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Personal Financial Planning: Strategies For Successful Practice Management
Personal Financial Planning: Strategies For Successful Practice Management
Personal Financial Planning: Strategies For Successful Practice Management
Hugh Crankshaw
November 2006
© University of Pretoria
MBA
ABSTRACT
the personal financial planning process. The purpose of this research was to
To do this in a meaningful way the research had two structured phases. The
first phase was a theoretical study that provided the basis for the design of a
research instrument. The second phase was an empirical study that was done
practice management.
Pretoria. It has not been submitted before for any degree or examination in any
other University.
Hugh Crankshaw
November 2006
Acknowledgements
At this point, I wish to thank all those who have assisted and contributed to the
success of this study, in particular I would like to thank the following individuals:
Gordon Institute of Business Science for staying the course with me.
TABLE OF CONTENTS
List of Figures x
CHAPTER 1
Page
CHAPTER 2
ii
Page
2.5 LEGISLATION 28
CHAPTER 3
RESEARCH QUESTIONS
Page
CHAPTER 4
iii
RESEARCH METHODLODGY
Page
CHAPTER 5
Page
RESEARCH RESULTS
iv
PRINCIPLES 58
Component 69
Component 70
Page
DISCUSSION OF RESULTS
CHAPTER 7
Page
Page
management 62
practice management 62
Table 5.4: Highest mean score for statements in the personal attributes
component 64
Table 5.5: Lowest mean score for statements in the personal attributes
component 64
Table 5.6: Lowest standard deviation value for statements in the personal
attributes component 64
Table 5.7: Highest standard deviation value for statements in the personal
attributes component 65
Table 5.8: Highest mean score for statements in the personal skills
component 65
Table 5.9: Lowest mean score for statements in the personal skills
component 65
Table 5.10: Lowest standard deviation value for statements in the personal
skills component 66
Table 5.11: Highest standard deviation value for statements in the personal
skills component 66
Table 5.12: Highest mean score for statements in the customer strategies
component 66
Table 5.13: Lowest mean score for statements in the customer strategies
component 67
Table 5.14: Lowest standard deviation value for statements in the customer
strategies component 67
Table 5.15: Highest standard deviation value for statements in the customer
strategies component 67
Table 5.16: Highest mean score for statements in the business strategies
component 68
Table 5.17: Lowest mean score for statements in the business strategies
component 68
Table 5.18: Lowest standard deviation value for statements in the business
strategies component 68
Table 5.19: Highest standard deviation value for statements in the business
strategies component 68
Table 5.22: Mean score ranking of all statements from highest to lowest 71
Table 5.23: Standard deviation value ranking of all statements from lowest to
highest 73
LIST OF FIGURES
Page
respondents 53
respondents 54
Figure 5.10: The relationship between number of existing clients and total
CHAPTER 1
Page
strategies that South African Financial Planners can use in the personal
In this chapter, the motivation for the research is supported by describing the
personal financial planning process and the need that exists to do personal
financial plan and select appropriate products with individuals. The process that
practice management and is critical to both the individual’s financial plan and
The chapter concludes by summarising the need for, and defining the scope of,
current personal and financial information, determines future financial goals and
develops a financial plan to meet these goals (Dawes, 1998). Once the financial
towards these goals and make adjustments to them as personal and financial
information changes.
wishes to retire at age sixty five having saved an amount of money to live off
much money should be saved each month from age twenty five and sixty five to
achieve the future financial goal is determined. The individual begins to save the
required amount every month until age sixty five (financial plan). At age thirty
the individual decides to retire at age sixty with the same future financial goal.
This increases the amount of money which must be saved every month and the
individual proceeds to save the new amount of money (review and adjustment
Future financial goals for an individual may include planning for life events such
members, been disabled and not able to work and earn an income, financial
To meet the demand for products and services that assist individuals to achieve
their future financial goals, specialised businesses have been established that
future financial goals. One type of business model that operates in this market
take on a financial risk of an individual in exchange for the individual paying the
mortgage with a bank and has the future financial goal of the outstanding
mortgage been settled in the event of the individual’s death. If the individual will
not have sufficient cash on hand at death to do so, the individual can transfer
this risk to the long-term insurance company by agreeing the amount of risk to
be taken by the company in the event of the individual’s death and the amount
of money to be paid by the individual to the company for the transfer of the risk.
R822.1 billion. Core products consisted of life assistance, sinking fund, health
The size of the industry has led to a high degree of complexity for an individual
who wishes to purchase a financial product. This is because each company has
their own suite of financial products presenting the individual with a wide choice,
and that differences between these products can be subtle in nature. This
complexity can result in the individual purchasing a financial product that will not
meet the future financial goal or, will meet the future financial goal but not in the
This complex financial product environment, together with the need to consider
other factors, such as current personal and financial information, future financial
goals and the regular review of these goals, has meant that there is a demand
individual to develop a financial plan, select the correct financial products that
are required to meet the plan’s objectives and review the plan with the individual
on an ongoing basis.
recommendations to the individual about financial products which are the most
appropriate to use to achieve the future financial goals, and assists the
individual with the implementation of the new financial product. Once the
financial product is in place the Financial Planner will review the progress of the
personal financial plan with the individual on a regular and ongoing basis. This
individual can change requiring adjustments to the plan. The Financial Planner
is then in a position to advise the individual what effect these changes have on
the personal financial plan and recommend adjustments to the plan so that it
There are many individuals and Financial Planners who engage each other in
Most Financial Planners do not earn a fixed salary. The Financial Planner can
either charge fees for the personal financial planning process, receive a
commission from the selling of a financial product or a combination of both. A
individuals who require the financial planning process, the quality of the
ongoing review of the individual’s financial plan and having the correct
because the chances of selling a product are increased, and therefore level of
process and are fundamental to both the achievement of future financial goals
in the individual’s financial plan and the financial success of Financial Planner.
