Financial planning firms operating in a post-pandemic world face remarkable and challenging economic conditions (Lee et al. 2022). In response, innovations are sought to develop partial components of the operational process using data-driven metrics (Gautam & Bhimavarapu 2022). Process is the primary function of reviewing operations (Bukowski, Motzoi & Meyer 2009). Financial planning firms regularly seek to access and incorporate operational benefits through innovative process-based developments (Gupta, Park & Phaal 2022). Academic inquiry regarding process focuses on how firms can proactively innovate repetitive actions, reduce the external influence and combine defined output using communication tools that create a competitive advantage (Barney 1991; Easingwood & Mahajan 1989; Penrose 1959). Access to financial advice is important as it increases levels of financial literacy, reduces psychological impacts and mediates consumer access to scams (Miller 2022). As barriers to accessing financial advice rise (Hayne 2019; Miller 2022), this research seeks to explore the relationship between firm process and profit in the hope that it may reduce barriers to accessing financial advice.
Providing financial advice is imperative in the highly regulated Australian financial planning sector, as time requirements directly correlate to consumer cost (McInnes 2019; Sharma & Patterson 2000). At present, the accepted process follows a six-step framework approach that, subject to individual interpretation, often results in a lack of definition and process clarity (Financial Planning Association 2019).
The research seeks to introduce a defined input, complete process using a change framework design (Kotter 2012), to explore underlying relationships between process and profit. Historically financial planning firms attribute costs based on the time taken to address individual consumer needs (McInnes 2019). As consumer needs evolve (Lyons & Kass-Hanna 2022), existing processes have become segmented to accommodate introductions and additional regulatory requirements. This has resulted in the unintended design of many smaller disconnected sub-processes (Rezapour et al. 2022). Together, sub-processes eventuate in alignment to produce the desired outcome of providing financial advice; however, sub-processes are difficult to understand (Rosenblum, Weiss & Parush 2003), are difficult to identify progress (Yang 2009) and elongate the financial planning process (Lidia 2014), unintentionally increasing consumer costs (Tharp 2022).
Positioned to address the literature gap, this research explores relationships between process (i.e., the underlying process of providing financial advice in line with predetermined expectations; Chieffe & Rakes 1999; Financial Advice Benchmarking Study 2022; Jarzabkowski & Balogun 2009; McInnes 2019; Miller 2022) and profit (i.e., firm specification of case costs, defined profitability margins and record of task requirements when providing financial advice; Barringer & Bluedorn 1999) while investigating further correlations from process and profit on levels of agency theory (i.e., continuous firm financial relationship through AFSL arrangements regarding ongoing costs required for authorisation to provide financial advice; Dibrell, Craig & Hansen 2011; Eisenhardt 1989) through a work-based assessment of South East Queensland financial planning firms. The research identifies existing firm processes before introducing a specialised complete process using a change framework (Kotter 2012) to facilitate the measurement between process and profit relationships, further recording effects on influential levels of firm agency theory.
We create a set of hypotheses where the presence of a specialised complete process relates to levels of financial planning firms’ process and profit relationships. Three research questions determine this study:
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If the process is predicated on reducing human error, leveraging resources and reducing time to complete tasks, then what role does a specialised complete process play in assisting these efforts?
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Can financial planning firms integrate a specialised complete process and experience profit increases as a result?
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Do increasing profit levels correlate to decreasing effects on firm agency theory?
Existing studies examine the relationships between process and innovation-based process development (Miller & Cardinal 1994; Salomo et al. 2008), between process and profit (Brews & Hunt 1999; Grant 2003; Rudd et al. 2008) and firm process innovations, including further process creation (Barringer & Bluedorn 1999; Zhou & Wu 2010). This research seeks to understand the specific relationships between motivators (Rudd et al. 2008) applied within regional South East Queensland financial planning firms to understand how processes may assist regional challenges in areas of firm shortfalls and reducing barriers to accessing financial advice.
The research offers multiple unique contributions by way of additions to process planning literature to (1) examine the relationship between specialised complete process and resulting profit, (2) examine the relationship between process and profitability and their underlying associations, and (3) aim to understand how the use of specialised complete processes may concurrently increase levels of profit while decreasing effects of agency theory as a result.
