What makes you a professional?
The FPSB is a non-profit association that manages, develops and operates certification, education and related programs for financial planning organizations so that they may benefit the global community by establishing, upholding and promoting worldwide professional standards in financial planning! On the 1st of December 2009 the organisation celebrated its fifth anniversary by releasing a global position paper titled The State of the Financial Planning Profession in the ‘Post Trust’ Era. The paper addresses a number of issues of interest to practicing financial services intermediaries. Although we cannot hope to share the entire 21-page document in today’s newsletter we can reveal some findings on one of the most important 21st Century financial services trends. The continued drive to the recognition of financial planning as a profession!
Defining profession
Before we can assess the level of professionalism in the financial services space we need to define the concept. Defining professionalism is not an easy task, and the FPSB paper points to discussions on the concept dating back to pre-industrial England! More recently Bernard Barber (1963) wrote that an occupation must have four characteristics to be though of as a profession. These include: “general and systematic knowledge, an orientation to community interests, self monitoring through internalized codes of ethics, and rewards that symbolize accomplishments through work and that are sought as ends in themselves.”
In 1994 a study by Cutlip, Center and Broom significantly expanded on the ‘profession’ concept. They singled out five characteristics inherent in all professions. We’ll elaborate on these traits – with reference to South African-based financial intermediaries – to gain a better understanding of the status of this esteemed career.
1. Requires specialized education to acquire a body of knowledge and skills based on theory developed through research
Education remains the root of most ‘profession’ discussions. A doctor, dentist or medical professional typically studies for six or seven years before specialising. And lawyers, actuaries, chartered accountants and engineers all complete four year diplomas as a bare minimum. This education sets the professional aside from the layman. A doctor – for example – has unique knowledge and skills not possessed by people outside the profession. In much the same way a financial intermediary has planning skills and product knowledge outside the remit of his client base. South African regulators are driving the education process with the introduction of compulsory FAIS Regulatory exams from 2010.
2. Provides a unique and essential service recognized as such by the community
Financial advisers do provide a unique and essential service. But at this point it’s not clear whether communities feel the same way. Think about the increasingly complex task of filing your annual South African Revenue Services IT12 Income Tax assessment, for example. There are far too many individuals who view this as an easy DIY task. If the industry wants professional recognition then it needs these individuals to equate their annual tax return with a tonsillectomy… It’s a far stretch, but what we’re trying to get at is the idea that a tax adviser handles the former (the tax return), and a doctor the latter! The good news is the FPSB paper reports that “people who have worked with a financial planner to develop a financial plan are more satisfied that those who haven’t.” The ‘Holy Grail’ for the industry is for consumers to understand and value financial planning – and accept it as unique and essential.
3. Emphasizes public service and social responsibility over private interests
Cutlip, Center and Broom refer to this altruistic characteristic as a “nobility of purpose.” The suggestion is that professional practitioners put societies’ needs before their own. We know that doctors take the Hippocratic Oath and undertake not to turn away patients in need. A financial intermediary has a responsibility to act in the best interest of the client and certainly fulfils a social good in doing so. Making sure an individual is adequately provided for frees up government resources for other social interventions... What else can the financial services industry do to fulfil this requirement? The FPSB suggests organisations in the field “reach out through pro bono activities and financial literacy events” to gain recognition for public benefit.
4. Gives autonomy to and places responsibility on practitioners
A profession is like a dynamic living ecosystem. When confronted by changing conditions the participants in this ecosystem “integrate information from a variety of sources and arrive at informed decisions.” The FPSB paper states: “Those who hold themselves out as financial planners should have the capacity to analyze a client’s situation, evaluate strategies, and make recommendations, without supervision.” The licensing system operated by South Africa’s Financial Services Board (FSB) has this as one of its goals. For financial planners to be recognised as professionals it’s essential those dispensing advice meet a certain minimum standard. The in-store salesperson offering a credit life policy cannot be lifted to the same podium as the Certified Financial Planner!
5. Enforces codes of ethics and standards of performance through self-governing associations of colleagues
“Professional organizations often have codes of ethics that set values for members, and enforce those values through disciplinary action.” One example that springs to mind is the General Council of the Bar of South Africa (GCB). This legal organisation is there to “consider, promote and deal with all matters concerning the teaching and practice of law and the administration of justice, in the interest of the public.” The GCB also deals with matters affecting the profession and upholds the interests of advocates throughout the country. The interests of local financial intermediaries are represented by bodies like the Financial Intermediaries Associate (FIA).
Given recent improvements it won’t be long before financial planning is recognised as a profession. It can even be argued the fundamental requirements for a profession are already in place. All that remains is for the industry to formalise the levels within this framework. Perhaps the CFP should be recognised as the ‘professional’ qualification in this space – with other stakeholders recognised as professionals in training!
Editor’s thoughts: It’s not easy to create a profession. Medical specialists, lawyers and engineer carved out their ‘profession’ niches over hundreds of years. But the financial services industry is making rapid progress. Do you think the CFP qualification is an adequate benchmark for professionalism in the financial services industry? Add your comments below, or send them to gareth@fanews.co.za