Within these elements there are many skills, attributes and structural
of the Financial Planner to acquire and implement them will determine their
and attributes are now a legislative requirement which sets a minimum standard
Taking into consideration the size of the industry, the potential devastating
Services Act (FAIS) (Republic of South Africa, 2002) was promulgated. The
general duties of a Financial Planner are to “at all times render financial
services honestly, fairly, with due skill, care and diligence, and in the interests of
clients and the integrity of the financial services industry” (Republic of South
Africa, 2002, Section 15 part 2). Section 15 of the FAIS Act describes in detail
compliant with the provisions of the code of conduct. The impact of FAIS on
upfront commissions from companies offering financial products after the selling
that the Financial Planner is encouraged to give continual advice about financial
products sold (Cameron, 2006). The implications of these changes are not yet
fully understood, but have the potential to affect the manner in which Financial
Personal financial planning, financial products and Financial Planners are all
wishing to achieve future financial goals in the modern South African economy.
of money connecting in the industry are significant and the effects of making
Added to these entrenched industry risks has been the introduction of legislation
standards have increased the cost of doing business through higher standards
This research project will provide Financial Planners with relevant and specific
data by identifying the top three practice management strategies that South
African Financial Planners can use in the personal financial planning process.
The title of the research project is stated as follows:
management
industry
management today.
CHAPTER 2
Page
2.5 LEGISLATION 28
2.1 CHAPTER INTRODUCTION
This review of literature and the supporting theory base establish that personal
financial planning is a service which is both widely used and applicable to many
service system model and develops within this framework components and
services to individuals, Black, Ciccotello and Skipper (2002) suggest that both
the theory base and the required research to guide how the theory base should
and Doctorate programs within university programs that are specific to personal
from existing disciplines where the theory base is applied to personal financial
planning. This literature review will evidence the same limitations as the
In research done in the United States by Elmerick, Montalto, and Fox (2002),
data from the 1998 Survey of Consumer Finances was used to determine the
extent to which Financial Planners were used by households. The result of this
research showed that 21.2% of households in the United States made use of a
they are more likely to seek the services of a Financial Planner over and above
other specific experts in financial discipline such as accounting. Ameriks, Caplin
and Leahy (2002) have used survey data to show that where households
decide that they need to do personal financial planning, they spend more time
developing and monitoring plans and this effort is associated with increased
wealth. Tomecek (2003) has identified a shift in attitude of individuals who now
financial management and that a single expert who can consolidate all of their
protect assets that are mortgaged if they die, faces the risk of not having the
these risks and the effective management of these risks (Elgar, 2004). It was
noted that individuals have the tendency to spend more time on managing
smaller risks that they encounter but do not spend time on risks that affect their
overall financial wellbeing. Elgar (2004) suggests that the tools for Financial
sophistication and that the skill level of Financial Planners will have to increase
as well.
2.4 CHARACTERISTICS OF PERSONAL FINANCIAL PLANNING
Kotler (2003, p. 444) defines a service as “any act or performance that one
party can offer to another that is essentially intangible and does not result in the
plan and then reviews the personal financial plan on an ongoing basis, it is
does not result in a physical product that is owned. The personal financial
context.
Considering the five service categories and other general distinctions noted by
Kotler (2003), the financial planning process is not a pure service, but rather a
major service with some accompanying minor goods. This is because the
financial plan has some tangibles attached to it. These tangibles would include
the documentation of the plan and the report in which the plan is reviewed. It is
a people based service that requires the client to be physically present, services
These attributes affect the way in which a Financial Planner structures the
about the expected level of the financial planning service based on the people
and the environment they see, and may want assurance from others prior to the
An individual’s perception of quality will not only be their expectations and actual
service received, but will also include the process they are taken through
(Parasuraman, Zeithaml and Berry, 1985). Figure 2.1 below illustrates the
planning process.
Figure 2.1: The service business as a system
Individual A
Service Business
Physical Environment
Personal Financial Planning
Other Services
Financial Planner
Other Individuals
Direct Interactions
Secondary Interactions
There are two principles in this model which need further consideration. These
are:
As a system there are elements that are either visible or not visible to the
customer. Elements that are visible would include the Financial Planner
that the individual interacts with, the office environment and other
customers. Elements that are not visible to the individual would be the
administration processes.
individual.
What Figure 2.1 demonstrates is that the all these elements combine and affect
the ability of the Financial Planner to deliver the financial planning process as a
would be the Financial Planner and their interaction with the individual.
Planners will play a large role on the quality of the personal financial
This service system model demonstrates that personal financial planning has
Although there are limitations in the academic theory base of personal financial
near and long-term goals and objectives”. Evensky (1997) suggests that a
assisting the individual achieve their future financial goals and reduce
individual (FPI, 2006). The University of the Free State (2005) describes what
Elements of the six steps are requirements of FAIS for the Financial Planner to
In this step the financial Planner should identify the services which will be
that clarifies the scope of the service and record what has been agreed.
