There was a time when almost anyone in the UK could offer financial advice to customers with relatively little oversight. “It wasn’t necessary to have qualifications when I first started,” recalls Julie Lord CFP™ Chartered FCSI, founder and executive consultant at Magenta Financial Planning, who began her career in 1986. “You could have been a double-glazing salesman on Friday and then a financial adviser on Monday.”
The profession has changed a lot since then, and one important step along the path was the introduction of the CERTIFIED FINANCIAL PLANNER™ certification to the UK in 1995. This established a consistent six-step process by which CFP™ professionals could look holistically at a client’s life and objectives and work with the client to create a financial plan. The Institute of Financial Planning (IFP), formed by a group of advisers and solicitors in 1985, brought the CFP mark to the country through an exclusive licence from the US-based Certified Financial Planner Board of Standards. These days the UK licence is owned by the CISI, following its merger with the IFP in 2015.
Origins of the CFP mark outside the UKIn 1971, the College for Financial Planning in Denver, Colorado, created a five-course curriculum leading to the CFP designation. The first 42 CFP professionals graduated in 1973. The certification quickly built up momentum and by 1985, around 10,000 more had joined their ranks, according to the ten-year anniversary book of the Financial Planning Standards Board (FPSB), which has been in control of CFP marks outside the US since 2004. The certification began to spread to other countries in the early 1990s, first to Australia, then Japan, before coming to the UK.
By the turn of the century there were close to 53,000 CFP professionals around the globe, more than 18,000 of them outside the US. The certification has continued to grow in popularity and by the end of 2019, there were nearly 190,000 CFP professionals worldwide.
UK-based CFP professionals share their experiences of attaining the certificationFinancial planning looked very different in the years leading up to the certification coming to the UK. “When the IFP was founded [in 1985], financial planning was so new, nobody knew whether they were practising it or not,” says Howard Gannaway CFP™ Chartered FCSI, one of the first in the UK to achieve the CFP certification in 1995.
Howard, who currently sits on the advisory board of Lincoln International Business School, recalls a “surge of enthusiasm” for the IFP in the early days from a range of people who wanted to establish whether it would provide a commercial advantage to them. He made this point before in The Review’s own 25th anniversary edition, published in 2017, where he speaks of being “surrounded by many different sorts of advisers, product sellers and even shipping container leasing salesmen” at the IFP annual conference in 1992.
"The idea that you could have a fee-based financial plan was a complete novelty"
Julie Lord was on the IFP Board in 1995. “We started to talk about doing things properly and professionally, and having a proper planning process rather than just a sales process,” she says. “Then I think things started to move.”
At the time, financial advisers tended to rely heavily on commissions rather than fees, although that also began to change in 1995, when new rules were introduced by the Securities and Investments Board, which meant commission payments had to be disclosed. The regulations required product-specific price disclosures, which in turn enabled consumers to distinguish between high-cost and low-cost offerings (commission payments were later banned in 2013 under the Financial Services Authority’s Retail Distribution Review). “People were locked into the commission system and they didn’t know how to get out of it,” explains Howard. “The idea that you could have a fee-based financial plan was a complete novelty.”
Beyond the issue of commission versus fees, there have been other big shifts. Ian Painter CFP™ Chartered FCSI, managing director of Affinity Integrated Wealth Management, points to the change from just selling products to selling a proper financial planning service, and the huge leaps in qualification requirements and professionalism more generally. “Somebody joining the profession now would find it hard to believe that all it used to take was a two-week training course, some in-house exams and that was it, you were free to sell financial products to clients,” he says.
Duncan Shimmin CFP™ Chartered FCSI, director of the Huddersfield office at Oculus Wealth Management, has similar recollections of achieving his certification “more years ago than I care to remember” in what would be seen now as superfast time. He recalls “turning up with a pad of A4, a calculator and a pen” when he took part in a one-week residential course, which involved submitting a life plan based on a case study. One of the main challenges at the time, he said, “was to learn the exact format that the IFP wanted to see and to deliver that”.
He remembers being encouraged that his fellow candidates were genuinely motivated by ethics, as opposed to sales: “It gave me confidence that there was a role for financial advisers, not just financial salespeople, and the reassurance that there were others out there who thought along the same lines as me.”
A framework for financial planning
In the words of the CISI, the CFP certification is designed to equip financial planners with a framework that is “robust and repeatable” and which can boost the confidence clients have in a financial planner being able to help them meet their life goals.
In order to achieve it, candidates need to master theoretical and practical financial planning knowledge by completing a course in line with FPSB standards. In the UK that currently involves the CISI’s level 6 Certificate in Advanced Financial Planning – which involves 200 hours of study and an exam – as well as a level 7 financial plan case study, which together add up to the level 7 Diploma in Advanced Financial Planning. CISI members who have achieved this diploma, have three years’ relevant experience and have taken the CISI integrity test are eligible for the CFP certification.
The current system has been in place since a review of the CFP was completed in 2019. That raised the financial planning diploma from level 6 to level 7 on the UK National Qualifications Framework to reflect the inclusion of more specialist knowledge. It was the first such review in ten years. “Both the market and the complexity of the financial advice required has changed,” said the CISI’s outgoing head of financial planning, Jacqueline Lockie CFP™ Chartered FCSI, at the conclusion of the review. “The new level 7 recognises this complexity and now equips the licence holder with the skills to meet this demand.”
