What is the value of professionalism for financial planners?

Professional status is conferred by the community in which one operates. Steve Helmich explains what it means to be a professional planner.

The financial planning industry is growing up.

Driven by poor consumer perceptions of the relevance and quality of financial advice, we’ve seen some big shifts from regulators, industry bodies, licensees and education institutions.

But the biggest changes are being made from within – driven by financial planners wanting to be seen as true professionals.

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We’re now on the edge of a golden age as financial planning works towards achieving professional recognition.

At the centre of this push is a drive to do what’s best for the customer, who will be the ultimate beneficiary of improved quality and access to financial advice.

But to achieve professional status, all financial planners must be focused on this evolution and not the past.

Some great strides have already been made by leading financial planners, but what is needed is a commitment to professionalism from the entire industry.

So what does it mean to be a profession? And what’s the benefit to planners and, ultimately, to customers?

Customer at the centre

Somewhere out there right now, there’s a retiree casting their fishing line, a widow in a house she owns, and children getting a quality education.

Behind these people is a financial planner with their best interests, their hopes and dreams, at heart.

Putting the client’s interests first is at the centre of a profession. After all, professional status is not something a planner can confer on himself or herself – it is a privileged status conferred by the community in which you operate.

While the quest to increase the professionalism of financial planners has been brought to the fore by the Future of Financial Advice (FOFA) reforms, particularly the best interest duty, putting the customer in the centre of financial advice isn’t new to most financial planners.

After all, financial planning has always been something that has helped people achieve their goals and dreams.

Just as a lawyer assesses a problem and helps find a legal solution, or a doctor diagnoses a health issue and recommends a treatment plan, so too does a financial planner assess a client’s financial situation and set in place a plan to help that client have the future they want.

But while financial planners perform admirable work, fewer than 40 per cent of the Australian adult population have ever used one1.

The Access to Financial Advice in Australia report highlights that among some consumers, notably those who have never used a financial planner or those who have had a negative experience with one, one of the main reasons for not seeking advice is the lack of trust they have in financial planners.

This mistrust has been exacerbated by the global financial crisis.

The effects on the majority of Australians not seeking financial advice include a chronic underinsurance issue. The Lifewise/NATSEM Underinsurance Report found that 95 per cent of Australian families do not have adequate cover2.

Many planners would agree that any measures to improve the professionalism of financial planners, including the broad aims of FOFA, will go some way to engage more people to access financial advice.

What does it mean to be a professional?

So while many financial planners have indentified the need to enhance the professionalism of financial planning – and there are recognised benefits for Australian consumers in receiving professional financial advice – what does it really mean to be a professional?

Professions Australia’s definition is as follows: 

"A profession is a disciplined group of individuals who adhere to ethical standards and hold themselves out as, and are accepted by the public as possessing, special knowledge and skills in a widely recognised body of learning derived from research, education and training at a high level, and who are prepared to apply this knowledge and exercise these skills in the interest of others."

Professions Australia also acknowledges that professionalism now covers many more disciplines than the original professions of law, medicine and divinity.

But it needs to be about the way financial planners do things, not just who they are.

That is, to be truly successful in this quest, professional standards need to be engrained in the way planners work.

This requires a strong commitment and willingness to change.

So how do financial planners ensure they are acting as true professionals? Let’s discuss a few key areas below.

Raising the educational bar

One of the hallmarks of professionalism is a commitment to ongoing learning. Just as a lawyer or dentist needs to commit to constant on-the-job education and technical training, so too does a financial planner need to begin their career knowing that they will need to top up their knowledge and broaden their skill-set continuously.

The customer of the future will be better educated and empowered, so they will look for professionals with internationally recognised credentials.

For financial planners, these are Certified Financial Planner (CFP) professionals.

Australia is well positioned in this regard, with 5,544 CFPs according to the latest figures from the Financial Planning Standards Board.

I would encourage all financial planners who are not CFP professionals to make it their goal to secure this internationally recognised distinction – do it for yourself but most importantly do it for your clients.

Part of the journey towards professionalism for financial planning is to ensure a high-entry benchmark.

When you go to a doctor or a lawyer, for example, you expect they will have a university degree. The same will eventually be the case for financial planning.

This will become the expectation new clients have of their planner. And if we want financial planners to sit alongside respected professions like doctors, lawyers and accountants – this is a positive step.

Ethics

A guiding principle of being a good adviser – a good professional – is to act in the best interests of your client. It is something that is intrinsic to any good financial planner – they always put their client’s interests first.

Just as a doctor seeks to provide the right diagnosis or treatment based on the evidence at hand, so too does a financial planner provide financial advice with an evidence-based approach. 

But, more than this, a minimum requirement is for financial planners to be a member of a professional association with a code of conduct. This is something that is valued by their clients.

Service to the community is also important, either contributing to a charitable organisation like the Future2 Foundation or doing pro bono work. It provides an opportunity for many planners to service a part of the community they don’t normally deal with: disadvantaged Australians.

Our experience has shown that for a structured pro bono program to be successful, a good partner is critical, especially one with a similar vision.

AMP has partnered with the Cancer Council to provide pro bono financial planning services to cancer patients.

The most profound outcome we have found through planner feedback is that pro bono work really drives home the value of advice to new planners and renews this feeling in planners who have been practising for a long time.

Win-win

Working towards professionalism is a win-win for everyone. It greatly reduces the risk of a few bad apples destroying confidence in our industry and ensures customers receive the best quality financial advice, suited to their specific circumstances, when they seek the services of a financial planner.

This is a great thing for financial planning and those currently in or looking to enter the profession.

Clients and potential clients will have increased confidence in financial planners who rise to the challenge of meeting new professional standards.

They will know that the planners they’re dealing with are held to the highest standards and will entrust them with their future financial wellbeing.

At AMP, our hope is that the huge shifts being made by the collective financial planning community will contribute to bringing more advice to more Australians – that is a good thing for individuals but also a great thing for Australia.

¹Roy Morgan Research, 2009 Single Source database, Roy Morgan Research, Melbourne, 2009 (unpublished).

²Lifewise/NATSEM Underinsurance Report, February 2010.

Steve Helmich is the director of financial planning, advice and services at AMP and the chair elect of the Financial Planning Standards Board.