Financial planning takes centre stage

That discussion will take place during the FPSC’s CFP Professional Symposium, during which industry experts will offer presentations on topics designed for CFPs and holders of the FPSC Level 1 certificate in financial planning. This year, the theme of “Trust Matters” coincides with the Ontario government’s examination into the lack of comprehensive standards for financial planning.

Cary List, the FPSC’s president and CEO, says the fact that clients are in dire need of advisors they can count on for their financial and emotional well-being is becoming increasingly apparent.

“If we go back to the financial crisis of 2008, that really rocked consumers and it rocked the industry,” List says. “What we’ve seen coming out of that [crisis] is that consumers are confused. They don’t know where to turn to get financial advice. It’s not so much that [consumers] don’t trust individuals; they don’t have trust in the entire system.”

The FPSC believes that if clients’ lack of trust in the industry could be overcome, clients themselves would benefit – and, at the same time, the industry would be much healthier. To achieve that, the FPSC has married its push for consumer awareness with its efforts to lobby the Ontario government to introduce stricter requirements for advisors calling themselves financial planners.

In early October, the FPSC launched a new website (www.financialplanningforcanadians.ca) to help Canadians wade through issues preventing them from finding a trusted advisor. The website aims to provide consumers with the education and tools to receive the best financial planning possible, List says: “We really are trying to capture the hearts and minds of those individuals that know they need assistance, but are not acting [upon it].”

The FPSC also has launched a campaign, tied to the new website, on social media to explain to Canadians the lack of educational requirements and ethical standards within the financial planning profession.

“[Financial planning] needs to be seen in the same way as medicine or engineering,” List says. “It’s no longer an FPSC initiative; it’s really a wave. We’re now also seeing major firms promoting [professional standards for] financial planning and Financial Planning Week.”

One of those firms is Toronto-based HollisWealth Inc., which is sponsoring a session entitled “Transitioning from a sales focus to a professional planning practice” at the symposium.

Farhan Hamidani, HollisWealth’s chief operating officer and managing director, says advisors are feeling the pressure to adapt, given the industry’s evolution toward greater transparency due to requirements under the second phase of the client relationship model (CRM2).

“A lot has to do with CRM2,” Hamidani says. “Advisors not only have to prove the day-to-day of what they’re worth, clients will see [that worth] in a dollar value. What advisors have to do now is ensure that they’re not always focused on returns in a portfolio.”

Financial planning should be the base standard, Hamidani adds, explaining that many advisors on the brokerage side are looking to change their title to “wealth advisor,” thus making it apparent to consumers that financial planning is part of their practice.

“[Financial planning] is the long-term trend because people can do their own [investments] today,” says Keith Costello, president and CEO of the Mississauga, Ont.-based Canadian Institute of Financial Planners.

Specifically, clients want to know why they should be paying for advisors’ services, given that there are lower-cost models (such as robo-advisors) entering the advisory field. Thus, he adds, moving beyond simply selling products and starting to offer a comprehensive financial planning value proposition is become increasingly important for advisors.

Slowly but surely, advisors are getting that message. Statistics obtained from Investment Executive’s annual Report Card series reveal that more advisors are incorporating financial planning into their practice. For example, in this year’s survey, 81.8% of advisors across the board said they create financial plans for clients; that’s a healthy rise from in 2010, when 74.2% of advisors reported that they embraced financial planning.

Advisors in the survey also said that receiving “support for developing financial plans for clients” from their firms has become more important to their business. This year, advisors gave the category an overall average importance rating of 8.4 out of 10, up from 8.1 in 2010.

In contrast, the percentage of advisors’ clients who have a financial plan in place has not risen as dramatically over that time. This year, advisors reported that 50% of their clients have a financial plan in place, up slightly from 48.7% in 2010.

That shows that the industry, as a whole, and advisors, individually, still have work to do to promote financial planning to clients.

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