Martin Vaughan

24 June 2015

Changes to paraplanning

Asked how much paraplanning has changed over the years, Martin pauses before giving a cryptic answer. “It’s changed a lot but it hasn’t changed at all,” he says.

He explains: “The term paraplanning first appeared in a paper written for the University of Denver, Colorado, in 1983. In it the author described what a paraplanner was – and remarkably, it’s still very much the same today. The basic tenets of what a paraplanner is still hold true.

“What has changed is that now people are understanding the role, what it is and what it can provide. People are experiencing paraplanners and seeing that they provide a valuable role. So, quite rightly, paraplanning is getting a lot more attention than it ever has in the past.”

In its development, paraplanning has helped to change the way that financial advice is delivered, he adds.

“Over the years, the introduction of people to support advisers and allow them to do the thing they are really good at doing, i.e. dealing with the client, I think has helped change the industry beyond recognition. As a result, it is now a much more professional industry.”

Now people know what a paraplanner is, the emphasis is now on how firms can use their paraplanner effectively, he says. “Consequently, what we’re also seeing is the market evolve. Rather than be generalists, paraplanners are beginning to specialise. That’s a new move and reflects how the financial services market itself is changing. Giving financial advice is far more complex now than it ever was and just as financial planners are specialising, so too are paraplanners.”

So what about the collaborative ethos among the paraplanning community, has that always been there over the years?

“There has always been an almost family type environment,” he says. “Paraplanners are not generally in competition with one another in the way that advisers often are.  So there is more freedom to share knowledge and experiences because there is little chance a paraplanner will poach a client. The sharing of what people did in a certain situation or how they dealt with a particular problem, or pointing to a good research tool or website, is about sharing experiences and that can make the financial planning profession better able to serve its clients in general,” he says.

“But what’s really great is that as the role is developing, so there are new people taking it forward. There is clear commitment and devotion to the role of paraplanner and a desire for paraplanning to be recognised as a profession, which includes the willingness to share information, something I don’t think you’d get in many other parts of the industry.”

Advice on setting up an outsourced paraplanner firm

As someone who has been there and done it when it comes to setting up an outsourced paraplanning operation, what would be Martin Vaughan’s advice to someone who was thinking about doing the same?

“My first piece of advice would be to have a go,” he says. “It may be the best thing you have ever done.

“That said, don’t underestimate how difficult it will be. I don’t mean difficult to find clients, generally speaking it won’t be difficult because a lot of financial planning practices have recognised that being able to outsource some or all of their paraplanning is a good thing. It’s knowing that paraplanning will just be a part of what you have to do – and you will need to be able to deal with all the other things that come with running your own business.”

Most important, he stresses, is “to know what you want to do and what you want out of it. Just as the in-house paraplanning role can be dramatically different from one business to another, the same applies to outsourced firms. You need to define what service you want to provide. It’s understanding the distinction between the different types of paraplanners and where your skill sets lie.”

Similarly, advisers need to know what they want from an outsourced paraplanner, he adds. “Do they want someone who is highly technical or do they want a CFP professional who can produce a general financial plan? Do they want report writers or people who are fully conversant with cashflow modeling software? They need to know what process they are going to outsource and what they are expecting for it.

“In my experience, if you are offering outsourced paraplanning services you need to define right at the outset what you are providing and what it is that the client wants from you.”

What you also have to remember, he stresses, is that there will be jobs you take on that you don’t necessarily like but you’ll do them to bring in other work or simply to pay the bills. “That’s what many people don’t get when they start up. It’s okay being an outsourced paraplanner for the people you’ve just worked for because you know them and they know you. But working for someone you’ve never worked for, that you’ve never met before and whose business you don’t know, is much different. Then you’ve got to try to describe what you do, so that when you deliver it’s what they expect. That doesn’t always happen.

“It’s understanding all that side of the business that can be difficult,” he says.

Professional Paraplanner