There are two separate elements in this step. The first is gathering financial
access to the personal financial information and advising the individual of the
scope of the agreed service. The second is the determination of the individual’s
future financial goals. These goals allow the financial planner to be specific in
and relevant to the agreed scope and if unrealistic, the Financial Planner should
determine if the individual’s future goals can be met given their current
resources and financial habits. As assumptions around, but not limited to, future
retirement dates and income needs will be used by the financial Planner, these
should be agreed with the individual and may require additional information to
There are three elements in this step. The first is to identify and evaluate
goal, or that existing financial plans already meet the future financial goal. It is
proposed.
future financial goals, the data provided by the individual and the analysis
The third element is the presentation of the financial plan to the individual. Here
the financial Planner should discuss all the relevant information that affects the
financial plan, and note for the individual that as their personal and financial
There are two elements to this step. The first is to agree who will be responsible
for the implementation of any actions or recommendations that arise from the
financial planning process. The second is to select financial products which will
achieve the future financial goals. Implied in this is the need for the Financial
This step ensures that the individual’s financial plan remains current with
personal and financial information by setting review dates with the individual,
advising the individual that they should notify the Financial Planner should
personal or financial information change and explaining the scope of the review
process.
adhered to.
delivers this service. Referring back to Figure 2.1, the term practice
Financial Planner and this framework will be developed to identify the four
expects from the service and the design of the service to meet their needs and
create competitive advantage. Research done by Sayer (2004) showed that the
respondents identified four areas that an ideal Financial Planner should exhibit
superior products and deliver after sales service. Day and Barksdale (2003)
the professional service were identified as the two major components of trust.
selected. These included poor presentation, poor people skills and lack of
communication skills. Coulter and Ligas (2004, p. 493) found that “successful
well as on the way in which the core service is performed” and suggested that
the ability of the people who deliver the service to adapt to diverse needs was a
success determinant for the respondents. This body of research reinforces the
and Bitner (1981) and the need for a high degree of customer orientation in
practice management.
As most Financial Planners are financially rewarded for the selling of a financial
product, conflict results from the trade off between immediate personal financial
success for the Financial Planner and the need to remain customer orientated.
Rozell, Pettijohn and Parker (2004) examined this issue and found that high
driving factor behind customer orientation was the level of emotional intelligence
This implies that a Financial Planner should adapt their approach to different
depending on the target market. One is the Life Cycle Model which considers
the consumption and saving of income by reviewing the patterns of income and
expenditure of an individual over their lifetime. Broadly this model presumes that
financially. During the income generating stage, the individual should have
enough income to meet current needs and save for a period when
there is no or little income. At retirement needs remain constant but income
falls. A financial Planner who understands where an individual is in the life cycle
model is better able to do financial planning for the individual. The money
personality model divides individuals into thirteen personal traits and nine
financial personality groups. Personality traits would include pride, work ethic,
decisions which provide both financial security and emotional stability and be
able to adapt the personal financial plan to meet the needs of the client.
The first two components of practice management that can be identified from
are to segment the client base into profitability categories, retain key customers,
been discussed in the six step financial planning process are the consultative
planning process and the need to manage the personal financial planning
to ensure that the Financial Planner is able to meet the expected needs of the
individual.
The third component of practice management that can now be identified is the
plan which should not only be about the pursuit of personal wealth, but should
include the principle of individuals, for whom personal financial planning is done,
achieving their future financial goals as the business fulfils its professional goals
(Schweizer, 2006).
An effective marketing plan, designed to achieve competitive advantage will
help build presence in a target market. The marketing plan positions the
Financial Planner in the minds of individuals around trigger events that cause
the individual to seek out the Financial Planner and should consist of a logo,
which should be adopted are recruitment and development of support staff and
their integration into the business plan and risk management processes to
Figure 2.2 below illustrates where the four components of practice management
are applied in the service system model and the need for these components to
planning service.
Business Strategies
Customer Strategies
Physical Environment
Personal Financial Planning
Personal Attributes
Other Services
Financial Planner
Other Individuals
Personal Skills
Direct Interactions
Secondary Interactions
2.5 LEGISLATION
One of the trends in the industry has been the passing of legislation to regulate
the financial Planning industry. These include the Policyholder Protection Rules
– section 62 of the Long – term Insurance Act No.52 of 1998, the Financial
Intelligence Centre Act No. 38 of 2001 and the Financial Advisory and
Intermediary Services (FAIS) Act No. 37 of 2002. Although these pieces of
p. M1-19) describes the reason for the regulation of Financial Planners resulting
from “the lack of financial literacy amongst the majority of the South African
population together with the intangible nature of financial products and services
has lead to many clients suffering financial hardship as a result of poor advice
given by” Financial Planners. FAIS addresses this by providing protection for
provides for an Ombud with authority to sanction Financial Planners should they
breach these minimum standards of service. The office of the FAIS Ombud was
handled 544 cases, resolving 14% of these and determining that Financial
FAIS requires that a Financial Planner must appoint a compliance officer, keep
records for five years, institute monthly accounting records and annual financial
2003). Where similar legislation has been introduced in Australia and the United
restructure the remuneration model, at the same time that FAIS is embedding
itself, would increase the Financial Planner’s costs to a point that significant
RESEARCH QUESTIONS
Page
This chapter provides reasons for the selection of the research questions and
Given the limitations of the literature and theory base as discussed in Chapter 2,
questions to validate the existing theory base and expand it in the area of
practice management.
