Now the Institute of Financial Planning has been merged into the Chartered Institute for Securities and Investment, most financial planners are getting used to the new norm. The CISI is a very different beast to the good old IFP. Not necessarily better or worse, just different. And that takes some getting used to.
One issue that has been causing a bit of unease since the merger is certifications. Certified Financial Planners can now add the title Chartered Wealth Manager to their alphabet soup of designations simply by undertaking the ‘Integrity Matters’ ethics exam and paying an admin fee of £30 plus VAT.
As someone who flunked the CWM exam a few years ago, I am not complaining. But the issue some commentators have raised is that the CFP is a QCF Level 6 qualification, while the CWM is Level 7.
So are the two really comparable? Much like the organisations that created them, CFP and CWM are different beasts. Again, one is not necessarily better than the other – they are just different.
The CFP is assessed by way of a case study, after passing an exam that tests knowledge of investment, protection, pensions, tax and general financial planning. Candidates are expected to prepare a financial plan, designed to test the application of their knowledge in these key domains, and demonstrate how they might present the plan to a client in a way that is meaningful.
The CWM, on the other hand, is assessed by three exams, covering financial markets, portfolio construction and applied wealth management. Put simply, the CFP is broader as it covers key areas of personal finance, while the CWM focuses on investments alone, albeit requiring a deeper knowledge of financial markets and portfolio construction.
This begs the question: what is wealth management in the true sense of the term? Is it the narrow focus on investment management or does it require a much broader range of skills in order to manage not only a client’s investment portfolio but their retirement, tax and estate planning as well?
Portfolio managers have hijacked the title ‘wealth manager’ for far too long. In reality, people’s wealth extends beyond their investment portfolios and, as such, effective wealth management requires expertise in other domains not covered by the current CWM exams.
However, one might argue that investment content in the CFP model could be more in-depth, and CFP holders should have to undertake an exam on portfolio construction before being able to use the CWM designation.
On this point, though, it is important to bear in mind many CFP holders would have already completed hundreds of CPD hours on investment markets and portfolio construction, and many will also hold other designations, such as the Investment Management Certificate.
What the CISI merger has done is create two different routes to gaining the CWM designation: one with a narrow but deeper focus on investment and the other with a wider coverage of key areas including pensions and tax planning.
I guess it is up to clients to choose what they prefer.
Abraham Okusanya is founder and director of Finalytiq