Is a degree for CFP overkill?

In less than four years time, theFinancial Planning Association(FPA) will make it mandatory for planners wanting to enter the Certified Financial Planner (CFP) program to hold a degree qualification — either in financial planning or a closely related discipline.

It is, says Chris McMillan, general manager, education business services with the FPA, part of the FPA’s push for professionalism.

“As the highest recognised designation, it puts us at the same level as other professions, for example, accountants with their CPA (certified practising accountant) program,” she says.

McMillan says the Diploma of Financial Planning (DFP) will remain the base level of education, however, in time, she expects that too will change.

“Going forward, the CFP will be the base,” she says.

“We want to make sure financial planners are recognised by the CFP designation in the same way as accountants are recognised by the CPA logo. I feel the general public will begin to expect planners to be CFP qualified.”

But if this is the FPA’s intention — to ultimately make the CFP the universal qualification for financial planners — it is going too far, according toIntegratec’s John Prowse.

“If it’s an elite qualification for a few who are offering high level advice, that’s one thing,” he says. “But I understand that the FPA is encouraging all its members to send all their planners through to CFP and that’s overkill.”

Prowse argues that financial planning clients are generally mums and dads and there are only a limited number of clients needing very technical, specialist financial planning advice.

“The vast majority of clients don’t have complex financial planning problems,” he argues. “Their main problems are too much debt, inadequate savings, no wills, no disability insurance — advising on things like that doesn’t require a university education, it requires commonsense, reliable advice.”

Prowse uses some compelling analogies to argue his case.

“You don’t take your car to a mechanical engineer to be serviced,” he points out. “You take it to a mechanic — unless it has a particular problem that needs attention from a mechanical engineer. Similarly, a tax agent has a clear system for dealing with large numbers of people efficiently and well and refers more complex problems on to a tax accountant.”

Not unexpectedly, Antony Young, research co-ordinator with the school of accounting and law at RMIT university, which offers several financial planning programs, strongly disagrees.

“I think it’s very dangerous to have the view that because you’re dealing with clients with less sophisticated needs, you don’t need a sophisticated education,” he says.

“Planners need to have the educational understanding to recognise more sophisticated financial planning needs — if they don’t have that understanding, they may not recognise that a client’s needs are more sophisticated.”

The pressure the industry is under following the ACA/ASICsurvey is, he argues, a good reason to lift educational standards.

“The industry has been heavily criticised in the media, so it needs attention and it needs to be seen to be doing something about raising the educational bar.”

The industry, he says, needs to take the next step to make the players more highly educated professionals.

But while Prowse acknowledges the problems relating to the quality of financial planning advice, as highlighted by the ACA/ASIC survey, he says they are not about technical competence.

“Technical competence is not the problem in this industry — consistency, reliability and affordability are the problems,” he says.

Addressing these problems is not about ensuring all planners are degree-qualified, according to Prowse, it is about streamlining financial planning processes.

“If you look at the financial planning process as an industrial process, it’s not very organised,” he says.

“The production of plans and reviews within offices is pretty inefficient — these inefficiencies need to be addressed, and the process streamlined. With the state of software now, we could be getting people through a lot more efficiently.”

Making degree qualifications mandatory, he says, will make the industry more elitist, meaning the average client will be even less well-served.

“Advice is already not affordable. The price is too high for the man in the street.”

Young, however, says if planners are going to compete against other professionals, such as accountants, a degree qualification will be absolutely necessary. In order to make financial planning a legitimate professional body, he says, education levels must meet degree standard.

As more people identify financial planning as a career path, increasing numbers of students are enrolling in financial planning degree programs straight after completing high school.

Young says graduates from these programs tend to first find employment in the industry as proper authority holders under a licence holder in large organisations and don’t deal with clients until they are ready.

But, armed with nothing more than a piece of paper from a university and very little in the way of life experience, the fact of the matter is that as long as the degree meets PS 146 requirements, theoretically they could — and how well would the financial planning client be served then?