There have been several discussions around the theme of the future of financial planning recently. It is a challenge not to let debate about professional bodies, or who owns which exam and what their structure should be, dominate the conversation. These issues have been circulating and rumbling on for many years now and will no doubt continue to do so.
So, I would like to focus on the theme of delivering true financial planning and the regulatory shifts and trends that subtly support this.
The Certified Financial Planner certification has stood the test of time in defining what ‘true financial planning’ is in practice. It is worth remembering that the ethos was based on ensuring clients’ needs were not missed, and placing clients at the centre of any strategies. The process that was ultimately developed was to ensure that all clients received the same high level of care and service.
That ethos has never been more relevant than today!
An emergence of goals-based planning
There has been a natural, organic emergence of goals-based planning in financial planning and wealth management, led by longevity trends, pension freedoms, professionalism in the RDR and transparency of fees.
Changes in the aspirations and risk profiles of clients following the pandemic has meant many clients no longer want merely to review their investment portfolio, but also to talk about their families, friends who they have missed, struggles with online Ocado shops, and how they have purchased another iPad to view their granddaughter’s TikToks.
For many grandparents, who were previously meticulous about estate planning, the focus may now be on enjoying time with their families whilst they are alive. These are the discussions that fill our reviews and strengthen our relationships.
The Regulator is subtly supporting this shift to goals-based financial planning
With the release of the new Consumer Duty FCA consultation paper, it is clear that goals-based financial planning and improving client outcomes is in focus more than ever.
Whilst these new regulations are still at the consultation stage, it is likely that they will be effective within the next 12 months, with the FCA announcing that new rules will be made by 31 July 2022. If you are not familiar with the proposals and would like to read more, then please access the links below for the consultation paper. A link to the FCA webinar on 10 June can be found here FCA Consumer Duty Webinar – 10 June 2021
A useful quote from the FCA webinar summarises the CP21/13 and its aims as follows: “The aim through these proposals is to see healthy competitive and trusted financial services markets where consumers can act confidently and make decisions that are in their best interest, that advance their financial wellbeing and futures.”
As with all new regulation, a common question that arises is how individuals and firms will need to evidence and demonstrate good client outcomes to the regulator. Whilst the FCA will not be prescribing specific metrics, each firm will be required to show that they are meeting the required standards.
Evidence of improving and refining processes will be seen as good practice, as will employee upskilling and incorporating a client-focussed company culture. The FCA is looking for the consumer’s best interest or consumer outcomes to be the new Principle, they are looking for cross rules that include clients’ financial aspirations – this is all the language of the CFP.
So that is where we are today, but what about the big issues of tomorrow?
Here is what I do not think should happen: 'There should only be one professional body'.
The CFP and CII routes ultimately complement each other; CISI’s is holistic and highly practical and the CII offers technical modules in isolation. If one considers that financial planning stems from the marriage of investment management and insurance, is it not right that we have two bodies who are each still part of one of those areas? That seems sensible to me even before we consider the drawbacks of monopolies for any product, service, member, client or consumer offering. Competition, in any sense raises the game; it is healthy.
In my view the biggest problem will be attracting enough diverse talent into the financial planning community – not just to the big firms, but also for the smaller companies. I do reflect on what my view would have been if I had joined Robur Wealth Management as a 23-year-old Thursday-night-out-in-the-City young recruit. At Robur, my principal was a lovely 50-year-old and we worked with a 73-year-old who was the most ferocious pension information chaser I have evet met. A great place to learn, but I suspect I would have missed having a peer to learn with.
That is why programmes created to support small businesses and to help facilitate and encourage new planning communities are critical.
The profession needs to welcome non-advisory information providers such as, for example, Boring Money. These platforms are instrumental in helping us to reach younger consumers and that should be embraced.
In my humble opinion technology will never absorb or replace face-to-face planning, because it misses those small moments: the touch of a partner’s hand on a knee, or the eyes blurring over when you realise they have taken in enough for one meeting. Those small empathetic touches cannot be recognised by a robot!
But technology will transform the way we communicate and deliver planning, influencing such areas as how we choose funds and how far impact investing and climate awareness move into the mainstream. Technology will play a role in greater transparency in fees, with algorithms that quickly compare fee structures between different firms, irrespective of how they are communicated to consumers.
I can see all of that happening, and some of it will be welcomed.
But I will end on one note: the future is bright for financial planning. Most firms I talk to are at client capacity and looking to grow. And, as of course I would say, the CFP is perfectly positioned to support that growth.