What are the top two challenges that a Financial Planner faces in
practice management?
CHAPTER 4
RESEARCH METHODLODGY
Page
This chapter defends the choice of research methodology which was selected
research methodology.
The unit of analysis, population of relevance, sample methods and sample sizes
are all defined and the research instrument is defended and described. The
choice of research instrument selected was a survey which was distributed for
completion and returned for analysis. The proposed methods of data analysis
their philosophies and assumptions of the world and the nature of knowledge. In
the context of research it would influence the way research is done (Hussey &
quantitative paradigm and qualitative paradigm and different terms are used to
Quantitative Qualitative
A summary of the main features of the two paradigms is described in Figure 4.2
below.
Figure 4.2: Features of the two main paradigms
Quantitative Qualitative
another
Welman and Kruger (2001) have distinguished between the two paradigms by
noting differences around intervention. Quantitative research design exposes
participants to an intervention that they would not have been subjected to in the
normal course of events. Qualitative research design does not create
interventions, but uses existing sources and interprets information about events
which have already taken place. Criticism of the qualitative paradigm suggests
the researcher does not observe reality but an interpretation of reality as they
become absorbed in the research process and the excessive dependence of
relying on secondary sources of information. Criticism of the quantitative
paradigm is that it is difficult to capture a complex issue in a single measure and
Having considered the purpose of the research, and the different research
factor of this decision was the limitations of the existing theory base, as
This theoretical limitation also resulted in a hypothesis not been stated and
in a new area that lacks established research findings (Welman and Kruger,
2001).
of relevance (Welman and Kruger, 2001). For this research project the unit of
population is the source from which this data can be obtained. In research, the
term population does not automatically mean people, but is the full set of cases
from which a sample is taken (Saunders, Lewis and Thornhill, 2003). The
population is the study object on which the research problem has application
and may consist of individuals, groups or human products (Welman and Kruger,
2001).
For this research project the population of relevance was Financial Planners
considering time frames and cost constraints. The correct use of sampling
techniques can mean that the validity of the research leads to higher overall
The sample size used was all Financial Planners employed at Standard Bank in
South Africa which was 723 Financial Planners at the date the research was
and the potential for all Financial Planners to participate in the research was
equal, there was no need to adopt variants of probability or non-probability
sampling techniques.
survey was constructed. Principles of survey design were followed and took into
account the order and flow of questions so that they would be logical to the
clear and concise instructions and not appear to be too long (Saunders et al,
2003).
validation. This was Lee Rossini (Soc Sci, LLB, LLM, CFP, Diploma in Business
Development Series.
The survey (see Annexure A) was divided into the following three sections:
Section 1: Demographic Information
This included items such as age, gender and income, broken up into specific
units where the respondent was asked to indicate the matching unit to their own
Use was made of a Likert rating scale on twenty statements about principle of
practice management but they were not rated statements. The purpose of these
statements was to frame the specific principle statements more precisely. Each
was included. The Likert scale asked each respondent to indicate their level of
agreement with the statement by marking the appropriate number (Welman and
Kruger 2001)
Three open ended questions were asked. All questions were directly related to
practice management. The first question asked respondents to select and rank
The survey was e-mailed to all Financial Planners described in the population of
relevance. Respondents were asked to reply by a certain date and used either a
dedicated faxmail service or e-mail address to return the completed survey. This
meant a trouble free return process for the respondent. Surveys that were
returned within the specified timeframe were captured into Microsoft Excel in
The primary data collected from the returned surveys was analysed by
statistical means and tests using Microsoft Excel. This was in support of the
content analysis which allowed the data to be converted into more manageable
set of information.
4.10 RESEARCH LIMITATIONS
The lack of previous academic research and theory meant that the
establish a hypothesis.
Standard Bank had the potential to exhibit a bias about their environment
The population of relevance chosen may not be large enough given the
currently licensed.
brought into play the response rate from respondents and the ability of
practice management.
CHAPTER 5
Page
RESEARCH RESULTS
PRINCIPLES 58
Component 69
Component 70
This chapter describes the empirical findings from the research into the
respondents were asked to complete the survey. The sequence was as follows:
The sample is described and the response rate for the survey calculated.
demographics.
test the degree to which the respondent agreed with the statements on
employed by Standard Bank in South Africa at the date on which the survey
Planners were distributed across South Africa and at the date of distribution of
Surveys were distributed to all 723 Financial Planners and a total of 185
surveys were returned, of which it was possible to use 179 surveys in the
analysis. The 6 surveys not used arose from the failure of the respondents to
complete the required responses. The response rate achieved for the survey
was 24.7%. This excluded the 6 surveys not used in the analysis.
level of education, total monthly income (before tax), number of existing clients,
practice. The analysis was done by totalling the number of respondents in each
category of the demographic and graphing the result. The analysis of each of
The gender distribution of the respondents indicated that 151 were male (84%)
and 28 female (16%). Figure 5.1 presents the gender distribution graphically.
