Marketing

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Financial Planning Industry

This situation analysis will look at the financial planning industry. It will explore if there are any requirements to be able to provide financial advice to the public, who are the governing bodies and what laws and regulations are in place for this industry. It will also look at the macro environment how it affects the industry, such as the political and environmental environments. There will be a SWOT analysis as well as looking at what customers want out of this type of service and who the main competitors are.

Industry overview

Aurelia Fin wants to start a financial planning firm together with her partner, Finnley Gold. She has a degree in financial planning from the University of Canberra. Aurelia has not had any professional experience in this field.

To be able to practice as a Financial Planner in Australia the individual, needs to hold an Australian Financial Services Licence (AFSL). The Financial Planning industry is heavily regulated and in order to provide planning advice individuals needs to meet standards defined in ASIC’s (Australian Securities and Investments Commission) Regulatory Guide (CPA Australia, 2013, ‘How to become a financial Planner’).

According to ASIC’s surveys in 2010 the average age of people who had used a financial planner was 54 years of age, they had on average $254,000 in super, had an average annual salary of $74,000 and over 50% owned their primary residence outright. They rated their experience with dealing with financial planner as 5.5 out of 10 (ASIC, 2010, ‘Access to financial advice in Australia’). Knowing these figures are factors of the success of the financial planning industry. It is important for companies to know who they are targeting their services at, how much the business can capitalise on these clients and how they need to improve their business practices.

According to IBIS World, an Australian Market research company, in 2013 there were 16,757 jobs in the financial planning industry. This number includes all roles in the financial planning industry, including administrative and customer service roles. The industry is also stated to produce $4 billion in revenue (IBIS World, 2013, Financial Planning and Investment Advice in Australia: Market Research Report).

IBIS World also recorded that the annual growth for the industry between 2009 to 2014 was 2.5%.The Australian government announced a complete overhaul of the industry and it is expected that the industry will struggle as it adapts to the new regulatory environment along with low consumer confidence. IBIS World also reported that 47.4% of the market share was held by the big four banks (Commonwealth bank of Australia, ANZ, Westpac and NAB) along with AMP (IBIS World, 2013, Financial Planning and Investment Advice in Australia: Market Research Report).

With 3,222 financial planning businesses across Australia and the big banks commanding 47.4% of the market share, independent firms have stiff competition(IBIS World, 2013, Financial Planning and Investment Advice in Australia: Market Research Report).

Situation analysis

Political forces

The financial planning industry is heavily regulated. The Treasury regulates the industry through the FoFA (Future of Financial Advice). There has been recent reforms to this regulatory document put in place to protect the public, it includes an ‘op-in’ requirement that requires advisers to obtain written confirmation from their clients every 2 years in order to charge on-going fees (for new clients only), advisors must provide an annual disclosure statement to their existing clients detailing fees and service information (PWC, 2013, Future of Financial Advice).

It also requires advisers to act in the best interests of their clients, there is also a ban on “any form of payment relating to volume or sales targets from any financial services business to dealer groups, authorised representatives or advisers, including volume rebates from platform providers to dealers” ,(The Treasury, 2011, Future of Financial Advice, pg 5, para 7), meaning that financial advisers advice will no longer be bias (in the past advisers could be paid a commission by product providers for getting their clients to use their product). They also increased ASIC’s licensing and banning powers (PWC, 2013, Future of Financial Advice (FoFA)).

ASIC provides the guidelines and authority in issuing Australian Financial Services Licences (AFSL) that all financial advisers are required to have in order to provide financial advice to the public. ASIC has minimum training and experience standards that must be met in order to obtain a AFSL (ASIC), 2012, Regulatory Guide 146Licensing: Training of financial product advisers).

Economic forcesAn economic force that affects the financial planning industry is interest rates. Interest rates increase when the economy is strong and decreases when it is weaker. The Reserve Bank of Australia (RBA) influences the interest rate structure by controlling cash flow in Australia. It issues currency (controlling cash flow) and conducts national monetary policy and is owned by the Australian Government (
Kidwell, D, S et al, 2007, Financial Markets Institutions and Money).

Sociocultural forces

Sociolcultural forces that affect the financial planning industry include; an increasing age expectancy of the public (or an aging population), preferred retirement age lowering, increasing responsibilities with regards to raising children, tertiary education participation increasing, increasing single parent families and larger homes. The increased concern with accumulating material possessions has meant longer working hours and increased goal aspirations also contribute. (Cull, M , 2009, The Rise of the Financial Planning Industry).

