these guys are doing. Think about what your package is and what the person wants to motivate them.”

While he noted that there could be limitations on some firms depending on size, small firms can “still make an attractive package”.

“If you want to take someone on, you’re taking someone on because you’re looking for someone to buy you out eventually, you’re looking for someone who’s going to help you grow the business a bit more or you can’t handle the clients you’ve got now,” Knight said.

“Yes, the bigger firms, if they’ve got 10 or 20 people may be able to do more of a financial incentive, but you still can structure a package if you’re a smaller firm, it’s a matter of making sure your PY graduate fits and wants what your business is. Don’t find out later.”