It's all in the planning

28 July 2011

Now is the time to take the lead on the next stage of developments within the financial planning profession. Having watched the FSA launch the Financial Conduct Authority recently, it was clear where there was work to do. The financial services industry is massive and, as has been proved, it is impossible to please all of the people all of the time.

An example of this is the ongoing review of Aifa. There is more argument about what is not happening rather than constructive debate about common policies to align behind. With IFAs representing the very best and the very worst standards, it is difficult to convey consistent, positive messages to external stakeholders such as consumers, the regulator and Government.

The Institute of Financial Planning believes that segmentation of the market for financial advice is essential to provide clarity and support to consumers. The FSA has made a dog’s dinner of the differentiators, with terms such as independent, restricted, simplified and basic advice not helping consumers. Advisers are starting from the wrong place when considering their regulatory status post-2013. Basing a business around the range of products seems, certainly to those outside of financial services, a ridiculous notion.

Firms should review their client proposition, establishing whether change is required and then set out what is to be provided. This typically begins with a fact-finding meeting with the client. Subsequently a planning meeting, with the client agreeing to meet the fees involved, will lead to the adviser helping the client evaluate their objectives before modelling some scenarios with cash-flow modelling software.

An asset-allocation model would be implemented before a review six-12 months later. Consumers are prepared to pay handsomely for such a service.

Having such a “fiduciary” responsibility to the client could extend to many firms running what is essentially a restricted advice model. Putting the focus on the client and not on the product is the way forward and the vehicle is undoubtedly the financial planning firm.

With the professional communities of financial planner and paraplanner now established, the IFP’s register of financial planning firms will provide further consistency. This register will focus attention on genuine financial planning firms which demonstrate a high level of consistency around practice. It is not about qualifications or competing designations but bringing together the business community to present a clear proposition for the consumer.

The intention is to increase the consumer reach and connection with key stakeholders. A forum of business owners running similar businesses will develop, enabling better debate and negotiating stance with those setting policy. The Accredited Financial Planning Firm register can only help consumers who seek an effective financial planning service, in particular through the complex maze that the FSA has created.

Nick Cann is chief executive of the Institute of Financial Planning

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