Gender Distribution
Female 16%
Male 84%
The age distribution of the respondents indicated that the largest group of
years. The second largest group of respondents (39, representing 21.7%) were
between the ages of 30 and 34 years. There were no respondents between the
Age Distribution
65+
60-64
55-59
Age Group
50-54
45-49
40-44
35-39
30-34
25-29
20-24
0 5 10 15 20 25 30 35 40
Frequency (n)
The highest level of education distribution of the respondents indicated that the
9.4%) held a Post Graduate degree. Figure 5.3 represents the highest level of
0 20 40 60 80
Frequency (n)
The highest level of monthly income (before tax) distribution of the respondents
indicated earnings of between R10 000 and R19 999. The second largest group
000 and R20 000. The smallest group of respondents (16, representing 8.9%)
indicated earnings of R40 000 to R49 000. Figure 5.4 represents the total
0 10 20 30 40 50
Frequency (n)
number of clients 200 and 299. The second largest group of respondents (35,
representing 19.5%) indicated number of clients 0 and 199. The smallest group
and 599. Figure 5.5 represents the number of existing clients distribution
graphically.
Figure 5.5: Number of existing clients distribution of respondents
600+
Number of Clients
500-599
400-499
300-399
200-299
0-199
0 10 20 30 40 50
Frequency (n)
25+
20 to 24
Number of Years
15 to 19
10 to 14
5 to 9
0 to 4
0 20 40 60 80 100
Frequency (n)
The highest number of direct support staff in your practice distribution of the
graphically.
Figure 5.7: Number of direct support staff in your practice distribution of
respondents
5+
Number of Support Staff
4
3
2
1
0
0 20 40 60 80 100
Frequency (n)
The relationships which were analysed all used total monthly income (before
The frequency of responses were totalled for the highest level of qualification
and total monthly income (before tax) demographics. Two high and low income
categories were selected and the percentage of individuals achieving these
The analysis showed that 9% of Financial Planners with Matric were earning
R50 000+ month compared to 35% of Financial Planners with Post Graduate
in the lower income category of R10 000 to R19 000 where 23% of respondents
40%
% of Individuals
35%
30%
25%
20%
15%
10%
5%
0%
Matric Diploma / Certificate Degree Post Graduate
Degree
Qualification
R10000-R19999R50000+
5.3.8.2 The Relationship between number of Years as Financial
The frequency of responses were totalled for the number of years as a Financial
Planner and total monthly income (before tax) demographics. Two high and low
were earning R50 000+ month as compared to 60% of Financial Planners with
results in the lower income category of R10 000 to R19 000 where 46% of
70%
60%
% of Individuals
50%
40%
30%
20%
10%
0%
The frequency of responses were totalled for the number of existing clients and
total monthly income (before tax) demographics. Two high and low income
The analysis showed that 6% of Financial Planners with 0 to 199 clients were
earning R50 000+ month as compared to 46% of Financial Planners with 600+
clients. This was a positive correlation suggesting that increased number of
clients results in increased income. This was further supported by results in the
lower income category of R10 000 to R19 000 where 56% of respondents in the
0 to 199 category earned this income compared to 4% in the 600+ clients
Figure 5.10: The relationship between number of existing clients and total
60%
50%
% of Individuals
40%
30%
20%
10%
0%
Number of Clients
R10000-R19999R50000+
PRINCIPLES
to express their views. The twenty statements were broken into four
importance.
To understand the relative importance of each variable, all 20 variables were
values are an indication of the spread of the mean distributions and values
which are low imply a narrow distribution, whilst higher values imply a wide
mapping the five point Likert scale. Values were assigned to the scale, i.e.
1=5%; 2=25%; 3=50%; 4=75%; and 5=100%. Table 5.1 contains a summary of
Table 5.1: Relative importance of principles of practice management as perceived by the respondent
Std Rating
Components of Practice Management Statements on Principles of Practice Management Mean Deviation %
The average of the mean scores for all twenty statements was 4.33 and the
average rating 86.53%. Eighteen statements had mean scores above 4. The
average mean score for these eighteen statements was 4.42 and the average
rating 88.46%. This suggests that respondents had a high level of support for
The average standard deviation for all twenty statements was 0.76. This is a
For components of practice management the average mean scores and rating
were analysed. The components were ranked highest to lowest using the
average mean score per component. Table 5.2 below contains a summary of
management
The personal attributes component ranked highest with an average mean score
The same analysis was done using the average standard deviation per
component and the components were ranked form the lowest average standard
deviation to the highest. Table 5.3 below contains a summary of the results of
this analysis.
practice management
standard deviation values of 0.65 and ranked highest. The customer strategies
component ranked the lowest with an average standard deviation value of 0.86.
statements within the context of the component. This analysis looked at which
statements had the highest and lowest mean scores as well as the lowest and
highest standard deviation values. Where the scores and values were equal in a
category, all statements were included on the tables. The components are
component
Table 5.5: Lowest mean score for statements in the personal attributes
component
Table 5.6: Lowest standard deviation value for statements in the personal
attributes component
attributes component
Table 5.8: Highest mean score for statements in the personal skills component
Table 5.9: Lowest mean score for statements in the personal skills component
skills component
Table 5.11: Highest standard deviation value for statements in the personal
skills component
Table 5.12: Highest mean score for statements in the customer strategies
component
component
Table 5.14: Lowest standard deviation value for statements in the customer
strategies component
Table 5.15: Highest standard deviation value for statements in the customer
strategies component
component
Table 5.17: Lowest mean score for statements in the business strategies
component
Table 5.18: Lowest standard deviation value for statements in the business
strategies component
Table 5.19: Highest standard deviation value for statements in the business
strategies component
ranking each statement with the highest and lowest mean scores in each
component.
