The defining dozen: a planner’s fundamental skills

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November 10, 2017

A dozen key financial planning competencies have emerged as the skills the industry most strongly agrees all financial planners must master, according to the largest and most comprehensive assessment of the industry’s competency framework.

The analysis, Financial Advice Competency Framework – An Industry Consensus, published by the Beddoes Institute in conjunction with the Association of Financial Advisers (AFA), Asteron Life and Kaplan Professional, outlines a set of competencies determined by the opinions and views of the industry.

It sets out seven knowledge domains that the industry itself agrees comprise competency in financial planning: technical services, professionalism, client focus, self-development, connecting with people, business operations, and strategy and leadership.

Within those seven domains, the analysis identified 36 separate skills that are agreed upon, to a greater or lesser degree, as integral to financial planner competency. But 12 of the skills – or competencies – achieved “unanimous” agreement – defined as having a so-called “consensus rating” (CR) of 0.17 or more.

Other competencies, such as strategic and business management, marketing and developing talent are also agreed upon as important, but less so, and are less specific to financial planning.

Arranged according to the consensus rating, the Beddoes analysis illustrates the skills the industry itself most strongly agrees are important. It should be noted that the analysis does not purport to show which competencies are most important, just how strongly the industry believes a particular competency is important. However, it is arguably this mix of 12 competencies (see box) that defines financial planning as a profession in its own right, separate and distinct from other finance-based disciplines, including accounting. They are also the skills that, when mastered, define an individual as a financial planner.

They are dominated by technical skills, but also include competencies relating to professionalism, client-focus, self-development and connecting with people.

“These are [competencies] that are now top-of-mind” says Beddoes director of research and development, Adam Tucker.

“They are commonly agreed upon,” Tucker says. “And these are some of the things we think of as being critical to the definition of financial advice, and consequently for the training of financial advisers as well.”

Tucker says some of the top 12 competencies are to be expected, such as having a grasp of the financial planning process, being able to assess and meet insurance needs, and being able to develop retirement and estate planning strategies.

But some are less intuitive, he says.

“Five years ago, we might have unanimously agreed it was technical skill [that defines a financial planner] but now we see that common ground expanding into some of these other areas that capture the articulation of what financial advice is today,” he explains.

Tucker says trust is a competency “we may not have thought about or articulated…five years ago, but we now believe it is [core].

“Professionalism is now moving centre-stage. A more robust and critical understanding of trust is moving centre-stage. And there is an appreciation that something we might have thought of as esoteric [is moving centre-stage], like judgement, and having good judgement, and the idea that we might need to teach how to have good judgement, to define what good judgement is, to track and monitor good judgement and to value good judgement.”

Tucker says the level of agreement on the professional competencies of financial planners is “pretty exciting”.

“When we’re talking centre stage, we’re talking unanimous [agreement],” he says.

“I think agreement was 92 per cent and above – in a group of 10 people you wouldn’t find one person who disagrees. You’d have to get 20 people in a room to find one person who disagrees. And that is a pretty high watermark for what we’re defining as centre-stage.”

 

The 12 skills that make a financial planner

Competencies that achieved a consensus rating (CR) of 0.17 or higher*

  1. Competency: Financial planning process (CR: 0.50)
    Domain: Technical skills

Being able to critically apply the financial planning process and create solutions tailored to client’s needs and circumstances including determining the client’s needs and goals, preparing, presenting and implementing a Statement of Advice, as well as monitoring and reviewing the plan over time.

2. Competency: Professional and ethical conduct (CR: 0.44)
Domain: Professionalism

Adhering to relevant codes of professional conduct. They must uphold professional ethics and values and understand, and be able to implement, the relevant ethical Code of Ethics relating to their professional conduct.

3. Competency: Client needs (CR: 0.43)
Domain: Client focus

Being able to correctly identify a client’s needs by being present and flexible when listening to the client’s concerns, goals, values and beliefs, helping them to articulate their needs. This may involve deconstructing a complex situation, uncovering and anticipating needs through extensive questioning, active listening, and testing ideas through the presentation of easily understood scenarios.

4. Competency: Insurance (CR: 0.41)
Domain: Technical skills

Being able to analyse their client’s needs in relation to insurance, apply the principles of risk management, understand the types of insurance and know how to evaluate insurance products. This also includes the requirements for clear documentation and disclosure in relation to insurance, the implications of taxation on premiums and benefits as well as an understanding of personal insurance (life, income protection, and health), general and compulsory insurance products and the management of claims.

5. Competency: Cash flow management (CR: 0.37)
Domain: Technical skills

Being able to manage cash flow including budgeting, securing and managing credit and understanding the impact on social security and government benefits – for example, superannuation

6. Competency: Regulations and compliance (CR: 0.35)
Domain: Professionalism

Understanding the importance of compliance with legislation and regulations and ability to be compliant throughout the advice process and in all interactions. Specifically it involves the obligation of disclosure to clients, the use of clear documentation (including the SoA), and an understanding of the regulations in relation to taxation, superannuation, investment and insurance.

7. Competency: Client management (CR: 0.32)
Domain: Client focus

Understanding the importance of maintaining a client-centric approach to the delivery of financial advice services including always acting in the client’s best interest, clearly explaining the services and the remuneration to be provided, identifying conflicts of interest and openly disclosing them to clients and not permitting these to influence any decision or action.

8. Competency: Trust (CR: 0.31)
Domain: Connecting with people

Understanding the role of trust within their client and professional relationships including understanding what trust is, why it is important and how it can be managed. Advisers must understand the impact on trust of integrity, credibility, caring, client service and the business model used by the financial adviser.

9. Competency:  Judgement (CR: 0.30)
Domain: Self-development

Demonstrating sound judgement when applying the discipline of financial advice to each client’s situation.

10. Competency:  Investment (CR: 0.22)
Domain: Technical skills

Investment: being able to critically evaluate investment decisions including measuring risk tolerance, understanding the psychology relating to investing
and the cost of investment. This also includes understanding the principles of portfolio construction and asset allocation, gearing, diversification, managed investment, securities, derivatives, shares, real estate, cash, foreign exchange, and international investments

11. Competency: Retirement and estate planning (CR: 0.21)
Domain: Technical skills

Being able to evaluate retirement and estate planning practices including superannuation structures, taxation and investment strategy, wills, trusts and powers of attorney, administration of an estate, business succession, asset protection, SMSF, taxation implications, superannuation and death benefits

12. Competency: Personal values (CR: 0.17)
Domain: Self development

Understanding the role of personal values and personal conduct in the provision of financial advice including showing genuine care
for each client’s welfare and future, demonstrating personal integrity, honesty, empathy, respect, maintaining confidentiality, keeping promises and acting proactively.

* The consensus rating (CR) is a standardised scale of expert panel approval between -0.5 and +0.5, enabling easier comparison of the degree of approval among competency statements.

Source: Financial Advice Competency Framework – An Industry Consensus, Beddoes Institute, AFA, Asteron, Kaplan Professional

 


TOPICS:  Adam TuckerBeddoes InstitutecompetenciescompetencyFinancial Advice Competency Framework – An Industry Consensus