“When you’re at the end of your rope, tie a knot and hold on.”
— Theodore Roosevelt, AIOFP
Where did it begin?
The financial planning profession didn’t emerge fully formed but evolved, over time, from an industry designed to sell insurance and investment products. An industry unfairly characterised by minimal work, high commissions and a focus on product distribution. While many of these agents may have seen genuine value in the products they sold, others just saw them as a lucrative sales opportunity with few barriers to entry and fewer ongoing responsibilities. Since the financial planning industry was born from product sales, it’s small wonder that it has been hard to decouple the idea of financial planning from financial product sales.
However it started, financial planning has come such a long way since those early days. The hard work that many put in over the years to elevate the industry, to create professional standards and to establish minimum requirements has been significant, just in the last 20 years alone.
While we celebrate these significant successes, as we should, we should also take a moment to consider the consequences and implications of these changes and the impact they’ve had. In particular, has the approach we’ve taken on the issue of adviser education done more harm than good?
Without disputing the idea that some individuals should not be providing advice, is the immediate loss of thousands of advisers (and the inordinate stress and pressure imposed on those that remained) likely to deliver long-term outcomes that justify the cost?
Has the industry over-corrected and focused on individual competency instead of properly responding to structural conflicts?
Where has it gone wrong?
“Education is what remains after one has forgotten what one has learned in school.”
— Albert Einstein
One could argue that the way in which rapid completion of education standards has been forced upon a cohort of advisers who have a wealth of experience, established businesses and strong client relationships misses the point. Education should be about more than qualifications. Unfortunately, it appears that the genuine desire to improve client outcomes and experiences has simply imposed a box-ticking exercise on top of an already over-burdened industry. Consider the other changes that also needed to be managed: the introduction and impact of Ongoing Fee Arrangements and Fee Disclosure Statements, TASA/TPB requirements coming in (then out), to FASEA being formed (then disbanded), to Red October (the 2021 introduction of Reportable Situations and Design and Distribution Obligations).
In the context of adviser competency, the baby wasn’t just thrown out with the bathwater – the entire house was demolished and now we’re gazing at the rubble trying to figure out how to re-build the house.
Make no mistake, the barriers to entry were too low for far too long. They had to increase significantly to help elevate the perception of the financial planning industry from a product sales function to a profession.
Education, when fully embraced, is an immersive learning process. It can teach us critical thinking skills, broaden our depth and knowledge of topics, teach us research skills, help us build the skills to actively listen and work with others, thereby helping us grow as people and professionals.
This is what makes education valuable – not the piece of paper itself, but the process we go through in order to obtain it.
Advisers intimately understand and value education. It’s built into the fabric of what advisers do with constant technical reading, Continuing Professional Development studies and participating in professional networks that foster the sharing of ideas and strategies to help clients. The real-world learning was already happening prior to the introduction of the FASEA education pathway. So, the requirement for education standards was never the problem. The way in which the FASEA education standards have been implemented is what has caused so much heartache, because education should be the gate-opener and learning curve for the start of a career, not something mandated in the twilight of a career when the practical experience has (hopefully) already been learnt.
Where do we go from here?
“If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.”
— Henry David Thoreau, “Walden”
Financial planning now has barriers to entry that are in line with other established professions; tertiary degrees, the Professional Year and long-established professional associations. It is most certainly emerging into being seen as a profession rather than an industry.
The challenge now is promotion. When every other article about financial advisers is about someone being banned for deceiving clients, the industry is forever hampered by the perception that advisers are not to be trusted.
Yes, these people need to be prosecuted and held to account for their actions. However, what we need more of are the good news stories, the reasons to inspire young people to come into the profession.
Great advice changes lives. The value of professional advice has been observed in numerous studies, including a collaborative report between CPA Australia and CoreData in 2020, this report highlighted numerous positive benefits of receiving professional advice. In particular, the report identified that consumers received significant benefits, both tangible and intangible, from the relationship; benefits that had little correlation with their adviser’s level of formal education. More than 80% of respondents expressing the view that overall, receiving professional advice gave them greater peace of mind financially, and more than 70% of respondents expressed the view that receiving professional advice allowed them to be free from financial worries and stresses.
Advice helps to protect people in their most vulnerable moments when they have been diagnosed with a serious illness, or are planning for their retirement and don’t know where to turn. Great advice gives people a roadmap and a way to plan for their futures rather than being paralysed by what is a very complex modern financial system. A great adviser can help a client to deal with this complexity and help transform paralysis into positive action.
Great advice is not just about crunching numbers. Financial modelling is done by software very well and assistance from AI, whilst still in its infancy and not without its limitations, is becoming increasingly sophisticated and more widely adopted. Put simply, stock-picking is not the future of the financial planning profession.
Experienced advisers have always understood this; they understand the need for soft skills, for active listening, and to have a trusted relationship are keys to being a great financial adviser. These skills are learned in real life, with real client interactions, not in degrees. The loss of thousands of these experienced advisers is possibly the most significant, and unintended, negative consequence of the way the FASEA education pathway has been implemented. These exited advisers are now unable to teach these skills and ‘pass the baton’ to the next generation of advisers, skills that are all the more crucial today when digitisation is depersonalising so many of our daily interactions, making that human connection with a financial adviser even more important going forward.
Those advisers who have survived and thrived with the changes in the last few years are well-placed to do this. Hopefully, some who left will return if the education pathway is legislated. Whatever happens from here, the profession needs to be its own advocate now through its behaviour and mentoring, so that the next generation of advisers can continue to firmly embed professionalism into transforming financial planning from being an industry into a robust, trusted profession. Those that believe that relevant experience is as valuable as formal qualifications, still have an opportunity to shape the future of the emerging advice profession.
Please click on the link below if you want to have your say about the education pathway, but act quickly because you only have until Wednesday 3rd May 2023 to make an impact.