The FPA’s (Financial Planning Association of Australia) ‘Code of Professional Practice’ provides guidelines for financial planners. Financial planners who are a member of the FPA are bound by their code of practice. They are: “Client first, Integrity, Objectivity, Fairness, Professionalism, Competence, Confidentiality and Diligence” (FPA, 2013, Code of Professional Practice, pg 6-7). If members do not abide by these codes they can be stripped of their membership. This membership is highly regarded in the financial services industry and is seen as a requirement by the profession in order to provide financial advice. This membership is what individuals look for when seeking a reputable financial advisor.
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Technological forcesThe development of computers and the World Wide Web provides customers instant access to information they require in light of the modern fast paced life. Financial institutions can use the curret technology to advertise their range of financial products. This along with high domestic and international competition has meant that clients are now seeking independent financial advice) Cull, M, 2009, The Rise of the Financial Planning Industry).
Technology can make it hard for small financial planning firms to compete as they may not have as extensive of a website as the Commonwealth Bank or offer an extensive range of products as a larger firm but they have the opportunity to market their business as a personalised service to which the larger firms do not offer.

Legal forces

The financial planning industry is bound by the following; “The Corporations Law (including the Financial Services Reform Act) and the common law” (Taylor, S, Juchau, R &Houterman, B, 2010, Financial Planning in Australia, pg 84, para 4). The Financial Services Reform Act, which was enacted in 2001 has brought into line the same disclosure standards for similar products, financial advisers are subject to the same licensing regime and comparable financial products are now subject to the same rules (Common Law, 2005, Financial Services Reform Act 2001; Act no 22).

ACIS is responsible for issuing Australian Financial Services Licence’s (AFSL). Financial advisors are required by law to have an AFSL in order to provide financial advice to the public. It required the financial advisor to meet the minimum training standards, once the training is completed the advisor must then need to operate under an existing licence holder and complete the experience component of the licensing requirements. Once an advisor has successfully meet these criteria’s they may be issued an AFSL. It is up to the ACIS whether or not an advisor is issued a licence(ASIC, 2012, Regulatory Guide 146 Licensing: Training of financial product advisers).

Competitor analysis

The financial planning industry is an oligopoly, with 47.4% of the market share was held by the big four banks (Commonwealth bank of Australia, ANZ, Westpac and NAB) along with AMP (IBIS World, 2013, Financial Planning and Investment Advice in Australia: Market Research Report). It is predicted that due to the new regulatory and econonomic environment that financial planners will gravitate to bank controlled dealer group (Liew, R, 2012, Mergers squeeze financial planning options).

In the 2011/2012 financial year the Commonwealth bank made a $373 million play for the independent financial planning group ‘Count’, the Australian Competition and Consumer commission gave its approval for the deal to go ahead (Liew, R, 2012, Mergers squeeze financial planning options).

Commonwealth Bank is a multinational bank, operating throughout Australian, New Zealand and Asia (CBA,Privatisation (1991) and subsequent developments). With NAB, Westpac and ANZ all operating as multinational banks, with branches in places such as the Middle East and Europe, they have a large competitive advantage. With AMP predominantly operating in Australia and New Zealand, but is expanding its international presence.

The big for banks have a wealth of employees with the necessary financial skills that make their businesses so successful. As Aurelia and her business partner do not have any experience in the financial advisory industry dor do they have any competitive advantage. They have knowledge of financial planning but no life experience in dealing with the industry. It would be very hard for Aurelia and Finnley to compete with such large competitors.

Customer/client analysis

The type of advice people want when using a financial adviser is; superannuation advice, financial investment advice and property investment advice.With the younger demographic more likely to seek property investment advice and the older demographic seeking advice about superannuation and financial investment advice (ASIC, 2010, Access to financial advice in Australia).

The AFA’s market research found that 32% of clients of financial advice were aged between 40-59 years of age and a staggering 59% were aged 60 years and over. With only 6% of clients aged between the ages of 25-39 years (AFA, 2013, Market Research; The New Frontiers).In ACIS’s ‘Access to Financial Adivce Australia’ it states that only 20-40% of the population use or have used a financial adviser (ASIC, 2010, Access to financial advice in Australia). The largest proportion of people of working age (aged between 15-65 years of age) was located in the Northern Territory and the ACT with Tasmania being the lowest. The majority of people aged 65 years and over lives in Tasmania, Victoria and NSW (ABS, 2012, Population by Age and Sex, Regions of Australia).
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Strengths

· Offering personalised services

· Can choose which area to specialise in such as superannuation

· Aurelia could go an gain professional experience and licensing before starting a firm, gaining a reputation and client base which she could bring across to her firm

Weaknesses

· Inexperienced and ill-equipped business partners

· Lacking appropriate licences

· Lack professional memberships

Opportunities

· Potential to add a third business partner, a financial planner with an AFSL, gaining years of experience and industry knowledge

· The large proportion of working aged people in Canberra – especially between the ages of 40-65yrs

Threats

· Unable to start a financial planning business without a financial planner that has an AFSL

· Largest portion of people who use financial planners are 65 years +, live in a different locality and most likely already have a financial adviser

Objectives

List the organisation’s overall objectives or its mission statement.

