FINANCIAL PLANNING

ENGAGE A PROFESSIONAL TO GUIDE YOU ON MONEY MATTERS

PROFESSIONAL, objective financial advice has, until fairly recently, been hard to come by. Countless South Africans have lost money at the hands of salespeople calling themselves financial advisors, who, among other transgressions, have exposed clients to high-risk investments or needlessly “churned” them into new products. Driven by commissions and preying on the vulnerable and ill-informed, they succeeded in giving the industry a bad name and eroding public trust.

Since its formation in 1981, the Financial Planning Institute (FPI) has been instrumental in elevating financial planning to the status of a profession and winning back the trust of consumers.

Next week is Financial Planning Week, so I thought it appropriate to update you on the FPI, the professional body for financial planners, and give you an idea of what its members can offer you.

While the terms “financial advisor” and “financial planner” are often used interchangeably, “financial planner” has come to be reserved for the professional echelon of the financial advice industry, at the pinnacle of which are FPI members holding the internationally recognised Certified Financial Planner (CFP) designation.

The FPI has been offering the

CFP certification to South African financial planners for about 20 years. A non-profit body, it is a founding and affiliate member of the Financial Planning Standards Board (FPSB), a global network of organisations in 27 countries and owner of the CFP mark outside the US. According to the FPSB’s website, there are more than 181 000 CFP professionals worldwide.

According to David Kop, executive director: relevance at the FPI, there are about 4 800 CFP professionals in South Africa, of which 3 800 are practising. This represents a relatively small portion of all financial advisors and intermediaries in the country, which number in the tens of thousands.

Of the practising CFP professionals, about half are employed by the large product providers or are so-called “tied agents” of these companies, offering only their products. The remainder are independent advisors with their own businesses or employed by independent advisory firms, and these planners typically offer a range of products from different providers.

Members must uphold the institute’s values and, importantly, adhere to its Code of Ethics and Practice Standards, which, essentially, ensure that your interests come first (see “Ethical code”). They must also earn a specified number of CPD (continuous professional development) points a year, ensuring they are on top of developments in financial services.

THE CFP PROFESSIONAL

To qualify for the CFP designation and become a fully fledged member of the FPI, a financial planner must possess a postgraduate diploma or BCom Honours in financial planning, have three years’ relevant practical experience, and have passed the CFP professional competency examination.

Lelane Bezuidenhout, recently appointed chief executive of the FPI, says six tertiary institutions around the country offer the postgraduate diploma or BCom Honours in financial planning. The curricula of these courses have been structured to meet the international standards set by the FPSB.

Kop says that more and more young people are embarking on a career in financial planning when they leave school, as against people “drifting” into the industry from other careers, as tended to be the case in the past. He says the FPI provides a well-supported and well-defined career pathway for school leavers wanting to become financial planners – other designations on the pathway are Financial Services Advisor and Registered Financial Practitioner. The FPI and its members also provide mentorship to help prospective planners gain the necessary work experience, particularly in drawing up financial plans for clients.

FINANCIAL PLANNING AT ITS BEST

Kop and Bezuidenhout see the professionalisation of the financial advice industry being driven mainly by the consumer, who, with greater access to information and a greater awareness of what is available – through the wonders of technology – is demanding more in terms of choice and transparency. Kop says there is a distinct move to separate the selling of products from advice, and it is gratifying to see regulators putting their weight behind this change.

At the heart of financial planning is the drawing up of a long-term financial plan for you and your family. The FPSB provides CFP professionals with practical guidelines on engaging with clients and drawing up and maintaining a financial plan (see “The FPSB’s six-point planning process”). But, as I have pointed out in previous columns, there is a lot more to the profession than number crunching (see Rands & Sense, directed at financial planners, by Kevin Feather from Allan Gray, on page 14).

The FPI has recognised this shift, which Kop says is away from the business of transactions to the business of relationships.

Bezuidenhout says the behavioural side of financial planning, which ensures that investors remain on track with their long-term objectives, is more and more evident in the CPD events scheduled for its members. One such event was the Humans Under Management conference, held recently in Johannesburg and Cape Town, which focused specifically on the human side of the profession, including life coaching and listening skills.

Bezuidenhout says: “Fintech solutions can do the basics for you, but only a human can really understand what your personal issues are, and this is the true value a professional can bring to the client.”

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