Financial Planning Standards Council president and chief executive Cary List believes that by 2020 Canadians will have a greater appreciation of the work of financial planners.While progress has been slow in realizing some of the goals that the FPSC set five years ago to create an environment in Canada in which financial planning is valued, Mr. List is optimistic that they can be achieved by the 2020 target date.
In his opening address at the Vision2020 Symposium in November, Mr. List reviewed these goals:
- That all Canadian high school students will graduate with some form of financial planning education.
- That financial planning will be recognized as a profession.
- That regulatory restrictions will be in place on who can call themselves financial planners in Canada.
- That Canadians will know what to expect from a financial plan and a financial planner.
- That there will be a sufficient number of qualified, competent and ethical financial planners to serve Canadians.
He said the first goal, of integrating financial literacy in the public education system, still requires considerable work, and the extent to which financial literary is integrated into school curricula varies widely across Canada. “There is no common vision of how education has to change to accommodate this,” he said. “I suggest that acceptance of financial literacy and sound financial behaviour is still a long way off.”
He noted that there has been progress toward recognition of financial planning as a profession with the Coalition for Professional Standards for Financial Planners (which includes the FPSC, the Canadian Institute of Financial Planners, the Institute of Advanced Financial Planners and the Institut québécois de planification financière) working toward a self-regulatory framework for the official recognition of financial planning as a profession. “Together we can do so much more than we can alone,” he said.
And he applauded the announcement by Ontario Minister of Finance Charles Sousa to investigate the merits of proceeding with more regulation of financial planners and considering the appropriate regulatory framework for doing so.
But he said there is still much confusion on the part of Canadians about what constitutes a financial plan, and the difference between product advice and financial planning advice.
The area that has seen the most progress in the past five years is the growing number of qualified financial planners. Mr. List noted that are currently more than 22,000 men and women in Canada who hold either the certified financial planner designation or Quebec’s planificateur financier designation. There are also about 1,200 candidates on their way to becoming financial planners. But although this is by far the highest per capita of any affiliate country in the world, he said it is still not sufficient to meet the growing needs of Canadians.
Hallmarks of professionalism
Several speakers at the one-day symposium described some of the hallmarks of professionalism, and spoke of the value that professional financial planners bring to their clients. Ed Dunkelblau, a clinical psychologist and director of the Institute for Emotionally Intelligent Learning in Chicago, discussed the importance of developing “emotional intelligence.” The success of high achievers, he said, is primarily due to their ability to handle their emotions and their relationships, not their IQs. These skills—which include controlling impulses, coping with negative feelings and being good listeners—“can improve productivity and the bottom line at no extra cost,” he added.
Financial planners who show empathy for their clients are most likely to retain their business, Mitch Anthony, president of Advisor Insights Inc. in Rochester, Minn., said in his presentation titled Know Your Client. “There is only one path to empathy, and it is not telling clients how great you are,” he said. “It is having them tell you meaningful stories about themselves.
“What disturbs me about the financial services industry,” he added, “is its lack of discipline around client discovery. In this respect, it is the most undisciplined industry that I know of. “For some advisors, the client discovery process is largely, ‘Hi! How much have you got?’ Followed by, ‘Okay, I have the solution for you.’”
Be curious about your clients, Mr. Anthony said. “People love to talk about their backgrounds.” A good starting point, he added, is “Where are you from?” followed by “What was it like growing up there?” and “What was money like when you were growing up?”
The client’s story will shape the financial planner’s approach to various things in the relationship, including risk management. “If you don’t hear that story, you are dancing in a mine field,” Mr. Anthony said.
“And what you don’t know about your client will keep you from managing some of his money,” he added. “It will also stop him from referring others to you.”
A financial planner offers clients true value during their life transitions—major events such the birth of a child, the loss of a job, a divorce and the death of a spouse, Mr. Anthony said. “Guess when people make the worst decisions? Right in the middle of the chaos of change…Your job is to stop them from doing something stupid.”
In his presentation on ethics, Chuck Gallagher, president of Ethics Resource Group, a business ethics consultancy based in Greenville, S.C., talked about how easy it can be to slide down the slippery slope from ethical to non-ethical behaviour—and the consequences of doing so. A former chartered professional accountant, Mr. Gallagher found himself in financial difficulties after the birth of his son in 1987. “I needed to rectify that quickly. All it took was telling clients that I was the trustee of a private equity fund and would invest their money for them. I rationalized that I was borrowing their money and that I would pay it back. I paid it back and I did it again, and that was the beginning of a Ponzi scheme.”
In 1990, one of his clients needed to liquidate his holdings in the bogus fund. The scheme quickly unravelled and Mr. Gallagher spent two years in a federal U.S. prison.
He told the symposium that financial services companies need to install internal controls systems to deter employees from unethical behaviour. “Even rationalization is best addressed through advisor training that can examine the false logic that ‘everyone else is doing it’”, he added. “If I hadn’t been able to rationalize my behavior, I wouldn’t have had a problem.”
Mr. Gallagher said that in most cases of financial fraud, the fraudster displays the following red flags:
- living beyond his or her means.
- Experiencing financial difficulties.
- Exercising excessive control in the workplace.
- Having unusually close relationships with vendors and customers. >
“Make no mistake about it,” Mr. Gallagher said, “choices always have consequences.”