by Nick Cann ACIB, CFP, Chief Executive, Institute of Financial Planning
 

Nick Cann, Chief Executive, Institute of Financial Planning

In a rapidly changing financial services world, the repolarised market will see advisers taking the opportunity to establish themselves as professional financial planners who will almost certainly be moving towards being fee-based. They will offer top-level service and advice to a range of clients who will happily pay in one form or another for the advice that they receive. These clients will be profitable and reliant on the planner and their business for an evolving strategy that will help them achieve their objectives. These planners will be part of small or large businesses that are building up real value for would be purchasers of the future. These professionals will behave differently from many of today's advisers, they will be better qualified and many will be Certified Financial Planner™ licence holders. Members of the public will seek out these advisers because of their proposition and the way that they deal with the client relationship. The planner of the future will also have robust back and front office technology to support and develop the business.

Quite clearly financial planning should form the backbone of all advisers' training. Let us first concern ourselves with what financial planning is. Many call themselves financial planners and do no such thing. Much of what is referred to is establishing a process that, in real terms, asks advisers to change their focus and approach towards their clients. It is moving from a sales culture to an advice and service culture but this is ultimately a better place to be. It is what the consumer needs so that confidence can be built in the adviser sector. Demand for good quality, well-qualified advisers is increasing. Clients need help with their affairs, particularly where they have been poorly advised or suffered large losses with their portfolios. Consumers want financial planning and actually need it. Advisory firms who are a little more progressive are also searching for well-qualified, good quality advisers.

Financial Planning is a professional service for individuals, their families and their businesses, who need objective assistance in organising their financial affairs to more readily achieve their lifestyle and financial goals.

The client therefore has to come first. The fundamentals of financial planning revolve around the six-stage process, which is as follows:

1. Identify the goals and objectives of the client.
2. Collect and assess all the relevant personal and financial data.
3. Process and analyse the information.
4. Produce a written plan.
5. Implement the plan.
6. Review progress and modify the plan, as necessary, to take account of changed circumstances.

Following this process might mean that no product is required or sold. However, if this process was followed more rigidly there would undoubtedly be less complaints and potential for mis-selling. A financial plan may be complex or relatively simple. It should, however, always result from having followed a process.

Financial Planning is not about investment advice or specific products. This is all possibly part of the output but advising on investments and investment products is not for the faint hearted. Far better that a strategy can be formed to work towards an agreed goal. If an adviser is trying to pick best performing funds all the time, it becomes a high-risk strategy both for the adviser and potentially the client. If investment management is outside your skill base, why would you want the responsibility of delivering investment returns?

Planners across the globe are benefiting because of the process that they follow. It is vitally important to know what you are planning for and what level of risk the client can and needs to tolerate. It is also important to deal with the correct asset allocation to achieve the stated objectives. Client relationships remain positive because in most cases the client has been educated about the process that is being followed and understands all eventualities.

As careers develop, individuals will acquire extra knowledge and skills via professional examination and other training. This will lead to better clients. At a certain stage in an adviser's development, they have to consider what route will actually make them better at their job and give them a particular direction. The current route to the Certified Financial Planner™ licence puts somebody on course to join a rapidly increasing number of professionals around the world. There are currently over 70,000 CFP licensees in 18 countries around the world. Having the AFPC or equivalent provides the technical knowledge required along with 3 years related experience, signing up to the Institute's code of ethics and a minimum of 20 hours relevant CPD each year. The Institute tests the practical application of this knowledge via a case study.

The power of financial planning comes from the control that can be had over the client. Working with them establishes a framework that requires action by both parties. Reviews are built in and this makes it difficult for the client to leave. The plan that the client takes away reflects the input that they have given so for as long as they need that assistance to achieve their objectives, they will happily pay for it.

About Nick

Nick Cann is Chief Executive of the Institute of Financial Planning and has now been in the role for 4 years. He also sits as a delegate on the International CFP Council and is Chairman of the European CFP Council and the International Marketing and Communications Committee.