If we think about competency in financial advice as simply a knowledge base learnt during tertiary education, then some observers might consider an adviser to be an amateur investment broker, accountant, and insurance sales person rolled into one, easily trained using snippets from various commerce degree curriculums.
But if we think about competency in financial advice as being embodied by an understanding of many core concepts and the application of these as skills, attitudes and behaviours, including the ability to create relationships and client-centric advice, services, teams and businesses, and to drive quality improvements, then financial advice can be a unique and cohesive standalone discipline in its own right.
Research has led to a new framework that casts financial advice as exactly that.
The Financial Advice Competency Framework: an industry consensus
Over the last year, the Beddoes Institute, the Association of Financial Advisers, Asteron Life and Kaplan Professional have been working to capture a consensus view from a wide range of stakeholders on the knowledge, skills and abilities required by competent and professional financial advisers. To date, the project has involved hundreds of participants, including consumers, advisers, regulators, academics, and industry and professional association members.
Rather than cataloguing competencies in existing curriculums, the project started with a blank canvas to ensure that there was space in the framework to include previously unthought-of competencies – skills and abilities that participants felt newly trained advisers should have in addition to the competencies that advisers are already being taught. It was an opportunity to re-imagine and re-engineer adviser education.
The Financial Advice Competency Framework was designed collaboratively, using the Delphi process, which develops a census by facilitating structured dialogue among industry stakeholders.
The competencies measured were constructed basd on in-depth interviews and online voting from many sector representatives, about understanding the knowledge, skills, attitudes and behaviours required to deliver quality financial advice to consumers.
Structured qualitative interviews with advisers, academics, consumers, regulators, licensees, associations and other stakeholders defined current and future competency needs and an analysis of current frameworks identified gaps and issues with existing checklists of adviser competencies.
In addition to the votes, more than 1600 written comments were received by the investigators and these have informed and shaped the new framework.
The interview data, along with financial advice competency literature, was used to draft the competency framework and rounds of feedback and voting by an expert online panel of more than 500 stakeholders resulted in 36 competency statements achieving greater than 70 per cent consensus.
The 36 competencies have been grouped into seven pillars, five of which are applicable to advisers active in the management of clients, and two ‘managerial pillars’ applicable to advisers who choose to manage staff and practices.
While technical competencies are considered core to the successful performance of advisers, the new framework includes 30 additional competencies that were put forward and approved by the online panel.
Following this, the Harvard proficiency scale was adapted to gauge the proficiency expected from graduates, trainees at the end of their professional year, and advisers with up to 10 years’ working experience.
It’s a big job
To date, this research has shown the financial advice profession requires a large and complex suite of concepts, skills, attitudes and behaviours. So large that some advisers choose to master a portion of the full discipline and limit their technical service offerings accordingly.
The expert online panel felt that advisers should not give advice outside of their area of expertise and that it was in the clients’ best interests for advisers to refer them to legal and accounting professionals, or other advisers with specialist skills, from time to time.
The panel also identified that some advisers may choose a role in which not all competencies in the new framework are required. They may choose a focused or more restricted practice (for example,
as a specialist risk adviser), be hired into a salaried role with a well-defined and specialist function,
or work in a niche practice.
A number of advisers may accept responsibility for managing teams and businesses and add managerial skills to their role as an adviser, and some may even choose to work in a role in which the managerial responsibilities largely replace those of being a client-facing financial advice practitioner.
How long does it take to become proficient?
The research has now shown that it takes several years to become proficient in many of these competencies, and even longer to become an expert. As a result, most of this learning, growth and development will occur while working as an adviser.
Unsurprisingly, managerial competencies take the longest to become proficient at while, surprisingly, some technical competencies are acquired quickly. The research has also highlighted the challenge of acquiring what some may call soft skills.
The impact on consumers
Both the breadth of the discipline and the time it takes to become proficient are poorly understood outside the financial services sector. If consumers were to appreciate the extent of the knowledge base, skill, and ability an adviser requires to provide quality financial advice, they might respect financial advisers as much as other professionals with long training times and higher qualifications.
A widespread awareness by consumers of the extent of a competent financial adviser’s expertise would also go a long way to elevating consumers’ trust in the sector.
Many in the online panel affirmed the necessity of tertiary education and a degree. However, they also attested to the need for continuing education within the workplace to acquire the skills and abilities necessary for a client-centred practice.
As the industry reaches an inflection point in defining and mandating the minimum training and qualifications required by financial advisers, there has been concern that interest groups within the sector and associations have sought to lower the bar to entering financial advice; instead, through the participation of consumers and a cross-sector panel in an ongoing, iterative and reflective dialogue, this research now sets the bar even higher.
This is important because it reflects what experienced advisers, consumers and other industry stakeholders believe is necessary to regain the confidence of consumers and ensure the successful delivery of quality advice.
This research acknowledges other frameworks and provides a pragmatic and fresh approach to understanding the competencies required to be a financial adviser. It provides new subject matter for educators to consider when developing their curriculums, and competency areas that may better prepare trainee advisers for their professional year.
The research acknowledges the need advisers have for tertiary education but also shows that several years of practical experience in the workplace are needed to acquire the necessary core skills.
Furthermore, this research highlights the value that experienced advisers bring to clients and trainee advisers. It describes where trainees fresh out of university are in their journey to becoming proficient in providing quality financial advice and draws a point on the horizon at which advisers might confidently be considered proficient.
The Beddoes Institute started this research project five years ago by asking advised clients for their perspective on the performance of the advice sector. In completing the Financial Advice Competency Framework, we’ve asked advisers and other industry stakeholders what abilities advisers need to have to deliver quality advice. Researchers have listened to advisers describe the complexity of the role and outline the oft-forgotten part of
it – developing relationships, managing clients and using finely honed interpersonal skills.
As part of this ongoing dialogue, the research team has had the pleasure of watching experienced advisers reconnect with the reasons they became advisers in the first place.
The Financial Advice Competency Framework will be released at the Association of Financial Advisers conference in October.