"Hannibal Lecter would easily pass an ethics examination – just enter the answers that one concludes the people setting the examination want"
The testimony of some of those who have gained the qualification over the years gives an indication of the benefits it can offer. “My interest and belief in financial planning as a stand-alone discipline, irrespective of product sales, led me to the IFP and to me taking and passing my CFP certification in 2007,” says Ian. “This opened my eyes further to the benefits of proper cashflow modelling, the difference it can make in people’s lives, and how the arrangement of financial products comes at the end, not the beginning of the process.”
Martin Ruskin CFP™ Chartered MCSI, head of business development at Paradigm Norton Financial Planning and outgoing chair of the CISI’s Financial Planning Forum Committee, recalls a similar impact, describing his achievement of the qualification in 2007 as a “lightbulb moment” in his career. “It was a wake-up moment in seeing the power of financial planning, which has brought huge value to clients, but also in sharing best practice and networking with other CFP professionals, both in the UK and abroad,” he says.
His views are echoed by Quentin McCormick CFP™ Chartered FCSI, managing director of Pavis Financial Management, who also passed the exam in 2007. “It gives you the confidence to deal with more complex matters and the ability to break things down to their component parts. It also demonstrates to clients and colleagues that you ‘know your onions’ and haven’t just passed a series of technical exams,” he says.
The ‘real-world’ elements of the CFP certification are a critical part of financial planning these days. “You could be the smartest person on the block and have all the technical qualifications, but if you don’t know how to apply that technical knowledge in a real-life client situation and talk to them and listen and answer their questions and give them confidence and reassurance – the ‘soft’ side of the work – then you’re only doing half a job,” says Julie, who adds that the CFP certification “was absolutely key to understanding that” for her.
The next 25 yearsWhile much has changed for the better over the past two and a half decades, when asked about what could change over the next 25 years, many in the sector feel there is still room for improvement.
Duncan argues that the current emphasis on examinations and processes, as opposed to outcomes, is unhelpful: “Hannibal Lecter would easily pass an ethics examination – just enter the answers that one concludes the people setting the examination want. Ethics comes from the heart, not the head.” He believes that the profession needs to lean more towards simplicity in order to deliver advice that is truly going to benefit consumers: “What we should be [doing] is making things simple and clear – not making things so complex that we can pretend to be a genius by unravelling them. The most important work is education – a client who understands their finances is in a much better place.”
“Compared to 25 years ago, things are so much better now,” says Julie. “Unfortunately, in my view, it’s still not quite right. There are people still selling stuff and not actually properly financial planning. I would like to see the FCA get to grips with financial planning as a profession and understand that just regulating financial products isn’t actually doing the job, because some financial planners are doing a lot of work with clients and charging some very handsome fees, and there’s no regulated advice or product involved.”
"People need validation from human beings, they need to be able to have a sounding board and share ideas"
Improving financial planning in the UK is not just a matter for regulators though, and initiatives from within the sector could also play an important part in the years to come. The Initiative for Financial Wellbeing, for example, carries out research and develops tools and events to promote the relationship between money and wellbeing. “Everyone needs to get behind these new movements, to really understand that these are the good guys, these are people who are really keen on making a difference to their clients’ lives, not just selling them products,” says Julie.
Technology, too, will inevitably have a role to play as digitalisation continues apace across financial services. Martin believes that tech can enhance what financial planners can offer to clients, although he believes that the true value of financial planning lies in the personal touch. “The role and skills of a CFP professional will always be in demand. An algorithm is simply not able to help navigate clients through life events and ensure that a plan remains on track to lead and maintain a financially independent lifestyle.” Julie also acknowledges the power of tech when it comes to advancing financial planning (she cites the Moneybox app as a useful budgeting tool that she recommends to her clients). However, like Martin, she says that the power of financial planning has its grounding in human interaction. “People need validation from human beings, they need to be able to have a sounding board and share ideas,” she says.
The changing needs of customers means financial planners constantly need to adapt their approach. Howard suggests that could mean more specialisation, training and education in the future. “I think planners may have to become a bit more specialised, or at least be prepared to be drawn down that road by clients if they need it,” he says. “In the same way that accountancy is now something you do at university and you come out with a degree in accountancy, financial planning needs an academic underpinning I think.”
Other possible changes are more contentious. “Financial products of all sorts are now so much cheaper than they ever used to be and with the internet and commercial pressures, this trend is likely to continue,” says Ian. “This is, however, somewhat at odds with the ever-increasing costs of providing advice within a regulated business framework. As a profession, I think we still need more of a shift towards the client paying much higher financial planning and stand-alone advice fees, with even less of an emphasis on fees being linked to financial products.”
What is unlikely to change though is the need for financial planners to gain a full understanding of their client’s situation and aspirations. That, at least, should mean the CFP remains an integral part of financial planning in the UK for many years to come.
This article was originally published in the October 2020 flipbook edition of The Review.
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