Future of Financial Planning

Gerhardt Meyer, CFP ®Phil Billingham, CFP ®

Wessel Oosthuizen, CFP ®

What we will talk about…real quick

Stuff I told you last time… Was I right..?

New regulatory developments…Around the world and back home…

Some of the themes from RDR and FOFA:•No more commission on investment business•Clients and planners to agree on fees for clearly defined services•Clients to be able to stop paying fees if they aren’t happy with service delivery

so… … was I right last year…?

Indications I might not be wrong…

DRAFT Information Letter re Binder Regulations

Ongoing TCF developments

New stuff coming from down under:

•Proposed a definition for “financial planner”or “financial advisor”

• May not provide financial services or have someone do this on your behalf and use “restricted words”

• Unless: you have a licence to give personal financial advice in respect of certain product categories

•National Entrance Exam•Legislation to govern tax advice and a new regulator in this space•Accountants now need a licence to give financial planning advice (from 1 July)

BIG NEWS!

• Canada– consulting public and industry on:

• should fiduciary standard apply to all? • mutual fund fees too high? ban commission?

• Singapore– various things being considered:

• raising standards• raising CAR

• India– new regulations for “investment advisors”

• define investment advice vs sales function• CAR now required for investment advisors

• FPSB RAP met in Washington during April• Some key things:

– Regulator helps with move from short to long(er) term client relationship

– Professional bodies help with move from caveat emptor to trusted advisor

– Compensation principles:• should not influence product• should not influence advice• client and planner agree on scope of services and compensation for

services which can be reviewed by either party at a later date• access to advice for all• compensation model should support provision of professional advice

The Retail Distribution ReviewWhat is all the fuss about?

•Adviser Charging• Paid by the client – a ‘bottom up’ approach

•Qualifications• ‘Level 4’ – roughly degree level

•Clarity of role• Independent or Restricted• ‘Do what it says on the Tin’

Client PropositionsCan you answer the following questions?

1.What are you for?

2.What do you do?

3.Who do you do it for?

4.Where do you do it?

The rule is:

“If you have never turned away a potential client, you do not have a Client Proposition”

From Adviser to Planner to Business

The key questions are:

•Who pays you?•Who is the client?

• The Actual Person or their Money• A clue – what are you reviewing and reporting on?

•Who is the client a client of?• The Adviser / Planner or the Business?

•Do you have a (very good) job or a business?• A clue – a business owner gets paid twice

Client Focussed - not Adviser Centric

• This does not mean you are not giving good Advice, or great service, or are not Ethical.

• It does mean that the systems and processes in place are there to support the Adviser / Planner, who then looks after the client

• So we need to review:• Culture• Systems

• Client ownership

We need to increase our ProfitsThis is in two parts:

1.Increase income• The 1% world• Get paid for everything you do• Capture more of the value chain• Providers as Partners, not Parents

2.Take out cost1. Process / industrialisation/ standardisation

2. Take out risk

Summary

• Regulation is on a path of Convergence

• There is a clear Business Model at the heart of their thinking

• It is based on existing Best Practice around the world

• When are you going to transition?

THE FUTURE OF THE FINANCIAL PLANNING

PROFESSION

Wessel Oosthuizen CFP®, FPSA®

THE EGG PRINCIPLE

The value of an egg

The value of an egg

Dietary value

Commercial value

Historic value

Esthetic value

THE EGG PRINCIPLE

Current

Historical

FutureWhat is the

financial planner value

proposition?

What is the financial planner

value proposition?

Historical

• Global CFP certification program developed from U.S. model

• Job analyses leading to “topic lists”• Examination syllabus based exclusively on topic lists• Job tasks only used for weighting topics on

examination

Historical – Weaknesses

• Students: “Why do I have to know that”• CFP certificants: “Getting the certification was not a

demonstration of my ability to perform financial planning”

• Employers: “I hire a CFP certificant, who knows a lot, but we still have to teach him how to be a planner”

• Public: “How do I know exactly what a CFP professional can do for me?”

• Internationally: “CFP certification in South Africa doesn’t mean the same as CFP certification in China”

Historical Structure

Client

Current - Global Standards

• Define the practice of financial planning• Distinction between financial planning professionals

and others• Focus on competent practice

How it All Fits Together

FPSB Global

Competency

Profile

InputsFP Process

(Six Steps)

Ethical

Principles

Exam

Education

Experience

Standardsof

Competence

Standardsof

Practice

Standardsof

EthicalBehaviour

Outputs

Professional Financial Planning Standards

Framework

Competency Standards

Competency Profile

Professional Skills

Technical Knowledge

Current Structure

ClientClient ClientClient

*Most Effective*Most Effective

CertificationOngoing

CompetencyRe-

certificationFinancial

PlanExamination FitnessEducation Experience

ASSESSMENT

Body of Knowledge

EQF Level 6 Minimum

1 Year Supervised

-or-

3 Years Un-supervised

Equivalent to 6 Hours/140 Question

Continuing Professional Development

Regulator/Professional Body Roles

Rel

atio

nshi

pS

hort

T

erm

Lon

g T

erm

Caveat Emptor

Trusted Adviser

Old Model Adviser

New Model Adviser

Professional Adviser & CFP Professional as Adviser

CFP Professional

Future Structure

ClientClient

PROFESSIONAL SKILLS

ClientClient

THE FUTURE OF FINANCIAL PLANNING WILL BE ABOUT

Trust Appropriate judgement

Autonomy Initiative

Responsibility Listening Thinking

BehaviourThe interest of the client

AT THE END IT’S NOT ABOUT THE EGG BUT THE CONTENT OF THE EGG

Questions?

@gerhardtmeyer

@PhilBillingham

Wessel in Bloem