DON’T GET CONFUSED
There is an important distinction between a financial planning professional and the financial planning industry
Financial planning is the comprehensive process of identifying and matching the life goals, plans and financial stability of an individual, a family or a juristic entity with a specially designed financial plan involving specific actions aimed at meeting some or all of the goals on a phased basis throughout the time frame identified by those different entities.
From the outset, though, it is important to clarify the distinction between the financial planning industry and the financial planning profession.
The regulator sets minimum competency standards for those licensed to provide specific financial services. Conversely, the profession establishes professional standards benchmarked against global norms and best practices. This underscores the significance of regulatory protection for the term “financial planner”. Consumers, and even some within the industry, sometimes conflate a financial planner with someone who simply meets minimum licensing standards.
There is no doubt that the South African financial services industry has made significant strides since the introduction of the Financial Advisory & Intermediary Services (FAIS) Act. However, it remains a
To what extent do those international standards align with the conditions and concerns faced by the average South African?
considerable distance from the competency levels of a certified financial professional (CFP) .
Few things in today’s world have a more direct impact on our wellbeing than our financial status. Securing and enhancing our financial lives, for ourselves and our dependants, is vital. Few people will have access to the kind of intimate and personal conversations that a financial planner will be trusted with.
As a result, the financial planning profession has been described as a helping profession. Professions require their members to be appropriately educated and experienced, to act ethically, adhere to professional standards and to act in the interests of their clients and society at large.
This need catalysed the birth of the Financial Planning Institute of Southern Africa (FPI). It emerged as a nonprofit entity in 1981, originally called the Institute of Life & Pension Advisers (ILPA). Its primary mission was to raise the bar for professional standards in the crucial domain of financial advice.
The ILPA’s inception wasn’t an isolated event; it aligned with a global movement aimed at professionalising the financial advisory sector.
As the late 20th century saw financial support and investment mechanisms grow increasingly intricate, coupled with instances of unscrupulous individuals perpetrating fraudulent schemes within the industry, there emerged a global trend towards establishing professional standards.
This movement had its roots in countries such as the US, England and Australia. When South African pioneers in financial planning considered a framework for standard setting, they looked to this model.
In its quest to bring international standards to South Africa, the FPI played a role by becoming a founding member of the International Financial Planning Standards Board (FPSB), the global custodian of the
CFP designation.
To be a CFP indicates that a person has achieved an internationally recognised standard of knowledge, coupled with practical experience and unwavering ethical standards, equipping them to offer comprehensive financial guidance — at least for those clients who would benefit most from a First World model of financial planning.
And therein lies the debate: to what extent do those international standards align with the conditions and concerns faced by the average South African? What is not in question is whether South Africans across the board require unconflicted professional help. What this issue of Collective Insight focuses on is whether our financial services industry or our financial services professionals will be able to deliver that help without a rethink of their training and business models.