The education of financial planners needs a shakeup if claims to professionalism are to have any credibility. Just such a revolution is coming. Simon Hoyle reports.
It should be a matter of grave concern to all professional financial planners that the barriers to entry to the industry remain so low. And it should be of equal concern that financial planning remains so far down the list of career choices for students leaving school and entering the country’s universities.
A glaring hole in the industry’s plans to attain the status of a profession is that there are still individuals in business who – with little more than a four-week crash-course in some very basic competencies – can call themselves “financial planners”. And more terrifyingly, they can find themselves in a position to dispense “advice” to the public.
However, as long as there remains a perception that the barriers to entry to the financial planning industry itself are either very low or non-existent, the struggle will continue to convince the public at large of the virtues and values of good financial planning services.
Phil Butterworth, managing director of the listed DKN Financial Group, describes the current situation as “just ridiculous”.
“We absolutely have to raise the bar, and put in place a much better process of how people get education, before they give any financial advice. The bar is way too low,” he says.
“It’s too easy to get in. Therefore, the public is sitting in front of people who have done a four-week course. That’s just ridiculous.”
But education needs to take place on several levels, simultaneously. Elsewhere in this edition of Professional Planner, the chairman of the Government’s Financial Literacy Council, Paul Clitheroe, explains why basic financial literacy is such a pressing concern, and the role planners can play.
Professional Planner also takes a close look at the shortcomings of RG146, and some suggested improvements to its implementation and enforcement. And we examine why educated clients are also a vital part of the mix.
The FPA has been attempting to make clear in the public’s mind the difference between “professional” financial planners (which has been interpreted as shorthand for “FPA members”) and the broader population of financial product advisers – who may hold compliance with RG146 as their sole “qualification”.
It’s done this over the past 10 years or so largely by increasing the demands it places on its own members – both in terms of their professional obligations, and standards of education.
The FPA’s success has been mixed. The public doesn’t seem to be drawing any meaningful distinction between “professional planners” and the rest, just yet; but the FPA’s own members are increasingly moaning about the association making life difficult for them to work as financial planners – so to that extent, at least, it has worked.
Professional Planner understands the FPA is finalising the release of a new education strategy, which will be formally released at the national conference on the Gold Coast in late November. It is likely to implement many of the ideas and proposals contained in last year’s white paper – specifically, focusing on tertiary degree requirements and further distancing the association and its members from RG146.
Any change to the FPA’s approach to education, particularly developing degree courses through universities, will very likely have flow-on effects for the Certified Financial Planner (CFP) designation, and may touch on issues around how closely the CFP is linked to membership of the FPA.
Raising educational standards seems to have solid support within the industry. Research conducted exclusively for Professional Planner by the market research firm Tepana Associates, shows that clearly.
What’s likely to cause debate – and this is the discussion that may kick-off during the upcoming FPA conference – is exactly how the requirements should be determined, and by whom; who they should apply to; and from when.
In this regard, the paper on the issue of education produced by the FPA a year ago may be instructive.
It sets out six “education expectations” (see ‘The FPA Expects’ below), and it is understood that the final form of the educational revolution about to be unveiled kept many of the original principles more or less intact through the consultation process. No doubt there will be changes to the timing from that set out a year ago, but if the objectives remain the same.
Key findings of the Tepana Associates research
Is the FPA’s 2009 policy on continuing professional development (CPD) supportive in setting an appropriate framework for planners’ maintenance and development of relevant knowledge and skills?
KATHLEEN TEPANA: The difference between FPA members and non-members was significant.
Twice as many FPA members (62 per cent versus 32 per cent) agree that the FPA’s new 2009 policy on continuing professional development (CPD) is supportive in setting an appropriate framework for planner’s maintenance and development of relevant knowledge and skills.
More than half the non-member respondents were unaware of the changes, or didn’t know if they were appropriate.
If you agree with the FPA’s plan to require a tertiary degree for all new planners, just briefly why do you agree?
TEPANA: Many advisers want their industry to be seen as professional; they want the bar to be raised; and they want to be considered along the lines of an accountant or a lawyer.
A number of advisers believe a degree requirement should have been a prerequisite to financial planning years ago, and that the industry bodies have been slow to recognise the importance of this initiative.
A lot of advisers believe a relevant degree qualification is a necessary prerequisite for the industry because there is the potential for significant harm to the financial well-being of investors as long as the industry remains product- instead of profession-driven.
A degree qualification was seen to be important if the industry is to be considered a true profession and move away from a sales-driven image. A degree should mean that advisers have improved analytical skills, are more capable of deeper analysis of investments and some advisers believe it will enhance professional manners and should apply to all planners not just new planners.
RESPONDENTS SAID:
“If clients knew how little educated Advisers legally needed to be to give advice they would be horrified. It is time to bite the bullet and be serious about education in our profession.”
“Creating barriers to entry, specifically educational barriers, remove the ease at which cowboys can enter the industry. Notwithstanding this
comment, a higher level of education will flow into higher levels of advice.”
“But a degree does not create a professional, removal of the financial institutions vested interest in the FPA is the only way to get to some basis on professional approach versus the chase of self-interest and profit.”
“So the public knows that the planner has a high standard minimum education and has had enough time to be exposed to all the facets of financial planning. Every other “profession” has a degree requirement.”
“Some financial planners, including me, are keen to be recognised as the professionals we are, rather than being classed with real estate agents. To manifest our professionalism, we must have professional qualifications, like engineers.”
“FPA still needs to raise the bar towards professionalism and get rid of their life agent policy flogging (high hidden commissions) legacy.”
“I think more on the job training needs to be introduced I am not sure if it needs to be a degree, or if the advanced diploma coupled with more on the job training would suffice.”
“To lift the professionalism and public perception of the value of competent advisers. I want to see the day where financial planners are sitting at boardroom tables on par with lawyers and accountants. To do that tertiary study capability is a must.”
