Professionalism in financial planning

In this first article in our new series, which aims to examine the concept of professionalism and the obstacles to attaining it, we look at whether financial planning is a profession and whether financial advisers are, in fact, professionals.

The question of professionalism is the biggest issue facing the life industry today. Ian van Schoor, CEO Marketing, Sales and Distribution for Liberty Group, says, "until the public's overwhelming experience of financial planning is a positive one, financial planning will not be viewed as professional nor the discipline of financial planning as a profession."

Is financial planning a profession?

Recent research indicates that financial planning is not yet perceived as a profession. The definition of a profession, according to Wikipedia is: "an occupation, vocation or career where specialized knowledge of a subject, field, or science is applied. It is usually applied to occupations that involve prolonged academic training and a formal qualification. Professions are usually regulated by professional bodies that may set examinations of competence, act as a licensing authority for practitioners, and enforce adherence to an ethical code of practice."

A quick comparison of these criteria with the discipline of financial planning would strongly suggest that financial planning is indeed a profession, when practiced in accordance with the standards set by the FPI and FSB.

However, it is a well known fact, and one the consumer press feeds itself on, that a lot of financial planning is conducted at a level far below the FPI's requirements. This is one of the reasons why the public at large does not see the life industry as a profession.

Are financial planners professionals?

There are many professional financial planners who offer a very professional service but there are also a large number of financial planners who offer an inadequate service either because they cannot or choose not to offer a satisfactory one. As long as the public is exposed to the second group, financial planners will not be seen as professionals.

The issue boils down to competence and intent. The competent financial planner with the interests of the client at heart will and is seen as a professional. The incompetent and ill intentioned will not. Changing the moral or ethical make up of a personality is close to impossible so individuals found wanting in these areas shoul by implication be excluded from an industry which needs to improve its credentials. A large responsibility for this rests with the life offices themselves.

Industry issue

Van Schoor comments, "I remain concerned around the resistance to rooting out undesirable practices which do not adhere to appropriate standards of professionalism. Perhaps the resistance lies in the fear of uncertainty brought about by change. Even more concerning is the fact that there is little evidence of a uniform approach to professionalism adopted across the industry. Despite the lip service paid to professionalism, few practice what they preach with 'unsavoury' advisers expelled from one player only to re-emerge at another." The issue of professionalism is an industry one - and we will only progress when there is one standard of professionalism across the industry. For these behaviours to re-surface elsewhere in the industry means the problem has merely been shifted, not resolved. This is very concerning - especially when the situation is exacerbated by churn of business.

"We believe we owe it to our customers, and to the majority of advisers, to take the lead in defining acceptable standards. Over time, we believe the benefits of quality advice and improved persistence will outweigh any short term concerns."