In the ranking of highest mean scores it was found that statement 1, “Having
high standards of integrity and ethics” had the highest mean score of 4.87.
basis” had the lowest mean score of 4.51. Table 5.19 below gives the results of
Component
In the ranking of lowest mean score it was found that statement 15,
“Discontinue customer relationships where value gained is less than the costs
of maintaining the relationship” had the lowest mean score of 3.07. Statement 9,
“Presentation techniques which convey information in a professional manner”
had the highest mean score of 4.51. Table 5.20 below gives the results of all
component statements.
Component
All statements were ranked from the highest to the lowest mean score
scores regardless of the component to which they were attached. The results of
Table 5.22: Mean score ranking of all statements from highest to lowest
Mean
Statements on Principles of Practice Management
Colour Component
Personal attributes
Personal skills
Customer strategies
Business strategies
The highest mean score of 4.87 was given to two statements, “Build
(statement 1). The rating percentage of these two statements was above
97.3%. The second highest mean score of 4.63 was given to the statement “An
ability to communicate with customers who are in a different life cycle stage”
(statement 7). The rating percentage for this statement was 92.54%. The third
highest mean score of 4.61 was given to the statement “An ability to
(statement 6). The rating percentage for this statement was 92.28%.
The lowest mean score of 3.07 was given to the statement “Discontinue
customer relationships where value gained is less than the costs of maintaining
the relationship” (statement 15). The rating percentage for this statement was
61.34% The second lowest mean score of 3.85 was given to the statement
services to each segment” (statement 14). The rating percentage for this
statement was 77.08%. The third lowest mean score of 4.08 was given to the
(statement 13). The rating percentage for this statement was 81.68%.
All statements were ranked from the lowest to the highest standard deviation
they were allocated. Statement numbers were colour coded according to each
ranking was to isolate the three statements with the lowest or highest standard
deviation scores regardless of the component to which they were attached. The
highest
Deviation
Std
Statements on Principles of Practice Management
Colour Component
Personal attributes
Personal skills
Customer strategies
Business strategies
The lowest standard deviation value of 0.50 was given to two statements “Build
relationships of trust” (statement 2) and “High standards of integrity and ethics”
(statement 1). The second lowest standard deviation value of 0.58 was given to
the statement “Manage financial planning needs of customers on an ongoing
basis” (statement 12). The third lowest standard deviation value of 0.59 was
given to the statement “An ability to communicate with customers who are in a
The highest standard deviation value of 1.16 was given to the statement,
“Discontinue customer relationships where value gained is less than the costs of
deviation value of 4.63 was given to the statement “Segment customers in the
(statement 14). The rating percentage for this statement was 92.54%. The third
highest standard deviation value of 1.04 was given to the statement “An ability
three statements from section 2 of the survey. The objective of the question was
that the respondent faced. The objective of this question was to see if additional
comments made were deemed to not add any value to the main objectives of
the research. For the purposes of analysis question 3 has not been considered.
5.5.1 ANALYIS OF QUESTION 1
The intention of this question was to establish the three most important
importance. The responses for each statement were totalled for each ranking
and a percentage calculated using the number of response for each statement
Table 5.23 below shows the top four statements in ranking position number 1.
respondents choosing this as the most important statement out of all twenty
statements.
Statement Statement % of
Number Respondents
1
High standards of integrity and ethics 61.4%
(Attributes)
2
Build relationships of trust 12.8%
(Attributes)
Manage financial planning needs of 12
4.5%
customers on an ongoing basis (Customer)
Use strategic planning to develop a business 16
3.9%
plan (Business)
Table 5.24 below shows the top four statements in ranking position number 2.
respondents choosing this as the most important statement out of all twenty
statements.
Table 5.25: Statements ranked in position 2
Statement Statement % of
Number Respondents
2
Build relationships of trust 24.6%
(Attributes)
Strong technical knowledge relating to 8
product, legislation and macroeconomic (Skills) 11.7%
factors
An ability to communicate with customers who 7
11.7%
are in different life cycle stages (Skills)
Manage financial planning needs of 12
9.5%
customers on an ongoing basis (Customer)
Table 5.25 below shows the top four statements in ranking position number 3.
respondents choosing this as the most important statement out of all twenty
statements.
Statement Statement % of
Number Respondents
Manage financial planning needs of 12
14.5%
customers on an ongoing basis (Customer)
Strong technical knowledge relating to 8
product, legislation and macroeconomic (Skills) 10.0%
factors
An ability to communicate with customers who 7
7.8%
are in different life cycle stages (Skills)
Manage risk by ensuring compliance 20
6.7%
requirements are adhered to (Business)
regardless of ranking and calculated a percentage. Table 6.26 below shows the
results of this analysis and the three statements which received the highest
overall responses. The result showed that the same statements and ranking
were evident.
Statement Statement % of
Number Respondents
1
High standards of integrity and ethics 70%
(Attributes)
2
Build relationships of trust 37.4%
(Attributes)
Manage financial planning needs of 12
28.5%
customers on an ongoing basis (Customer)
described in the literature review) and poor client perceptions (this related to
Page
DISCUSSION OF RESULTS
This chapter discuss the results of the research using the three research
questions as its major themes. The objective of this chapter is to integrate the
research results and the theory base to establish whether the research
Each question has been examined separately and results and theory which
relate to the research questions have been isolated and discussed. Specific
findings are stated for each of the research questions and the analysis closes
with a discussion as whether or not the research objectives have been met.
