Financial services' steep learning curve

Education has become a buzzword in the financial services industry. Angela Faherty takes a look at what the industry is doing to improve standards.

Education in the financial services industry has become something of a holy grail in recent years with more emphasis placed on specialised courses and training as the industry moves towards achieving a greater level of professionalism. 

While moves to make the industry a more highly regarded profession are well underway, education on a broader level is still in a state of flux, as the underwhelming standard of financial literacy among consumers continues to present the industry with challenges.

Attempts at removing these obstacles are underway however, with the introduction of Government-funded initiatives aimed at spearheading the way for improved financial knowledge among consumers. 

Challenges for planners

One of the challenges facing the industry is the frequency with which legislative changes occur.

Keeping abreast of these changes can be difficult but associations and fund managers are keen to help financial planners become indispensably informed by running road shows, technical workshops and conferences to advance professional development. 

Essentially, education among the financial planning community can be divided into three parts, says Deen Sanders, deputy chief executive at the Financial Planning Association (FPA).

He says: “Broadly speaking, there are three types of education streams for financial planners. The first is regulatory which is governed by law. The second is professional education and the third is personal professional skills.” 

With such a vast spectrum to cover, it is little wonder that remaining familiar with the range of educational developments in the sector is a job in itself, yet the popularity of courses and workshops across the industry illustrates that there is clearly a demand and thirst for knowledge among planners.

A prime example is the FPA’s National Member Roadshow in March this year which attracted almost 2,000 financial planners across all 32 chapters Australia-wide – an increase of 25 per cent in attendance compared to the 2009 roadshows. 

Demand for help with legislative changes has also become customary, says Sanders. He says the association has seen a growing demand for subject specific workshops as the move towards greater professionalism in the industry takes hold.

“People are starting to ask more questions about specialisation pathways, such as fee-for-service transition workshops and specialist workshops on subjects such as aged care and estate planning,” he says. 

Although the FPA runs a series of events throughout the year to help its members stay familiar with industry developments, fund managers are also taking a vested interest in educating financial planners.

For example, Aberdeen Asset Management has recently launched the first in a series of educational publications aimed at helping investors better understand the confusing world of fixed income. 

The three-part series, Investment Fundamentals: Everything you wanted to know about fixed income,aims to address the problems and confusion surrounding the complexities of the fixed income market, says Brett Jollie, managing director at Aberdeen Asset Management. 

He says: “Based on the adviser feedback we have been receiving, fixed income is one of the more complex asset classes and is greatly misunderstood. The aim of the campaign is to explain the concept of fixed income as an asset class and the benefits it can offer investors.” 

Jollie adds that the Investment Fundamentals campaign will be a three-stage process which will focus solely on fixed income as an asset class. Part two is due for release in July and will cover the subject in greater depth, with the final part of the educational supplements due for release at the end of the year. 

“The first issue has addressed the basics of fixed income and is an attempt to explain the rationale behind fixed income as an asset class. The second guide will be based on the premise of understanding what fixed income can offer, how the asset class can be included in an investors’ portfolio,” he adds. 

Jollie says that while there are no set agendas for future issues of the publication, the firm’s intention is to continue to broaden the knowledge of advisers, particularly in the areas in which they demand more information.

He adds that in addition to requests for information on specific asset classes, advisers are often looking to enhance their soft skills through professional development workshops, something to which the FPA has also committed on a long-term basis. 

New blood

While continued professional development is an important cornerstone in the industry, attracting new recruits into the sector also presents something of a challenge.

While the FPA and the government are working together to create an educational framework that will create a professional standard in the industry, other methods are being adopted to attract young recruits into the sector. 

Getting new blood into the sector can be a challenge, however, yet a number of academies have opened up in recent years to attract new talent into the industry.

The AMP Horizons Financial Planning Training Academy, which opened in October 2007, aims to recruit, train and develop the next generation of financial planners and drive professionalism in the industry. 

Since its launch, 347 graduates have gone through its program which entails a 12-month professional year encompassing 10 weeks of formal academic training and nine months ‘on the job’ experience working as a planner.

The program offers training and development in the provision of financial advice and the curriculum has been created to fuse study with practice via classroom-based learning, e-learning and expert coaching. 

Tim Steele, director at AMP Horizons, says the aim of the academy is to continue the drive towards creating a professional financial planning industry.

He says: “Given the changes in the industry and the focus on quality of advice, there is a need to fully embrace the march to professionalism. If the financial planning industry is to become a true profession, then it is vital to understand that education is the key to this. Our aim is to create a national centre for excellence.”

Steele adds that the academy has just completed its thirteenth intake of graduates, with two further intakes scheduled for later in the year.

Following completion of the 10 weeks training at the academy, graduates have the option to become representatives of AMP Financial Planning and have the opportunity to work in the AMP Horizons full service financial planning practice. Those who complete the full professional year can either start an AMPFP practice or join an existing AMPFP practice. 

