Raising the bar on planner qualifications

’Mr Dale, my friend has just got a job as a financial planner.’

‘Really?’

‘Yes, he did a weekend course and now he works for some company, giving people financial advice.’

These were the opening lines in a conversation with my future son-in-law one weekend. It continued: ‘Yeah, he didn’t have to do all that stuff you did for the qualification. What’s it called?’

‘The CFP?’

‘Yeah, that’s it.’

‘Right, so he did a weekend course and became a financial planner. Why didn’t he do a weekend course and become a surgeon, or an architect, maybe a dentist, accountant, lawyer or doctor?’

‘I don’t think you can do weekend courses for those kind of jobs, can you?’

Of course, no one is suggesting that the educational rigour, or intellectual capacity required to become a financial planner is anywhere close to that of the noble professions mentioned above — far from it. However, if financial planners are to be regarded as members of a profession, the minimum standard of training and education needs some attention, to say the least.

For the uninitiated, the minimum educational and training requirements required to become a financial planner are outlined in the Australian Securities and InvestmentsCommission’s (ASIC) Policy Statement 146.

The financial services industry commonly refers to this as PS 146, and to legally work as a financial planner one is required to become PS 146 compliant.

There is no shortage of providers offering PS 146 compliant courses, their duration ranges from two days to three months. I guess it was one of the two-day courses that my future son in law’s friend completed.

Education and training is the cornerstone of any discipline. The financial services industry has a long way to go in this department, beginning with the standard of PS 146, which is woefully low, and the bar has yet to be lifted off the ground. It sits there, just below the surface wallowing in mud.

To make things worse, take a glance through the employment section of most financial publications and see what the majority of employers seek in the way of professional qualifications or designations, not the Diploma of Financial Planning, not the Certified Financial Planner (CFP), believe it or not, yes, PS 146 compliance.

Is this an indication of what little training is really needed to become a financial planner, or are the employers who are ready to accept such low standards of education simply looking for salespeople to peddle their products, under the guise of a financial planner?

It is funds under management that count most for fund managers, it is their lifeblood, and for them advice is simply a by-product. For financial advisers it is the opposite, the relationship and advice being the most important aspect, with the investments simply a flow-on from the advice.

That is why high standards of education and training are so important. A spokesperson from a well-known institution recently told a prospective recruit it would only take three months for him to become a financial adviser. I’m sure there are many who would agree that it takes a lot longer than three months to become a good financial planner. If basic educational standards were raised, comments like these wouldn’t be made.

Imagine your parents sitting in front of a financial planner unaware that the person they are speaking to has only three months experience, with PS 146 as their only financial planning qualification. The word ‘professional’ doesn’t easily come to mind.

The education of a financial planner is forever changing

The Financial PlanningAssociation (FPA) now intends to vigorously promote the CFP designation as the pinnacle of achievement for financial planners. How vigorously I’m not sure, but such a campaign has the potential to alienate FPA members who choose not to become CFPs.

As professionals, the CFP should be mandatory. Even Benjamin Graham, the teacher of Warren Buffet in his book The Intelligent Investor, advises investors to seek out CFPs for advice.

Several years ago, as a colleague and I sipped champagne after the Diploma of Financial Planning graduation ceremony, I happened to mention that there was no rest for the wicked because of the impending start to our CFP studies, which were just a few weeks away.

My colleague smiled and quietly said that he didn’t need to go through the CFP study program because he had completed the first unit of the Diploma of Financial Planning before the end of semester two in 1997.

He would simply be awarded the CFP designation. I’m sure there are reasons for such generosity, even though they are not apparent to me. No doubt someone will enlighten me regarding this practise, which still applies today for those who can meet the 1997 study criteria.

Unfortunately for me, 1998 was a year too late for a free ride to the summit, and it proved to be some way off before I too could stand shoulder to shoulder with my colleagues at the pinnacle of financial planning achievement.

Embittered and resentful I carried on, the icing on the cake being the fifth unit, which had just been added to the CFP course of study for the first time and, you guessed it, just in time for me.

I thought the financial plan assessment in the eighth unit of the Diploma of Financial Planning was tough. Little did I know what lay in store for me!

The fifth unit, or the CFP certification unit as it is referred to, proved to be the most hazardous part of my journey, and also my wife’s, who wasn’t even studying it. This unit was a little different to the other four, as it came with no study materials. The assessment was based on a presentation to a fictitious client, which had to be recorded, two three hour exams on the same day, with two hours for lunch in between each exam, and a case study for which a Statement of Advice (SOA) had to be written. The course material notes promised that the SOA would be rigorously marked. They kept their promise, which was so nice of them. The markers pushed the boundaries of pedantry to new heights. The 24 per cent pass rate in semester one, 2005, followed by a 48 per cent pass rate in semester two, 2005 (which included repeating students who failed in semester one), showed how tough it was to get across the line.

To make matters worse, I failed, and had to go through it all again, which wasn’t much fun.

So, did all of this make me a better professional financial planner than my colleagues who didn’t have to follow the same route as me?

Not in the least, in fact, they are the ones I most admire, not because of any credentials, but because of their professionalism, their values, work ethic, knowledge and experience, for which there is no substitute.

The only difference between those colleagues who weren’t required to struggle down the same road as me, in my view, is the way in which we might view the CFP letters on our business cards. For me, the letters should be written in red ink to symbolise the blood, sweat and tears it took to finish the journey. For me, the letters are a never-ending symbol of pride because of the hours of effort, frustrations, failures, intrusion on family time and, above all, the persistence it took.

I’m positive that my colleagues couldn’t feel the same way. How could they? Getting something for nothing has little value. Given the same chance to take the easy road to CFP certification, would I have taken it? Of course I would have, but now it is all finished I wouldn’t have it any other way. I really did get the best end of the deal, truly.

The only thing I can say is that the frustrations, failures and the struggles have been worthwhile.

Strange as it may seem, the CFP has no standing in PS 146. It’s not an educational qualification, and I can only be a CFP as long as I remain a member of the FPA. But it is the international benchmark, the standard that we as professionals should all strive towards.

I hope the FPA does a real job in promoting the designation and I hope my son-in-law’s friend uses PS 146 as a springboard towards the CFP benchmark. It will take time and effort, but it is worth it.

So if you are thinking about becoming a CFP, please jump in with both feet.

Before you do, however, commit to memory Winston Churchill’s nine-word speech to the students at either Eton or Harrow. It went as follows:

“Never give up; never give up; never give up.”

At sometime in your studies you may need his words.

Michael Dale is a financial adviser with Fiducian Financial Services .