Remuneration key to solving adviser retention

The ability to attract and retain talent is a common challenge across the financial services industry, and particularly in the financial advising discipline. It is no surprise, therefore, that the topic came up for discussion during a panel discussion featuring three young Certified Financial Planner (CFP ®) professionals, held at the 2024 FPI Professional’s Convention recently.

Young planners’ journeys

The panel discussion was moderated by Nici Macdonald CFP® and Head of Certification at the Financial Planning Institute of Southern Africa (FPI) and featured 2024 Financial Planner of the Year, Rudolph Geldenhuys; winner of the 2024 FPI It Starts with Me Award, Nonhlanhla Nxele; and Jodrey Rossouw. As an aside, the focus on young financial planners aligns nicely with the popular short-term insurance focused competition, The Insurance Apprentice (TIA), which enters its 11^th season in 2025. TIA aims to attract more people to the insurance industry, among other objectives. 

The moderator kicked off proceedings with a leading question: who better to tell us what young financial planners need from their employers than young financial planners? Macdonald then asked about the high attrition rate among young financial advisers starting their careers in South Africa. “One of the major stumbling blocks is that there is no breathing room or space to grow,” said Rossouw. She observed that fresh graduates had the knowledge to succeed, but lacked the soft skills needed to build a significant book. In reality, even when graduates were offered a three- to six-month-long salary runway to get started, they still ended up leaving. 

It seems fair to single out remuneration structures as a leading constraint in the ‘attract and retain’ financial advisers paradigm. Geldenhuys raised concerns over the different treatment of new hires in financial planning versus other professions. In most professions the trade-off involves an employer offering remuneration and work experience in return for time given and enthusiasm. “For any other profession, the norm is you earn a salary in exchange for time given, but in financial services, historically, that has not been the case,” he said, explaining why fewer than five of the 35 final year financial planning graduates in his year remained in the profession. 

Poor remuneration structures to blame

“These graduates were not able to make it due to remuneration structures, which for many off them turned out to be commission based,” Rossouw said. He commented on the absence of sales-focused coursework for a career that was heavily sales-based. Put another way, all the knowledge around financial needs analysis (FNA) and estate and tax planning comes to nought if a young financial adviser cannot reach out to potential clients, and use that and other soft skills to sell an investment or insurance policy. Nxele echoed her peers’ concerns over remuneration structures saying that when starting out at a large corporate her world was a nightmare of clawbacks, lapses and pressure to write policies.

“It is not easy to retain young advisers in a commission structure; there should be a pot that small businesses can tap into to offer salaries when financial advisers are getting started,” Nxele said. She also commented on the madness of telling young advisers that financial advice was not about selling policies in the reality of their monthly pay hinging entirely on policy sales. Rossouw framed this realisation nicely, saying that commission makes sense if you want a policy salesperson; but that if you want an unbiased financial planner, a salary gives them the space and stability to grow financial planning skills. 

Whatever the solution, it must give young entrants a clearer understanding of the industry and profession, and offer sufficient remuneration to sustain them to the point where they have built an adequate book of business. The young planners on the panel also offered some useful insights under the ‘retain talent’ heading. “There is nothing quite like the certainty of knowing your next step,” Geldenhuys said. His suggestion to financial practice owners was to have honest, open discussions with new hires in which they set out expectations and shared possible career and / or growth paths. Having this discussion upfront removes the potential for disappointment (and exit) later. 

Why employee benefits trump pizza

Aside from open communication around career paths, Rossouw quipped that employee benefits had greater ‘pull’ than pizza Friday’s in the ‘stay or go’ debate. She argued that offering financial advisers employee benefits had the dual benefits of helping them to practise what they preached, and putting the all-important personal financial building blocks into place when they started working. 

Macdonald then changed track, asking what established advice practices should do to accommodate the disruption and innovation that new hires inevitably brought to the table. The panel offered various pointers including expressing your belief in the individual; giving new hires the space to express themselves; and integrating their vision into the practice. Rossouw challenged the ‘old guard’ to include their new hires in planning sessions. 

“When you are vision casting what the practice is going to look like over the next two to three decades, consider having your younger financial planners in those meetings; we have a different perspective and may have some other alternative suggestions that could help over the long run,” she said. On a more philosophical note, she said practices had to be dynamic and flexible, because nothing is constant but change. 

The discussion then shifted to the role of mentorship in talent development. “Mentorship is less about age and more about the mentor’s availability and alignment with what the mentor is setting out to achieve,” said Geldenhuys. He said mentors should have their mentee’s interests at heart, and be prepared to tell them the difficult things they did not necessarily want to hear. As far as commitment goes, it is important for the mentee to onboard what his or her mentee says, and just as important for the mentor to want to be part of the process. “Quality mentorship is going to take our profession from where we are today to something unrecognisable 10, 20 or 30 years hence,” he said. 

Mentorship offers dual benefits

Rossouw said there were lessons to learn on both sides of the mentee, mentor relationships. “I have been very privileged in my career to have a lot of seniors who had an open door policy,” she said. An open door policy gives young financial advisers access to individuals who specialise in different aspects of financial planning. 

And all the panellists agreed on a ‘pay it forward’ attitude to skills development, encouraging beneficiaries of sound mentorship to see how they could pass on these benefits to new hires or peers. “This is the outcome of the mentorship journey that I have been on with my mentors,” said Nxele, commenting on her 2024 FPI It Starts with Me Award. “I am now taking all of this knowledge and transferring it back to my mentees”. 

Clear, frequent and open communication is non-negotiable in retaining and developing young advisers or planners. “If you have people in your organisation that you want to keep, then you must have open conversations and put the outcomes of those conversations in writing,” concluded Geldenhuys. Practices that create and document each new hire’s career path are less likely to be left in the lurch by their talent heading for greener pastures moments before they crack the succession ‘nod’. 

Writer’s thoughts:

Some would argue that commission-based remuneration structure in the completive financial advice space separates the wheat from the chaff, others reckon it is the reason South Africa faces a shortage of advice skills. What do you reckon: commission or starting salary plus? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].

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