Standing out from the crowd is more important than ever in the financial planning profession.
Since the end of August 2012 the Personal Finance Society has seen a 19 per cent increase in the number of chartered financial planners, with an overall total of 3,758 at the end of August 2013. Even more significant is the 25.7 per cent rise in fellowship over the same time, with 1,417 professionals now holding the FPFS designation.
These figures confirm that financial planners are continuing to recognise the importance of demonstrating greater levels of professional commitment to their clients as a way of differentiating themselves from their peers – particularly as the ‘independent’ and ‘restricted’ labels have become so blurred from a consumer perspective.
From the views of advisers obtained at PFS events around the country, it is clear that maintaining independent status is not necessarily as difficult as many industry strategists had first predicted, a view that I have publically shared for some time.
That said, in the FCA’s first thematic review on implementing the RDR, the regulator reported that 30 per cent of firms it looked at and which are holding themselves out as independent and had to be challenged under the rules. It should of course be noted that 70 per cent of firms seem to have met the regulators requirements without challenge.
However, following the publication of initial post-RDR findings, an increasing number of advisers have said they remain open minded but are considering a move to restricted to avoid the risk of future non-compliance; the majority, however, believe they will retain a whole of market proposition.
The consumer benefit of labels is becoming ever more questionable and therefore, as we have seen, financial advisers are increasingly moving towards qualifications and professional development in order to differentiate themselves.
This is because, as we know from other professions such as law and accountancy, chartered is increasingly recognised as a much broader professional standard and trusted by consumers.
Consumer research undertaken by Skandia UK last year found that 86 per cent of those asked found chartered status to be attractive, with 49 per cent considering it extremely attractive. When asked about independent versus restricted, 51 per cent said they would prefer an independent adviser, compared to just 1 per cent who preferred a restricted adviser.
Finally Skandia asked consumers what was more important, independent status or chartered status by asking individuals what they would prefer: a restricted adviser with chartered status or an independent adviser without chartered status. Sixty-seven per cent said they would prefer a restricted adviser with chartered status –illustrating that it is the expertise and experience of the adviser which really matters to consumers, not labels.
Labels were introduced under polarisation when advice propositions were described as either tied or independent, two major regulatory changes later and labels have become too complex to be a consumer benefit.
As more independent advisers consider the move to restricted status due to risk of regulatory non-compliance, chartered and certified financial planner labels will increasingly become the differentiators. For those advisers which have moved to restricted status claim that it has had no negative impact as it is the individual and proposition, not the label, which the client buys.
Keith Richards is chief executive of the Personal Finance Society