The SA Best Practice of the Year (Sapoty) competition is now in its third year. The competition was designed to evaluate financial advisory businesses, not just in terms of the quality of their financial planning, but their sustainability and effectiveness as businesses.
The number of entries continues to grow. In the first year, 2007, there were 80 entries. This increased to 125 last year and 130 this year.
The top grade in the competition is super fit and while there were just three entries in this category in the first year, there were nine in both 2008 and 2009.
The main organiser of the event is Celestis, a practice management consultancy owned by Old Mutual.
The competition is confined to independent firms and excludes agents of franchises of the life offices as well as corporate brokers such as Citadel, Alexander Forbes and PSG Konsult.
It is by no means an Old Mutual event, for example Sanlam Glacier and Liberty have both been sponsors in all three years. This year, alongside the big three life offices, the sponsors include the Financial Intermediaries Association, Prudential, Coronation and broker network Masthead.
Celestis head of practice management Esmé Davies says that everybody gains as a result of this competition. Practices that enter get a HealthCheck report from Australian-based Business Health. This is an overview of their business and it entails having their strengths and weaknesses identified. For clients, this is important as they benefit from better run practices with improved succession planning and client relationship management, for example. And for sponsors, improved practices mean an improvement in product distribution.
Davies says that for Celestis it gives a chance to access data to improve its offering to financial advisers. She says that the awards are different from other competitions in the financial planning industry as they award the team and not the individual financial adviser.
"We look at the way the practice is run, including team involvement. And we believe that the business should not be about a single individual, rather about the team - business continuity and succession planning are vital and account for a large proportion of the marks in the competition."
Celestis and its partners, FANews, Business Health and Compli-Serve, are looking for the best financial advisory practice in SA. This is based on the extent to which the practice has implemented best business principles.
Areas that are tested include, but are not limited to, client relationship management; financial management (especially profitability); business planning; succession planning; staff management; and risk management.
Well managed financial advisory practices will provide better, more consistent and more sustainable advice and service to their clients.
The competition aims to measure and improve the way in which financial advisory practices are run and therefore contribute to the consumer.
Every practice that enters into the competition has to complete a HealthCheck - an online assessment that asks the practice more than 130 questions about the business. Once completed, the practice is provided with a detailed report that outlines suggestions on how to improve. It also benchmarks the practice against other practices in the industry - as well as international practices that have completed the same assessment (in Australia, New Zealand and the US). There is an international database of 3 000 and the SA database accounts for about a quarter of that.
Following the cut-off date of the competition, the 15 best practices - based on the online assessments - are audited (by representatives of Celestis and Business Health) to verify information and establish additional facts about the business.
A full compliance audit, in line with the Financial Advisory & Intermediary Services (FAIS) Act is also conducted by Compli-Serve. Ten practices are then put forward as finalists and the winner is chosen by a panel of independent judges.
For a small business unit, Celestis puts a lot of sweat into the competition. Rob Glenister, an executive at Celestis, says it is a company that specialises in the delivery of practice management - or the implementation of best business principles. "The competition creates greater awareness among financial advisory practices and product providers of the need for practice management.
"It focuses attention on the very services we deliver at Celestis. "
Davies says she would like to see an increase in the number of well managed financial advisory practices in SA - for the benefit of the industry as well as the consumer.
She says with the sponsorship spread across many of the large industry players, the competition is now an independent industry event.
In the panel that decides on the winner there are no representatives of Celestis or the greater Old Mutual group. The panel includes Peter Dempsey, the deputy CEO of the Association for Savings & Investment SA (Asisa); Justus van Pletzen, executive director of the Financial Intermediaries Association (FIA); Godfrey Nti, head of the Financial Planning Instituue (FPI); and Richard Rattue, MD of Compli-Serve.
The competition would not be necessary if it were not for key weaknesses or areas of improvement in SA financial advisory practices.
Glenister says one of those is business planning. "We have seen an improvement in the number of business plans and quality of business plans. But too few practices have detailed action plans and not enough of them are shared with staff."
Another area is staff management, which includes aspects such as job descriptions, performance management and incentives. "But we are beginning to see a very pleasing positive trend in the way in which practices manage and develop their staff with a strong emphasis on training and incentives," he says.
Succession planning is one of the biggest areas of concern. Most practices in SA, Davies says, are centred on a single individual - usually the owner or the key financial adviser.
There has been an improvement in succession planning (making contingency for death, disability and retirement), but many businesses have not formalised these arrangements. For example, there are no formal contracts in place with the identified successor or else he or she is very young and inexperienced.
Practice management might sound a bit theoretical but it is vital. It is the implementation of best business practice or principles. Davies says it's a way of doing business - doing the right things right (improving efficiency, profitability and increased capital value).
Celestis's role is to help financial advisers to manage their practices better. It focuses on customer relationship management, financial management, business planning, succession planning, staff management and risk management.
The competition complements the somewhat better known FPI (Financial Planner of the Year). This is a competition that aims to find the best financial planner in the industry. To qualify, financial advisers have to prepare a detailed financial plan, based on a case study.
So what should consumers consider when choosing a financial planning practice? Davies says that the practice must be registered with the Financial Services Board (FSB) and be licensed as a financial services provider (FSP).
The financial adviser(s) in the practice should be appropriately qualified and have adequate experience in providing financial planning services. Currently, in SA, the highest financial planning qualification is issued by the Financial Planning Institute of SA and is called a certified financial planner (CFP). In addition to academic qualifications, one should not underestimate the value of financial planning experience.
As a client, your financial adviser should offer to prepare a financial plan for you or your family, based on your financial goals. This plan, depending on your financial situation and requirements, should at least take the following into account: estate planning; retirement planning; security of your dependants, should anything happen to you; and personal protection, in the event that you become disabled or incapacitated.
The practice should give their clients access to all the products and services required for them to reach their financial planning goals - either directly or through contracted strategic partners.
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The practice should have contracts in place with reputable product and service providers - this includes the services of a reputable compliance officer.
The continuity of the financial planning practice is very important in the event of anything happening to the financial adviser, for example death, disability and retirement. Always ask who will take care of your financial planning requirements in the event that your advisor is no longer available.
Good practices stay in touch with their clients, through good times and bad. Proactive, personalised client communication is essential and regular client review meetings will ensure that you are on track to reach your financial goals.
Risk management, with specific reference to client files and information is crucial. Client information should be regularly updated, backed up and stored off-site.
The best practices outsource noncore services, such as IT support. They are also profitable, thus ensuring that they will be around to provide services tomorrow.
