Unless you have been stranded on a desert island, you cannot have failed to realise fee-based advice...
Unless you have been stranded on a desert island, you cannot have failed to realise fee-based advice will take an increasing role in the financial services industry. You may not like it and you may have very rational arguments as to why it should not be so but, in reality, it is already happening.
As we have all noticed, there is a big difference between someone that wants to pay a fee and someone that will pay a fee. For those that want to and will pay, it is important your prospective clients see there will be value in the fees you will charge and that you have the relevant knowledge and skills to help them.
Before you switch-off, proudly clutching your FPC and AFPC certificates, 35 years' experience and so on, name me one exam that actually demonstrates you can plan a client's finances for the future. Yes, a host of G10, G60 and so on does show you know how the taxation of a unit trust in a discretionary trust works but does not demonstrate you can apply that knowledge to a client's overall situation, this year and next year, nor forecast what will happen in 20 years' time.
If you are a financial adviser, you are normally addressing short-term needs with a suitable product. The solution has to be a product otherwise you do not get paid.
A financial planner works in a different way. The end result may be a product but, equally, it may not.
In simple terms, the starting position is to assess the client's goals and objectives, relate these to their current financial position, then recommend an appropriate plan of action, based on reasoned and agreed assumptions of future investment returns, earnings increases and price inflation, in order to achieve the client's goals and objectives.
A financial plan, by definition, involves action, ongoing review and further action where required. This action may result in a financial product being placed, but may not.
A financial planner is ideally placed to provide fee-based advice, as products are secondary to the process. Planning is process-driven not product-driven.
Arguably, advisers should be focusing on planning, as this is often where their technical strength lies, and outsourcing what is normally best done by a specialist, such as investment management.
How can you demonstrate that you can plan? Well, the only qualification that demonstrates you have knowledge and can apply that knowledge in the form of a comprehensive financial plan is the Certified Financial Planner (CFP).
The Institute of Financial Planning (0117 945 2470) runs many courses that help advisers convert to fee-based planning, as well as a financial planning foundation workshop and CFP preparation days.
Don't ask what extra qualifications you should have to help with a conversion to fees but what process you should be adopting to help that conversion.
Danny Cox is pensions development manager at Hargreaves Lansdown
Will remain until completion of OM's managed separation
Dispute over structure of combined group
Financial Guidance and Claims Bill
Favorable tax treatment
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