List the marketing objectives that are intended to help achieve the organisation’s overall objectives.

Ensure the marketing objectives are:

Target market

You need to quantify your target market – How many 25- 30 year old single males are in Belconnen? (ABS data)

You may also want to consider organisational customers e.g hospitals, accountants etc.

How will you segment the market?

· Single target market?

· Multiple target market?

· Combined

Segmentation basis: demographic, lifestyle, benefits sought?

Marketing mix strategy

Product

Detail the product strategy and how it will offer value to the target market. Include a discussion of branding. While you might not include a total product concept analysis of the product in your marketing plan, it may be a useful exercise to inform the information that does end up in the plan.

· Positioning

· Branding

· Service

· Packaging

· product life cycle considerations

Price

Detail the pricing objectives (e.g. cash flow, positioning and market share) and the pricing method(s) used to determine prices. Competitors’ pricing should also be discussed.

Consider:

· basis for setting prices

· Major price points

· Discounts and incentives

In the budge section you will provide breakeven point ( no cashflow and profit and loss will be required).

Promotion

Explain the promotion mix that you will use ( identify suitability and costs)

· (advertising,

· public relations,

· sales promotions and

· personal selling

· online

· social media).

· Consideration should also be given to additional marketing communication options such as guerrilla marketing, sponsorship and viral marketing if appropriate for the organisation.

· After analysing each of the options – which one(s) will you use and why?

o promotion to end consumer? Or intermediaries?

o provide a schedule and then a detailed budget for promotion in the budget section

Distribution (place)

Detail the distribution strategy that will ensure the organisation’s products are available to customers where and when they want them. The discussion should address the use of marketing intermediaries if appropriate to the organisation’s distribution strategy and the location of your business if that is important. If appropriate also look at sourcing

Budget

Detail the budgetary requirements of the marketing plan and demonstrate how the plan can be implemented with the available resources.

Identify the major:

· variable costs ( ingredients, components)

· fixed cost (rent, wages, advertising etc)

Identify a breakeven point- how many items do you need to sell to break even?

The breakeven point may not be able to calculated in all circumstance- if that is the case provide as much data as possible , sourced from MINT, annual reports or press reports ( for example you might find the development costs for a particular product reported in the press).

You need to provide an estimate of how many of your product you intend to sell and justify this based on your target market and competitor analysis.

You also need to provide a schedule and costing for your promotional activities

Implementation

Explain how the marketing plan will be put into practice, including specific steps and milestones as well as control mechanisms to ensure the implementation is in accordance with the plan.

· Time line

· When what will be done and who is responsible

Evaluation

Detail the marketing metrics (e.g. return on investment, customer satisfaction) that will be used to evaluate the success of the marketing plan and inform further revision and refinement of the plan.

References

Australian Bureau of Statistics (ABS), 2012, Population by Age and Sex, Regions of Australia, ABS, Australia, viewed 16 September 2013

http://www.abs.gov.au/ausstats/abs@.nsf/Products/3235.0~2012~Main+Features~Main+Features

Association of Financial Advisers (AFA), 2013, Market Research; The New Frontiers, AFA, Australia, viewed 16 September 2013

http://www.afa.asn.au/documents/item/219

Australian and New Zealand Bank (ANZ), History, ANZ, viewed 17 September 2013

http://www.anz.com.au/about-us/our-company/profile/facts/history/

Australian Securities & Investments Commission (ASIC), 2010, Access to financial advice in Australia, viewed 16 September 2013

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep224 /$file/rep224

Australian Securities & Investments Commission (ASIC), 2012, Regulatory Guide 146Licensing: Training of financial product advisers, ASIC, Australia

Common Law, 2005, Financial Services Reform Act 2001; Act no 22, Common Law, Australia