Guided by Barringer and Bluedorn (1999), the research synonymously identifies process and profit systems. Though we acknowledge financial planning firms have many existing processes in place, often these fall short of the complete ‘end-to-end’ process consideration, thus impeding the firm’s responsiveness to commercial threats (Ebrahim, Ahmad & Muhamad, 2014; Grant 2003; Jain 2022; Kaneberg, Magnus Jensen & Hetz, 2021; Kukalis 1989). This study explores how the process may facilitate the generation of positive operating conditions for financial benefit. It introduces a designed complete process framework using a change framework theory designed to measure recorded relationships between process and profit within 134 South East Queensland-based financial planning firms. It then applies relationship findings to the context of AFSL agency theory (Eisenhardt 1989), aiming to understand how increasing profit may further assist firm capabilities. It assists with levels of professionalism, seeking to evidence rationale for potential process review and positioned as a catalyst for further discussion of underlying procedural issues.
Literature Review and Hypotheses Development
Relatively small amounts of empirical evidence exist in the area of process within the financial planning field. Adopting a resource-based view (Penrose 1959), firms further develop commercial advantages by leveraging existing assets (Barney 1986, 1991, 2001). This research treats process as a commercial asset due to its significant capabilities to alter outcomes. The research aims to understand how the introduction of a specialised complete process can leverage a competitive advantage in the form of increased profit throughout the process of providing financial advice.
Accepted traditional practice within Australian financial planning revolves around a six-step process positioned to achieve the result of providing financial advice (Knutsen & Cameron 2012). Traditional methods often become segmented due to regulatory introductions, resulting in task duplication, difficulties relating to task ownership and limitations presenting in process knowledge, which can delay task completion (McCoy, Ross & Goetz 2015).
Existing research investigates financial planning processes and decision-making direction in organisations (Delmar & Shane 2003; Eisenhardt & Zbaracki 1992; Mintzberg 2000, Schwenk & Shrader 1993). Relationships between process planning and profit have been found to be both negative (Honig & Karlsson 2004) and positive (Delmar & Shane 2003), with the overwhelming majority demonstrating a positive association when introduced effectively (Cakir & Adiguzel 2022; Castilho & Barakat 2022; Miller & Cardinal 1994; Seeling et al. 2022). Literature shows that process needs to encapsulate the defining, determining and implementing of strategic initiatives to ensure the achievement of expected objectives (Jarzabkowski & Balogun 2009). Literature has focused on ends and means segments of process creation (Brews & Hunt 1999; Titus et al. 2011). Ends focuses on desires to achieve and means reflects the considered process of intention to achieve (Brews & Hunt 1999). Specialised complete process development seeks to include both, further outlining clear objectives, establishing direction, ownership, obligations and clarity, and is designed to formalise future expectations for process direction (García-Bañuelos et al. 2017). Research shows that employees desire consistency between procedural systems and task explanation within the organisational climate to understand duties (Okpara 2002).
To outline process significance, a change framework (Kotter 2012) has been incorporated to explain stage contextualisation for practical application. Imperative supportive inclusions, noted in the field of medicine (Taran et al. 2022), require templated file notes, workflow guidance, specific regulatory adherence and the capability to outline personal direction through self-paced learning that is introduced to build foresight, ensuring stage competency (Hines et al. 2017).
The research develops existing theories, combining means and end with a change framework to evidence the relationships between process and profit by introducing a complete end-to-end process.
Process Limitations And Creation
Processes designed to achieve set objectives have been positively related to firm profit applied in professional fields (Brews & Hunt 1999; Schwenk & Shrader 1993; Tazelaar & Snijders 2013). However, evidence suggests that effectiveness declines when environmental uncertainty increases (Harmon 2019). This poses a significant threat when applied in the financial planning context because of the increasing regulatory burden (Dhama 2022; McInnes 2019), changing economic market conditions (Chepulyanis & Vlasova 2022; Grozdanovska, Bojkovska & Jankulovski 2017) and ongoing disruptive threats financial planning consumers face (Campbell et al. 2020; Sharma & Patterson 1999). Formal process naturally presents inflexibility, making efforts to adapt to change or adopt firm methodology difficult (Mintzberg 2000); this is usually the point of process fracture. Given recent pandemic challenges, firms seek complete process considerations designed to match the changing external environments and provide options for those staff who prefer to maintain working-from-home arrangements (Chong, Huang & Chang 2020). The existing use of sub-process models often fails to achieve desired performance expectations and reduce competitive advantage (Saeidi et al. 2015). Complete processes can increase reliance on default action and develop ethical decisions, making processes used to deploy future resources. Recently, financial planning firms have demonstrated a willingness to deviate from traditional practice to access available opportunities, affording them competitive advantages in pursuing process development (Pratapa, Subramoniam & Gaur 2022).
