Should planners need a degree?

If we think back to 1988, a person could obtain an authorised representative’s licence through attending two days of in-house training.

The examination requirement to prove that we had gained sufficient knowledge consisted on an open-book exam with access to past examination answers to be used as guidance. Hardly what we might call rigorous! The hard part was writing fast enough to finish early enough to indulge in a drink or two before departing for home.

Since then the situation has changed considerably. Today, a person new to financial planning and wanting to obtain an authorised representative's licence is generally required to complete at least DFP1 and DFP 2 if not additional subjects from the eight subjects of the Diploma of Financial Planning. In other words, at least one semester's load of study for a part-time student.

But what of the future? We know that to obtain an authorised representative's licence a person will need to complete an ASIC compliant training course. There are a number of providers on the market who are meeting such needs and charge appropriately.

Licence holders are advised to use such training programs as a minimum to demonstrate the competency of advisers. In addition, licence holders will need to ensure that all representatives attend 20 hours of ongoing training or professional development. It should be noted that the minimum requirement does not equate to a full diploma course, merely part of it. However, many licensed dealers are urging representatives to complete at least the Diploma of Financial Planning.

Why is ASIC pushing for a minimum competency standard and why are some dealers pushing for their representatives to complete the Diploma? The basic answer is to do with consumers of financial services - the public.

ASIC's requirements is to put in place a minimum standard to help meet the need for consumer protection. Dealers are conscious of the perception of the public and the need to be able to provide a formal qualification to indicate the educational standard has been achieved by the adviser.

Yet what lies ahead if we extend the horizon out past ten years?

If we consider the evolution of the accounting profession, we see that thirty years

ago accountants received on the job training at an accountancy firm and so

qualified to be a CPA or a Chartered Accountant. Now, thirty years on, those people are still in practice and well-respected professionals.

To become an accountant today, a person needs to complete an undergraduate degree in accountancy and then complete a post graduate program after a minimum time in an accountancy related work experience.

Nursing is another occupation which we have seen in recent years change from on the job training to the requirement to complete a nursing degree before entry into nursing. Will this trend be replicated with financial planning? My view is that the answer will be yes. Why do I think so?

In the first place, a level of professional recognition has been established in the form of the certified financial planner (CFP) designation. Regardless of some people's views about the worth of such letters it has been established as a mark of distinction in the field of financial planning and is gaining acceptance among consumers.

Secondly, more settled pathways by which a person obtains the CFP have emerged over the past five or so years to the extent that it is regarded as a second stage tertiary qualification.

To obtain the CFP now requires the completion of a four of five unit program from the University of Western Sydney. The entry points to the CFP program require the completion of the DFP, the Graduate Diploma from the SIA, an undergraduate degree in business and financial planning or other such university courses.

Thirdly, there are more undergraduate and graduate courses in personal financial planning emerging from various universities and the enrolment for the DFP is at very high levels. There is an undoubted demand for formal qualifications in financial planning. The demand is coming from three fronts: the advisers themselves, the licensed dealers and the public.

What other pointers are there that formal qualifications are on the march for financial planners? One was a comment made by a BDM on the occasion of discussing a possible masters program in financial planning. The comment was

"Will a masters help them to sell more?"

The attitude of financial planning being a selling profession is one which is held by many. However, as Ross Bowden indicated in this column on September 28, we are seeing and will see in the future many more people who undertake their own investments. Ross pointed out that this is likely to result in people seeking the advice of financial planners in a different way -more as an adviser than a transaction facilitator.

Another occasion was at a recent training session on software. It was interesting to hear that some financial planners undertaking the training are less concerned with the manipulation of the software but rather on the keystroke which gives them the result.

In other words the process and how the results are obtained are less important than the final pronouncement of "your client should invest in XYZ".

The accompanying comment by the instructor was to the effect that some advisers want to be told what to do rather than be knowledgeable about the processes and the calculations.

So what does this mean? Overall, what the signs are saying is that the future of financial planning is likely to be in the hands of those who are not sellers of products but are advisers in the truer sense. Advisers on: RBL problems, correlation of managers in portfolios, estate planning. superanuation and tax rules, etc.

For advisers to have the full confidence of the public the basis for such advice will fall on the formal qualifications of the adviser. So, we come back to the likely requirement for professional advice in the future, to be based on a degree in financial planning.

What extra advantage does a degree provide? It provides a broader background to the context of the business world, it requires students to solve problems and develop a skill base and it assesses students in a variety of methods.

The industry based diploma has served the financial planning industry well to this stage but will not be sufficient at some stage in the future. It may be ten years or so ahead but it will happen. Remember that twelve years ago there was no diploma in financial planning. Remember that the 6 unit diploma then moved to 8 units. Note that to be a CFP you now need to 12 units.

We now see a demand from some planners that have completed the diploma that they wish to upgrade to a degree as they see the need to have a degree being a future requirement. The trend is there. How long it will take is yet to be seen.

<I>Warren McKeown is the financial planning course director at RMIT University