Commonwealth Bank Australia (CBA),Privatisation (1991) and subsequent developments, CBA, viewed 17 September 2013

https://www.commbank.com.au/about-us/our-company/history/privatisation.html

CPA Australia, 2013, How to become a Financial Planner, CPA, Australia, viewed 17 September 2013

http://www.cpaaustralia.com.au/professional-resources/financial-planning/policy-and-research/how-to-become-a-financial-planner

Cull, M , 2009, The Rise of the Financial Planning Industry, The Australasian Accounting, Business & Finance Journal,Vol 3, No 1, viewed 17 September 2013

http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1050&context=aabfj

Financial Planning Association of Australia (FPA), 2013, Code of Professional Practice, FPA, Australia

IBIS World, 2013, Financial Planning and Investment Advice in Australia: Market Research Report, IBIS World, Australia

Kidwell, D, S et al, 2007, Financial Markets Institutions and Money, Wiley, Milton, QLD

Liew, R, 2012, Mergers squeeze financial planning options, The Financial Review, Australia, viewed 17 September 2013

http://www.afr.com/p/personal_finance/portfolio/mergers_squeeze_financial_planner_LwgrKht7xsMM3AEBLnBV8O

PricewaterhouseCoopers(PWC), 2013, Future of Financial Advice (FoFA), viewed 17 September 2013

http://www.pwc.com.au/industry/financial-services-regulation/fofa.htm

Taylor, S, Juchau, R &Houterman, B, 2010, Financial Planning in Australia, LexisnexisButterworths, Australia

The Treasury, 2011, Future of Financial Advice, viewed 17 September 2013

http://ministers.treasury.gov.au/Ministers/brs/Content/pressreleases/2011/attachments/064/064

Financial Planning Industry

Industry overview

Situation analysis

Political forces

ASIC provides the guidelines and authority in issuing Australian Financial Services Licences (AFSL) that all financial advisers are required to have in order to provide financial advice to the public. ASIC has minimum training and experience standards that must be met in order to obtain a AFSL (ASIC), 2012,
Regulatory Guide 146

Licensing: Training of financial product advisers).

Economic forces

An economic force that affects the financial planning industry is interest rates. Interest rates increase when the economy is strong and decreases when it is weaker. The Reserve Bank of Australia (RBA) influences the interest rate structure by controlling cash flow in Australia. It issues currency (controlling cash flow) and conducts national monetary policy and is owned by the Australian Government (Kidwell, D, S et al, 2007, Financial Markets Institutions and Money).

Sociocultural forces

__________________________________________________________________________________

Technological forces

The development of computers and the World Wide Web provides customers instant access to information they require in light of the modern fast paced life. Financial institutions can use the curret technology to advertise their range of financial products. This along with high domestic and international competition has meant that clients are now seeking independent financial advice) Cull, M, 2009, The Rise of the Financial Planning Industry).

Technology can make it hard for small financial planning firms to compete as they may not have as extensive of a website as the Commonwealth Bank or offer an extensive range of products as a larger firm but they have the opportunity to market their business as a personalised service to which the larger firms do not offer.

Legal forces

The financial planning industry is bound by the following; “The Corporations Law (including the Financial Services Reform Act) and the common law” (Taylor, S, Juchau, R & Houterman, B, 2010, Financial Planning in Australia, pg 84, para 4). The Financial Services Reform Act, which was enacted in 2001 has brought into line the same disclosure standards for similar products, financial advisers are subject to the same licensing regime and comparable financial products are now subject to the same rules (Common Law, 2005, Financial Services Reform Act 2001; Act no 22).

Competitor analysis

Commonwealth Bank is a multinational bank, operating throughout Australian, New Zealand and Asia (CBA, Privatisation (1991) and subsequent developments). With NAB, Westpac and ANZ all operating as multinational banks, with branches in places such as the Middle East and Europe, they have a large competitive advantage. With AMP predominantly operating in Australia and New Zealand, but is expanding its international presence.

Customer/client analysis

The type of advice people want when using a financial adviser is; superannuation advice, financial investment advice and property investment advice. With the younger demographic more likely to seek property investment advice and the older demographic seeking advice about superannuation and financial investment advice (ASIC, 2010, Access to financial advice in Australia).

The AFA’s market research found that 32% of clients of financial advice were aged between 40-59 years of age and a staggering 59% were aged 60 years and over. With only 6% of clients aged between the ages of 25-39 years (AFA, 2013, Market Research; The New Frontiers). In ACIS’s ‘Access to Financial Adivce Australia’ it states that only 20-40% of the population use or have used a financial adviser (ASIC, 2010, Access to financial advice in Australia). The largest proportion of people of working age (aged between 15-65 years of age) was located in the Northern Territory and the ACT with Tasmania being the lowest. The majority of people aged 65 years and over lives in Tasmania, Victoria and NSW (ABS, 2012, Population by Age and Sex, Regions of Australia).