Grant (2003) refers to firm emergence as the ability to create structured processes while decentralising decision-making capabilities from associated peers. Additionally, sub-process creation contributes to systemic compliance issues and is often responsive (Dustdar, Hoffmann & Van der Aalst 2005) and singular in its application (Mohammad & Nishida 2009).
Hypothesis 1
Specialised complete processes will positively correlate firm profit.
Costs are often influenced by the time taken to provide financial advice (Tharp 2022). Sub-processes increase the time taken to achieve results (Alexander 2018). Complete process use reduces regulatory risk, reduces time to complete tasks and increases profit outcomes in the legal (Ferlie et al. 2005) and medical fields (Taran et al. 2022).
Hypothesis 2
Process and firm profitability are positively associated.
Specialised complete process can integrate design, approach and flexibility (So 2020) to combat turbulent environments. Adaptive approaches to process planning can therefore complement firms’ ability to pivot, changing to adopt future commercial needs. When used objectively, the process can assist in leveraging a unique key resource of preparation. These combinations improve the process’s ability to overcome inertia, combat human error and further explore process development (Islam et al. 2022). Existing literature argues that complete process is associated positively with profit (Grant 2003; Rudd et al. 2008; Saeidi et al. 2015; Wiltbank et al. 2006), but the empirical strength of research findings has been questioned. One reason surrounds the consistency of measuring variables, another identifies the desired method of process at the age of publication and another names economic variables such as subjective individual cost. To limit variables, we specify profit parameters throughout the process of providing financial advice to segmented individuals within a predetermined advice sector over five years. The research includes only fixed fee cost arrangements to measure the time taken to provide advice against the cost of providing advice to identify the median profit margin. This affords effective measurement of present process to profit margins with transferable empirical data to compare results against implications of introduced specialised process design.
Hypothesis 3
Process development through use mediates the relationship between process and profitability.
Process development is a willingness to seek technological developments and improve services in pursuit of commercial advantage (Chepulyanis & Vlasova 2022; Saeidi et al. 2015). This is often ‘perceived as exploring something new that has not existed before’ (Cho & Pucik 2005, p. 556) and thus an imperative ingredient in contributing to seeking advantages in competitive financial planning markets. Information can influence process decisions by understanding customer needs, accessing innovative technologies and identifying future market trends. For these reasons, processes must include future innovative options (Salomo et al. 2008) to extend their lifespan and relativity. Studies have investigated the role of process mediation and found that innovation often mediates relationships between growth and quality (Cho & Pucik 2005), which is an imperative ingredient in financial planning. The current study suggests that increasing the positive relationship between process and profit may mediate the effects of firm agency theory and assist firms to further act in their client’s best interest due to accessing increased benefits through process design.
Agency theory is the financial relationship between a principal and an agent (Eisenhardt 1989). In the field of stockbroking, it presents as a mutually beneficial financial relationship of stock movement (Gedicks 2005), which can often persuade the agent to increase recommendation volumes for financial gain (Oladimeji & Aladejebi 2021). This is further evident in the service fields of real estate (Marsh & Zumpano 1988), banking (Berger & Di Patti 2006) and financial planning (Kingston & Weng 2014), which received harsh criticism from the Hayne Royal Commission (Hayne 2019). Agency theory applied within financial planning is defined as a continuous financial relationship that subordinates associated agents demanding adherence, often influencing agent action (Eisenhardt 1989). The research seeks to understand if increasing profit margins further reduce the effects of agency theory, allowing advisers to adhere to compliance section 961B (Corporations Act 2001).
A tool has been designed for the Australian financial planning field, positioned to further record relationships with agency theory.