How important are paraplanners to adviser firms today?

Sitanta Ni Mathghamhna looks at whether all advisers need a good paraplanner to run a healthy business.

Paraplanning has traditionally been perceived as something of a transient profession, with the typical career progression involving an evolution to fully fledged financial planner.

However attitudes have changed and paraplanning is increasingly viewed as a career in its own right. These ‘career paraplanners’ are ensuring the profession is emerging from its status of back office role and being accorded an increasing level of respect. But do advisers need paraplanners to run a successful business?

Industry views

Many feel that a financial planner with impressive sales banter and a knack for identifying customer needs should not be tied to a desk producing complex financial plans which is where paraplanners, with their advanced technical expertise, come in.

Rebecca Taylor of financial planners Dunham Financial Services says paraplanners are essential to her business for this reason: “It’s incredibly difficult to do a job where you are expected to be both client facing and also fulfil a more technical role.

“My paraplanner is fully qualified and has all the people skills necessary to fulfil an IFA role but it’s her choice to work as a paraplanner. It just not practical to try and do both – it’s a much more efficient way of working to separate the two.

“There are still firms that amalgamate the roles, but I think that business model will become increasingly anomalous. Half the problem is that the industry doesn’t recognise the value of paraplanners – it’s seen as a stepping stone and remunerated accordingly.

“Firms often favour people who go out and bring clients into the business but paraplanners work to retain the client, so there should be an equal division of the spoils.”

Paraplanning as a career

A difficulty with paraplanning is it is still something of an ill defined role and some firms do not make a distinction between administrative duties and paraplanning, which can devalue the occupation.

Josh Hartwood of Eldon Financial Planning sums it up: “If two firms advertised for a paraplanner position that could entail two very different roles. With the exception of seeing clients, we expect paraplanners to get involved in every aspect of the business, so our paraplanners input is integral to the company. That is not always the case.”

However the paraplanner role becomes more recognised it is likely to be accordingly remunerated. Tim Brear of wealth management consultancy Brook-Dobson Brear, says: “I think its coming into its own as a profession – we don’t see it as a stepping stone but rather a role in its own right and that’s an attitude increasingly prevalent within the industry. I think that’s important because it means paraplanners can concentrate on gaining the qualifications and experience necessary for their role, rather than those needed as an adviser. In fact one of the reasons we do not use the term paraplanner is that it in some ways suggests a planner in waiting.”

Keri Carter, financial planner at Broadway Financial Planning reiterates this point and says the new IFP qualifications will aid recognition of paraplanning as a career, rather than a pit stop on the way to better things: “As of late there has been a certain hijacking of the term by admin staff, but I think it’s very important that it is recognised as a profession in its own right.

“This seems to be turning around again with the introduction of the RDR, which is embracing a different way of doing things. I worked with the financial services skills council on the issue of the new paraplanner qualifications, and hopefully that will help to change perceptions.”

Freelance paraplanning

The traditionally poor retention rates for paraplanners as well as the expansion of new career paths beyond the conventional financial adviser role, into compliance for example, as well as business development roles is applying increasing pressure on the already inadequate supply of paraplanners.

This has led to a trend for contracting out to freelance paraplanners.

Martin Vaughan of Paragon Paraplanning, an outsourcing paraplanning company, epitomises the new breed.

He reversed the usual paraplanner-to-adviser route; after an initial stint as a financial adviser he worked for an insurance company and a high street bank.

Vaughan is now employed as a freelance paraplanner typically working on more complex, top end plans for a few select IFAs.

Despite the trend for freelance paraplanners, Vaughan does not believe paraplanning – even for smaller firms – will move toward a freelance model as has happened in the USA and Australia.

In those jurisdictions the much higher salaries paraplanners have been able to command over the past three years has made hiring freelancers the more viable option for many smaller firms.

Vaughan says: “For most firms, i.e. those above the smaller one-man-band business model, paraplanners form an integral part of the financial planning team. I like to use the analogy of the football squad – you don’t have 11 Wayne Rooney’s onside. Sure Rooney scores the goals, but you also need a guy in defense and someone manning the goals, so that the team overall wins, not just one person.”

Glyn Williams of wealth managers, Build Your Wealth, agrees: “We’re a very small business and as such I don’t think the role of paraplanner is essential per se, because we can buy in a lot of services, but we’ve made the role essential with the aim of enhancing our client offering. If the clients realise they don’t just have an IFA but also someone who has been in the business for a long time and who understands their concerns and the business, that’s a bonus.”

Changing attitudes

The industry seems to concur paraplanners are paramount to the running of an effective IFA outfit. As yet however there is a long way to go before the industry remunerates them accordingly.

The development of the role away from its admin tainted past into a more definite professional identity and a corresponding body of career paraplanners may finally help catapult paraplanning out of the back room.