6.2 ANALYSIS OF RESEARCH QUESTION 1
for Financial Planners who offer the service of personal financial planning?”
The monthly income (before tax) demographic was used as an indicator of the
The assumption was that higher levels of monthly income (before tax) meant
was not directly supported in the literature review, it was implied in the
literature suggested that success in delivering a service can only come in the
Figure 2.2.
The objective of analysing the highest level of education demographic and its
effect on income was to see if having a higher level of education increased the
in complexity and will require higher levels of sophistication going forward. The
competency and therefore higher levels of trust. Further, the literature describes
that one the top four requirements identified by individuals who wished to make
use of a Financial Planner was “knowledge and expertise”. It is worth noting that
legislation stipulates that a Financial Planner should exercise “due skill” when
legal obligation for education on the Financial Planner and prescribes minimum
levels of education.
The research indicated that 35% of Financial Planners with a Post Graduate
with a Matric. The percentage of Financial Planners earning R50 000+ a month
with a Diploma / Certificate was higher than that of Financial Planners in the
Matric and Degree categories, but lower for Financial planners in the Post
000+ in the Degree category was higher than those in the Matric category. The
results of the income category R10 000 – R19 999 displayed an opposite trend,
with 23% of Financial Planners in the Matric category and 6% in the Post
The research found a direct correlation between the highest level of education
demographic and the monthly income (before tax) demographic. This trend
Demographic
demographic and its effect on income was to see if the number of years as a
Planner.
the customer strategies proposed by the literature is the use of life cycle
Planner should be providing the personal financial planning process over the
extended period of an individual’s life. The number of years as a Financial
individual can use to make a judgement about whether to use the service or not
and gives credence to the capacity that the Financial Planner has to fulfil the
service. Research has established that individuals deem “after sales service” as
The research indicated that 60% of Financial Planners with 25 years+ earned
R10 000 – R19 999 displayed an opposite trend, with 46% of Financial Planners
of Financial Planners earning R10 000 – R19 999 decreased in every category
The objective of analysing the number of existing clients demographic and its
effect on income was to see if the number of existing clients increased the
The theory base makes reference to the “service system model” and the
this model indicates that an individual will interact with other individuals when
using the service as a “direct” interaction and this has either a positive or
negative effect on the system. The number of existing clients also presents
This suggests that existing clients impact the service and implies a link between
generate the required level of income. The most efficient model for a Financial
Planner would be to have the lowest number of clients possible to generate the
The research indicated that 46% of Financial Planners with 600+ clients earned
R50 000+ a month as opposed to 6% of Financial Planners with 0 to 199
clients. The percentage of Financial Planners earning R50 000+ increased in
the categories 200 to 299, 400 to 499 and 500 to 599 clients, but decreased
from 200 to 299 clients to 300 to 399 clients. The results of the income category
R10 000 – R19 999 displayed an opposite trend, with 56% of Financial Planners
in the 1 to 199 client category and 4% in the 600+ category. The percentage of
Financial Planners earning R10 000 – R19 999 decreased in every category
The research found a strong correlation between the number of existing clients
demographic and the monthly income (before tax) demographic. This trend
achieve the same level of income with fewer clients. In the context of practice
Planners felt with the statements. These responses could then be used to
This section examined all the questions as one entity and made no distinctions
derived a list of twenty principles that were grouped into components of practice
customer strategies and business strategies. This process formed the basis of
Section 2 of the survey instrument. It was not assumed that the principles of
provide a credible foundation for this research project and created a framework
instrument.
The research found that the mean score attributed to all statements on
of 0.76. This suggests a high level of agreement from Financial Planners that all
the principles of practice management listed in the survey instrument are
professional service.
The research found that the highest mean score for all statements was given to
Given the stated customer expectations on this issue and the results of this
practice management are having the personal attributes of integrity and trust.
code of conduct refers to acting with care and diligence. At this basic level, a
Financial Planner needs to assess whether they are able to fulfil these
requirements with all existing clients in their practice, and if not, take steps to
rectify this and remain compliant with legislation. Research has shown that
where these needs cannot be met. It is not feasible for a Financial Planner to
meet either the legislative or desired needs of every individual they may
encounter.
The research found that the two statements with the lowest mean scores of
3.07 and 3.85 respectively and standard deviation values greater than 1 were
each segment. In the context of the high average mean score for all statements
This could be attributed to the nature of the population of relevance who are
proposition of the bank, which has relationships with the customer through other
in income. This should not be done at all costs and the focus should rather be
any of the demographic factors were responsible for driving the result. This
analysis was inconclusive and the survey instrument does not appear to provide
The service system model demonstrates that all aspects of the practice are
interrelated. This suggests that if there is any weakness in a part of the system
the overall service experience of the individual will be adversely affected. One of
the components of the practice management service system is the support staff
that may either be visible or not visible to the individual, but have an important
The research found that in the number of direct support staff in your practice
demographic, 84% of all respondents had direct support staff in their practice.
This was a high percentage value and demonstrated that the majority of
recruit, develop, retain and lead support staff” had the third lowest mean score
These results implied that although the majority of Financial Planners use
support staff, both the structures around and attitudes towards support staff
These were identified by picking up key themes in the literature which was
grounded in the service system model. All are interdependent and each one
must be successful in their own right for a practice to deliver the service.