The success of the program is evident in the fact that the firm broadened its training scope in May this year by extending the reach of its program to include the ongoing education and development of its entire financial planner base.

Since its inception, it had focused solely on the training of new candidates and the change follows a strategic review of AMP’s financial planning advice and services business. 

By opening up the service to existing AMP financial planners, advisers can now focus on their continued professional development and build up their existing knowledge, Steele says.

“By broadening the training scope we can now provide ongoing continued professional development to those advisers currently in the industry. It is critical that the financial planning community retains and builds their technical knowledge over the course of their career,” he says. 

Steele adds that a key component of the AMP Horizons Academy is the ability to tailor programs to suit the personal experience of each planner.

“There has been an increase in the demand for information about self-managed super funds (SMSFs) and requests to enhance soft skills, such as practice management and the ability to engage clients,” he says. 

Government initiatives

With initiatives underway to help planners reach a professional status and improve the standing of financial planners across the board, there is still one element of education that remains a challenge: the financial literacy of consumers. 

It has become increasingly apparent that educating consumers on all matters financial is imperative if the industry is to ever achieve its maximum potential, but overcoming this challenge is no mean feat.

The industry has long been advocating the need to enhance financial literacy among consumers and while it is a slow process, it appears that the government is starting to show signs of moving in this direction. 

Superannuation, in particular, appears to have attracted much attention, as the compulsory contributions have brought the need for retirement planning to the forefront of people’s minds.

This, coupled with the fact that the increasing prevalence of superannuation has led to more people having exposure to, and responsibility for, their retirement investments has resulted in the government introducing a number of initiatives to set the foundations for improved financial literacy among consumers. 

Earlier this year, the government launched its National Financial Literacy Strategy and the MoneySmart website, which replaced the old FIDO and Understanding Money websites.

The revamped website saw the government pump $12 million funding into the scheme, with the aim of offering comprehensive information and online resources and contacts for those people who want to better manage their financial health. 

Speaking at the recent Money Management Retirement Incomes Seminar, the first in a series of educational workshops for financial planners, the Parliamentary Secretary to the Treasurer, The Honourable David Bradbury MP, said early signs show demand for information among consumers is clearly apparent. 

He said: “The early popularity of MoneySmart demonstrates that there is a real appetite among the community to learn more about personal finances. Already more than 250,000 individual users have logged on to the website and more than 100,000 people have downloaded the new MoneySmart iPhone app.” 

While the figures show there is certainly a hunger among consumers to better manage their finances, additional measures are also in place to ensure financial literacy becomes ingrained in the consumer psyche.

The previously mentioned National Financial Literacy Strategy provides a framework that will provide education through schools and other pathways, as well as create partnerships with the many sectors involved in financial literacy in order to measure the impact and promote best practice. 

Similarly, further measures are being introduced in the form of the Australian Securities and Investments Commission’s initiative, Helping Our Kids Understand Finances program, which has received $10 million funding from the Gillard Government.

The program will train 6,000 teachers and develop a range of resources to integrate financial literacy education into the Australian curriculum. 

“By targeting children early in their lives, we can build better awareness of the concepts of budgeting and saving and strengthen their ability to deal with more complicated financial products like credit, that are often linked to popular consumer items like mobile phones,” Bradbury said. 

Jollie agrees that the financial literacy of consumers is a big issue that needs to be addressed. He says: “The financial environment in Australia means we have a compulsory superannuation system, yet most people are unequipped to understand the dynamics of their investments.

There is also a tendency not to use advisers which has to be resolved. Education has to start at school. Everyone goes to school and it is here that we can help to address the basics.”

Starting young

Tackling the issue of financial education by introducing the subject into school curriculums seems to be a popular concept, but will it really help solve the issue of consumer literacy?

Opinion is divided. The government is clearly committed to implementing measures that will see the education process start in schools, but there remain a number of elements to consider. 

While Sanders agrees that more education is needed, he says the relevance of financial education at school level must be appropriate.

“It is pretty hard to get a child to worry about planning for retirement, so therefore it is important to develop a financial literacy regime that is appropriate to the needs of the individual.

"At school you could start with mobile phone contracts and credit and adopting good financial behaviour. Things such as superannuation, life insurance and estate planning come later and at different stages of life,” he says. 

Steele agrees. “There is not one panacea to solve the financial literacy problem. Compulsory superannuation has increased consumer awareness of finances, but education should start in schools with topics such as managing debt. It should then continue through to community planners once schooling is complete,” he says. 

The future

Education looks set to play a significant role in the future of financial planning as well as in the lives of consumers.

The financial planning community appears to be addressing regulatory change as it moves towards achieving greater professionalism, while the government is collaborating with industry parties to ensure the creation of a framework that should go some way to improving the financial literacy of consumers. 

However, frequent changes to legislation and a disinterested audience in terms of consumers are challenges that need to be overcome if the battle is to be won.