Will the real financial planner please stand up?

The international Financial Planning Standards Board (FPSB) believes it’s time for the use of the title ‘financial planner’ to be restricted and protected by law or regulation.

The FPSB wants to see financial planning recognised as a distinct professional practice, “clearly distinguished from product-related advice”. It wants the term ‘financial planner’ restricted to those who are held to a fiduciary standard under law or regulation, are subject to the oversight of a professional financial planning body and are subject to “the law or regulations related to the practice of a profession”.

It also wants to see related titles, such as ‘financial adviser’, ‘financial consultant’, ‘financial counsellor’ and ‘life planner’, caught under the same rules in order to avoid the ability of advisers to ‘self-select’ the standard of care given to consumers.

The FPSB warns that “without legislation that clearly defines who is appropriately qualified to hold themselves out as financial planners, advisers may seek to avoid the fiduciary standard of care by describing themselves with a title that requires a lower standard of care or by limiting the duties owed to clients through contract”.

According the FPSB, Malaysia, New Zealand and the Canadian province of Quebec are the only regions to restrict the use of the term financial planner.

“No one can say for sure how many people worldwide hold themselves out as financial planners, but the FPSB is aware of many who hold no formal training or qualifications and do not engage in financial planning with clients.”

“In most parts of the world, people can hold themselves out as financial planners without having to meet any standards or achieve any special qualification to do so. The result for consumers is, at best, confusion and, at worst, bad advice that can damage or destroy the ability of individuals and households to secure their future financial wellbeing.”

In its white paper titled ‘Regulation and oversight of the financial planning profession’, the FPSB also traverses the distinction between product sales and advice in the determination of a profession.

The FPSB states that while financial planners “frequently offer” product-related advice as part of the financial planning process, it sees the “process of financial planning” as distinct from product-related advice and services. However, most countries “do not regulate financial planners as financial planners per se”, but on their “ability to advise and sell various products” or within the framework of a financial services firm-licensing scheme.

The board acknowledges that while professions such as medicine, law and accounting have created a clear distinction between advice and product recommendations, “financial planning is still emerging as a profession within the context of a larger financial services system that is driven mainly by product sales”.