__________________________________________________________________________________

Strengths

· Offering personalised services

· Can choose which area to specialise in such as superannuation

· Aurelia could go an gain professional experience and licensing before starting a firm, gaining a reputation and client base which she could bring across to her firm

Weaknesses

· Inexperienced and ill-equipped business partners

· Lacking appropriate licences

· Lack professional memberships

Opportunities

· Potential to add a third business partner, a financial planner with an AFSL, gaining years of experience and industry knowledge

· The large proportion of working aged people in Canberra – especially between the ages of 40-65yrs

Threats

· Unable to start a financial planning business without a financial planner that has an AFSL

· Largest portion of people who use financial planners are 65 years +, live in a different locality and most likely already have a financial adviser

Objectives

List the organisation’s overall objectives or its mission statement.

List the marketing objectives that are intended to help achieve the organisation’s overall objectives.

Ensure the marketing objectives are:

Target market

Discuss the organisation’s target market segments, their characteristics and how the target market and market segments were selected. Be specific; for example, if the target market is urban 25–30 year old single males, then say so — do not say young single men.
You need to quantify your target market – How many 25- 30 year old single males are in Belconnen? (ABS data)
You may also want to consider organisational customers e.g hospitals, accountants etc.
How will you segment the market?
Single target market?
Multiple target market?
Combined
Segmentation basis: demographic, lifestyle, benefits sought?

Marketing mix strategy

Product

Price

Detail the pricing objectives (e.g. cash flow, positioning and market share) and the pricing method(s) used to determine prices. Competitors’ pricing should also be discussed.
Consider:
basis for setting prices
Major price points
Discounts and incentives
In the budge section you will provide breakeven point ( no cashflow and profit and loss will be required).

Promotion

Explain the promotion mix that you will use ( identify suitability and costs)
(advertising,
public relations,
sales promotions and
personal selling
online
social media).
Consideration should also be given to additional marketing communication options such as guerrilla marketing, sponsorship and viral marketing if appropriate for the organisation.
After analysing each of the options – which one(s) will you use and why?
promotion to end consumer? Or intermediaries?
provide a schedule and then a detailed budget for promotion in the budget section

Distribution (place)

Budget

Detail the budgetary requirements of the marketing plan and demonstrate how the plan can be implemented with the available resources.
Identify the major:
variable costs ( ingredients, components)
fixed cost (rent, wages, advertising etc)
Identify a breakeven point- how many items do you need to sell to break even?
The breakeven point may not be able to calculated in all circumstance- if that is the case provide as much data as possible , sourced from MINT, annual reports or press reports ( for example you might find the development costs for a particular product reported in the press).
You need to provide an estimate of how many of your product you intend to sell and justify this based on your target market and competitor analysis.
You also need to provide a schedule and costing for your promotional activities

Implementation

Explain how the marketing plan will be put into practice, including specific steps and milestones as well as control mechanisms to ensure the implementation is in accordance with the plan.
Time line
When what will be done and who is responsible

Evaluation

Detail the marketing metrics (e.g. return on investment, customer satisfaction) that will be used to evaluate the success of the marketing plan and inform further revision and refinement of the plan.

References

Australian Bureau of Statistics (ABS), 2012, Population by Age and Sex, Regions of Australia, ABS, Australia, viewed 16 September 2013

http://www.abs.gov.au/ausstats/abs@.nsf/Products/3235.0~2012~Main+Features~Main+Features

Association of Financial Advisers (AFA), 2013, Market Research; The New Frontiers, AFA, Australia, viewed 16 September 2013

Life Insurance Specialist – Insurance Supermarket International USA – , TX

Australian and New Zealand Bank (ANZ), History, ANZ, viewed 17 September 2013

http://www.anz.com.au/about-us/our-company/profile/facts/history/

Australian Securities & Investments Commission (ASIC), 2010, Access to financial advice in Australia, viewed 16 September 2013

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep224 /$file/rep224

Australian Securities & Investments Commission (ASIC), 2012,
Regulatory Guide 146
Licensing: Training of financial product advisers, ASIC, Australia

Common Law, 2005, Financial Services Reform Act 2001; Act no 22, Common Law, Australia

Commonwealth Bank Australia (CBA), Privatisation (1991) and subsequent developments, CBA, viewed 17 September 2013