The modern financial adviser, whether they are salaried or self-employed, needs to understand the critical success factors of financial advice businesses and be able to harness these for the benefit of their own professional practice. In AFA 1: Business Strategy for Financial Advisers, you will critically review the contemporary financial advice environment and position your current business in that environment to identify, using a range of diagnostic tools, the key areas you need to change to ensure ongoing relevance and success for your advice business. At the successful conclusion of this unit, you should be able to demonstrate your ability to craft a sophisticated strategy for your professional advice business. To assist you reach this goal, the topics covered in this unit are: Topic 1. The Financial Advice Environment: Thinking Big Topic 2. Change, Innovation and Adaptability Topic 3. Strategic Management Topic 4. External Analysis: Finding Opportunities and Threats Topic 5. Internal Analysis: Strengths and Weaknesses Topic 6. Developing and Implementing a Strategic Plan Topic 7. Business Structures and Technology Topic 8. HR Management and Strategy Topic 9. Financial Statement Analysis Topic 10. Financial Management and Control As you progress through the 10 topics you will be required to complete a number of tasks (titled Strategic Elements) that will inform and contribute to the development of your Strategic Business Plan for your business. The strategic plan is the major business project for this topic and is assessable. You can download the template for your Strategic Business Plan here. As you do each strategic element you can work straight into your strategic business plan. You will have weeks 11 & 12 to refine all your work and prepare your final strategic business plan for submission at the end of week 12. © Kaplan Education Pty Ltd. All rights reserved. 2 of 7 AFA1: Topic 1 Topic 1 – The Financial Advice Environment: Thinking Big It would not be overstating the case to suggest that the Australian financial advice industry has always existed in a state of flux. By its very nature it must be continuously responsive to market fluctuations, including adjusting to changes in government legislation where the regulatory authorities are also sensitive to changes in economic activity and consumer behaviour. Consequently, this topic starts with an overview of the contemporary financial planning environment, including a survey of some of the changes that are likely to happen as a result of proposed legislative changes, the continuing impact of the global financial crisis (GFC), Australia’s ageing population and the increased use of, and access to, technology. This information is necessary for the savvy planner who wants to position their advice business in the best place possible to meet the needs of the consumers of the future. The topic then covers the fundamentals of business strategy planning and asks you to start the strategy building process by critically evaluating the state of your current business. This evaluation will form the starting point from which you will be able to develop the plan for your business to adapt to the new environment and remain a successful adviser; irrespective of your current business model. After completing this topic you will be able to: • Explain the strategic planning model • Analyse the current state of the financial advice industry • Identify drivers of change that will shape the future of the industry. Evolution of the financial planning environment Significant social and economic changes over the past 35 years have led to an increase in the complexity of financial markets and an ever-expanding range of financial products. This has made it increasingly difficult for individuals to plan for their own financial futures. The resulting uncertainty has led consumers to turn to professional financial advisers for help. Some of the major factors that have led to the growth of the financial advice profession include: • Demographic shifts: Australia has an ageing population as a result of an increase in life expectancy and a decrease in birth rate. This means that people must plan to fund their retirement and many have turned to financial advisers for assistance. • Inflation: Changes in the rate of inflation can have a significant effect on the value of investments and lifestyles, particularly for those relying on a fixed income. Professional financial advice can help people manage their affairs to minimise this impact. • Growth of credit: Increased availability of credit has increased the financial risks placed on many householders. Financial advisers can help their clients use credit wisely to maintain a manageable level of debt. • Changes in government policies: There have been many changes — including means testing for social security benefits, the privatisation of government-owned businesses and compulsory superannuation savings. Financial advisers have an increasingly important role to play in assisting their clients to understand the impact of these policies and in helping their clients improve their personal financial management. © Kaplan Education Pty Ltd. All rights reserved. 3 of 7 AFA1: Topic 1 • Increase in investment products: There has been an avalanche of new investment and personal insurance products (such as trauma risk cover) over the past 25 years. Many people have turned to financial advisers to help them choose products that meet their specific needs. • Increased complexity and availability of information: Investors want advisers to be up-todate with the latest trends and have the ability to communicate and translate complex issues into personal situations. • Increase in the number of people investing: Private share ownership has grown substantially in Australia across all income groups. • Increased use of, and access to, technology: As the use of mobile devices continues to grow, the adaption of financial services to this online environment has grown rapidly over the last few years. Many of these changes will continue to influence the future advice industry as government policy and legislation will continue to evolve, information will become increasing available, and the population will continue to age.