The Future of Financial Planning

Future of Financial Planning Gerhardt Meyer, CFP ® Phil Billingham, CFP ® Wessel Oosthuizen, CFP ® What we will talk about… real quick Stuff I told you last time… Was I right ? New regulatory developments… Around the world and back home… Some of the themes from RDR and FOFA: •No more commission on investment business •Clients and planners to agree on fees for clearly defined services •Clients to be able to stop paying fees if they aren’t happy with service delivery so… … was I right last year…? Indications I might not be wrong… DRAFT Information Letter re Binder Regulations Ongoing TCF developments New stuff coming from down under: •Proposed a definition for “financial planner” or “financial advisor” • May not provide financial services or have someone this on your behalf and use “restricted words” • Unless: you have a licence to give personal financial advice in respect of certain product categories •National Entrance Exam •Legislation to govern tax advice and a new regulator in this space •Accountants now need a licence to give financial planning advice (from July) BIG NEWS! • Canada – consulting public and industry on: • should fiduciary standard apply to all? • mutual fund fees too high? ban commission? • Singapore – various things being considered: • raising standards • raising CAR • India – new regulations for “investment advisors” • define investment advice vs sales function • CAR now required for investment advisors • FPSB RAP met in Washington during April • Some key things: – Regulator helps with move from short to long(er) term client relationship – Professional bodies help with move from caveat emptor to trusted advisor – Compensation principles: • should not influence product • should not influence advice • client and planner agree on scope of services and compensation for services which can be reviewed by either party at a later date • access to advice for all • compensation model should support provision of professional advice THE EGG PRINCIPLE Historic value Dietary value The value of an egg Esthetic value Commercial value THE EGG PRINCIPLE Historical What is the financial planner value proposition? Current Future Historical • Global CFP certification program developed from U.S model • Job analyses leading to “topic lists” • Examination syllabus based exclusively on topic lists • Job tasks only used for weighting topics on examination Historical – Weaknesses • Students: “Why I have to know that” • CFP certificants: “Getting the certification was not a demonstration of my ability to perform financial planning” • Employers: “I hire a CFP certificant, who knows a lot, but we still have to teach him how to be a planner” • Public: “How I know exactly what a CFP professional can for me?” • Internationally: “CFP certification in South Africa doesn’t mean the same as CFP certification in China” Historical Structure Client Current - Global Standards • Define the practice of financial planning • Distinction between financial planning professionals and others • Focus on competent practice How it All Fits Together FPSB Global Competency Profile Exam Education Experience FP Process (Six Steps) Ethical Principles Inputs Standards of Competence Standards of Practice Standards of Ethical Behaviour Outputs Professional Financial Planning Standards Framework Competency Standards Competency Profile Professional Skills Technical Knowledge Current Structure Client Client ASSESSMENT Education Body of Knowledge EQF Level Minimum Experience Year Supervised -or- Years Unsupervised *Most *MostEffective Effective Financial Plan Examination Equivalent to Hours/140 Question Fitness Certification Ongoing Competency Continuing Professional Development Recertification Regulator/Professional Body Roles Long Term CFP Professional Relationship Professional Adviser & CFP Professional as Adviser New Model Adviser Short Term Old Model Adviser Caveat Emptor Trusted Adviser Future Structure Client PROFESSIONAL SKILLS Client THE FUTURE OF FINANCIAL PLANNING WILL BE ABOUT Trust Appropriate judgement Autonomy Initiative Responsibility Listening Thinking Behaviour The interest of the client AT THE END IT’S NOT ABOUT THE EGG BUT THE CONTENT OF THE EGG Questions? @gerhardtmeyer @PhilBillingham Wessel in Bloem