Financial advisers must change their working practices and become financial planners if they want to...
Financial advisers must change their working practices and become financial planners if they want to raise standards of financial advice and consumer confidence, argues the Association of Investment Trust Companies.
Responding to the FSA's proposals for a single exam framework, the AITC says customers are not getting the best service available from financial advisers because the emphasis tends to be on sale of products rather than the needs of the client.
In order to meet consumer needs for advice, the number of financial planners available to consumers should increase from 300 to 10,000 over the next ten years.
Most 'advice' services are transaction-led rather than designed to advise the client because "advisers keen to sell financial products may not give due consideration to all of the circumstances of their customers", says the AITC's latest edition of ITS Lobby - a round-up of the AITC's political discussions and thinking.
(Click on the web link in the right-hand column to view a PDF-version of the lobby note).
Comments expressed by the AITC indicate the investment trust trade body sees financial planning as a higher standard of financial advice delivery as final comments suggest reform of the financial advice market presents "an opportunity for the FSA to positively encourage financial advisers to become financial planners".
The AITC suggests becoming a financial planner may also help IFAs to rectify problems in obtaining PI cover, as it believes higher standards of financial advice will lower mis-selling potential.
"The AITC believes that the number of financial planners should be increased to around 10,000 over the next 10 years. With a wider network of advisers, consumers will be able to obtain speciliased client-focused services more easily," says the AITC.
"Improvements in the level of advice may also limit future mis-selling claims, boosting public trust in the financial services industry. A rise in registered, well-qualified advisers will make 'lighter touch' regulation of financial advice a more viable prospect.
"With clearer advisory processes in place, advisers may also find professional indemnity insurance easier to obtain," continues the AITC in ITS Lobby.
Unsurprisingly, Nick Cann, chief executive of the Institute of Financial Planning has welcomed the AITC's comments as another stage of recognition for the Certified Financial Planner training regime, alongside proposals by the FSA to use planning as the highest standard in its IFA training reforms.
The important thing is the greater recognition we have for financial planning, the more improvements consumer will see.
"Achieving 10,000 financial planners in 10 years will need a lot more help from the industry to achieve that goal and it would need more commitment from advisers," says Cann.
"Even if people don't want to become a CFP, advisers should know and use the principles and structure of client needs. If we had a genuine client case review structure - as used in financial planning - there would be less chance of mis-selling," adds Cann.
What do you think of the AITC's comments? Is financial planning a better standard of financial advice? Email your thoughts to Julie Henderson, IFAonline editor, and we'll post your messages on the website.
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