The research found that when the four components’ mean scores were
averaged, customer strategies had the lowest overall mean score of 4.03. The
This result suggests that Financial Planners did not fully understand the
which were convenient and chose to ignore others. The limitation to this
conclusion was that the result for this component was influenced by the aspect
of the financial Planner working for a bank and potentially not having the
freedom to apply all of the customer strategies freely in the context of practice
management as an individual.
6.2.3 Conclusion on Research Question 1
is clear form the overall mean scores that all the principles of practice
management were validated, and further insight was gained into the role of
the most important when offering the service of personal financial planning?”
The objective of this research question was to have the Financial Planner
identify the three practice management principles which were seen to be the
most important. This was a done so that the research project could establish in
management.
The research found that the three selected principles based on a simple vote
were as follows:
already discussed. Statement 12 had a mean score of 4.51 and ranked sixth
overall. However this is the first time statement 12 appears as significant result.
the last step in the personal financial planning process. With out it the personal
financial plan does not remain current with an individuals’ changing personal
and financial goals, the Financial planner does not build a practice and a
commitment to after sale service does not exist. It is an important principle and
The objectives for Research question were met. Three principles of practice
Research Question 3 asked “What are the top two challenges that a Financial
The objective of this research question was to have the Financial Planner
identify the top two challenges facing financial Planner in practice management.
This was qualitative analysis and grouped themes together using a content
analysis.
The results of the research found that the top two challenges were as follows
Compliance
Practice management
The aspects of legislation and its impact on the Financial Planners has required
Financial Planners to change the way in which they operate, a further analysis
showed that Financial Planners who had been in the industry for longer were
more prone to state that compliance was an issue. This would imply that this
legislative requirements.
lacked skills when it came to issue in their practice, or experience high levels of
dissatisfaction with how their practices were running. The latter may be a
reflection of working in the bank, where there are possible constraints placed on
the Financial Planner in the manner in which a clients have to be dealt with.
The objectives of question 2 were met. Two clearly identifiable issues facing
Financial Planners in their practices were articulated and expressed in the result
of the research.
CHAPTER 7
Page
The personal financial planning process, which individuals use to achieve future
financial goals, has generated the need for products and services to assist the
promulgation of legislation which ensures that the Financial Planner acts in the
best interest of individuals and gives the best service to the individual at all
times.
this inconsistency that has motivated this research. The focus of this research is
delivery to the individual and achieve personal financial success. In broad terms
this is known practice management and this research will attempt to develop a
To do this in a meaningful way this research has two structured phases. The
first phase was a theoretical study that provided the basis for the design of a
research instrument. The second phase was an empirical study that was done
on the responses received on the research instrument to establish principles of
practice management.
business strategies. All four components integrate with each other and a
weakness in one will impact on another. The implications for Financial Planners
are that to improve service delivery the four components need to be managed
and developed as a single unit. It also means that existing measuring systems,
into one of the four components. There was high levels of agreement from
Financial Planners that all the identified principles were relevant to a practice
management and not a final list. The implications for a financial planner are that
the range of skills which are required are very broad. To be good in a particular
be a determinant of success.
The single most important practice management principle from the perspective
of both individuals and Financial Planners was identified. This was without
question the need for high levels of integrity, ethics and trust. The implications
for Financial Planners are that no breach of these standards should be tolerated
at any cost. It also brings into question the current recruitment practices of
entities that employ Financial Planners. Most recruitment procedures are based
personal attributes is rarely done, but these attributes together with those
already mentioned were the highest ranked principles in the research results. It
management suggests.
Planner. The research results for two of the demographics, levels of education
correlations. This meant that higher levels of education and increased years as
personal level the case for engagement in ongoing education is clearly made. At
Further, the need to retain Financial Planners in the industry over an extended
clients poses two questions. These are, what is the ideal size for number of
clients per Financial Planner and how does a Financial Planner manage the
client base to an efficient level? These questions require detailed research and
fall outside the scope of this research project. However, t is recommended that
of these questions.
The main contribution of this research was to increase the information available
been undertaken.
the research.
by Financial Planners.
The personal financial planning process has been articulated and placed
in an appropriate context.
management. It is felt that this will link the theory and actual experience
together and provide insight into how effective the theory is.
improved financial success for the Financial Planner. This has not been
tested and empirical research on this subject would help develop the
the understanding of the personal financial planning process and the role of
this field.
REFERENCES
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Press
ANNEXURE A – THE RESEARCH INSTRUMENT
An MBA Research Project Survey
If you are going to submit the survey via e-mail, please remember to save your
changes to the document and forward the e-mail to the given address. This will
ensure that the document is sent as an attachment with the e-mail.
Please indicate your response by making a mark in the space provided in the
appropriate block.
Gender
Male Female
Age
20 – 24 45 – 49
25 – 29 50 – 54
30 – 34 55 – 59
35 – 39 60 – 64
40 – 44 65 +
Please read the statements carefully and then indicate your response to each
statement by circling or marking the relevant number in each row. In cases
where you have no experience of the particular statement, please mark “Not
Applicable” (N/A).
Please write your response in the space provided below each question.
Question 1: Please select from the list of attributes, skills and strategies in
section 2, which in your view are the three most important practice management
strategies and list them below in order of importance?
3
Question 2: What is the biggest challenge you face in your practice today