CIFPs Conference - June 11, 2007
Tenets of a Profession
FPSC’s role
Where are we today?
The challenges
What’s FPSC doing about it?
The Competency Profile in Detail
Where to from here?
CIFPs Conference - June 11, 2007
Is financial planning a profession?
Why or why not?
CIFPs Conference - June 11, 2007
Requires high level of education
High standards of conduct
Generally accepted standards of practice
Clearly defined, unique set of knowledge, skills and abilities with high standards of achievement
CIFPs Conference - June 11, 2007
Commitment to continuous learning
Prime purpose of rendering a public service – public accountability
Standards based on concerted opinion and force of organization
CIFPs Conference - June 11, 2007
FPSC’s Mission
Benefit the public by leading the evolution of financial planning through the development, enforcement and promotion of the highest competency and ethical standards in financial planning as defined by CFP
professionals
CIFPs Conference - June 11, 2007
FPSC’s Purpose
Build and continuously define the financial planning profession through
CFP
certification, ensuring that it is a viable, sustainable and rewarding profession that serves the public interest
CIFPs Conference - June 11, 2007
The Result
Through our work (and the work of the professional community) we build trust in the profession and the CFP
practitioner community
This in turn paves the way for CFP
professionals to succeed
CIFPs Conference - June 11, 2007
The Result
Recent survey in the U.S. of CFP
professionals listed obtaining CFP
certification as number three success factor.
First two factors spoke to subsidiaries of
CFP
certification – communications and trust
CIFPs Conference - June 11, 2007
For FPSC
The standards-setter for the profession
Influential promoter of public interest
Influential advocate for the profession
Unique in our clearly defined role as the professional regulatory authority for FP
Influential promoter of the value of FP and of CFP
certification
The organization that leads the way to a strong and respected profession represented by CFP
professionals
CIFPs Conference - June 11, 2007
Joint Responsibility
Whose responsibility is it?
FPSC
Your professional association
Yourselves
We all have to do our part
CIFPs Conference - June 11, 2007
The Gaps
Cannot be seen as a marketing tool
Must be recognized as serving public good
Must have uniformity and consistency of service
Must be perceived distinct value to public
CIFPs Conference - June 11, 2007
The facts - The Good News
2006 independent survey of CFP professionals tells us:
CFP is most important pursuit
CFP validates skills
CFP improves knowledge
CFP gives competitive advantage
CIFPs Conference - June 11, 2007
Facts – More Good News
One in three adult Canadians know the CFP
CFP has the highest unaided awareness of all
FS designations
High levels of consumer satisfaction
Associated with positive attributes o “Cares about me” o “is accessible” o “is in tune with my needs”
CIFPs Conference - June 11, 2007
The Less Good News
Consumer Perceptions
Very strong association with “salesperson”
Weak association with important characteristics of a profession o Consistent o Thorough o Unbiased o Professional
CIFPs Conference - June 11, 2007
More Not-so-Good News
25% of YOUR CLIENTS don’t know that you hold the CFP!
50% of those who do know don’t know what it means
CIFPs Conference - June 11, 2007
Poor understanding of what financial planning represents, and its public value
Case in point…
CIFPs Conference - June 11, 2007
The Good
17,000 strong community
High standards of entry
Exceptionally high retention rate
Growing awareness of financial planning and of CFP
as the profession’s standard
No credible alternative professional credential
CIFPs Conference - June 11, 2007
More Not-so-Good
Still limited provision of comprehensive financial planning among the FP community – is this serving the public?
Very few consumers pay directly
Most Canadians don’t have a financial plan
Those that claim to have one didn’t use a financial planner to design it!
CIFPs Conference - June 11, 2007
Who’s Going to Fix Them?
FPSC’s responsibilities
CFP
professionals’ responsibilities
CIFPs Conference - June 11, 2007
Establish appropriate requirements for entry to the profession consistent
(“inputs”)
Rigorous Examination
Appropriate experience requirements
Appropriate, relevant education
CIFPs Conference - June 11, 2007
Establish and oversee standards that CFP professionals must meet (“outputs”)
Standards of Practice
Standards of Ethical Conduct
Standards of Competent Performance
CIFPs Conference - June 11, 2007
FPSC’s Ongoing Mandate
Enforce all standards
Require and enforce relevant CPD
Continue to define the profession, but through you
Promote the value proposition
CIFPs Conference - June 11, 2007
Standards for CFP Professionals
Ethical conduct
Practice
Competent performance
CIFPs Conference - June 11, 2007
Ethical Conduct
Defined by Code of Ethics
Well established
Well defined
Well adhered to
Rigorous systems in place to enforce
CIFPs Conference - June 11, 2007
Standards of Practice
Practice Standards
Well established?
Well adhered to?
Rigorous systems in place to enforce?
CIFPs Conference - June 11, 2007
Why are They So Important?
Clarify expectations between planner and client
Better-informed public
Enhanced confidence in the profession
Establish consistency and uniformity
Guidance for CFP professionals
CIFPs Conference - June 11, 2007
Reaction of the CFP Community
Generally embraced – recognition of benefits to the profession
Some see this as merely another
“compliance” measure
If we are going to be recognized as a profession, we need to overcome this attitude
CIFPs Conference - June 11, 2007
Implementation Issues
Greatest concern from practitioners regarding Standard 100
How do I write an Engagement Letter?
What should it look like?
I need further guidance
“We already have enough compliance burden”
CIFPs Conference - June 11, 2007
FPSC’s response
FPSC guide to implementation of Standard
100 developed
Seven scenarios
Suggested phrases
Direct link: http://cfp-ca.org/pdf/FPSC-
Resource-for-Practice-Standard-100.pdf
CIFPs Conference - June 11, 2007
Ongoing Implementation Challenges
CFP professionals not fully aware of obligations
Public not fully aware of expectations
Not all organizations fully aligned with planners
Oversight challenges
CIFPs Conference - June 11, 2007
Overcoming Challenges
Use all resources available to you
Work with your organization
Share ideas with your peers – get involved in your association and join or create a chapter
FPSC will assist through ongoing guidance, employer visits, etc.
Understand the intent, scope and rationale for the Practice Standards
Ask yourself – am I meeting my personal obligations establishing the financial planning profession?
CIFPs Conference - June 11, 2007
The Missing Piece
While Practice Standards further define the process, they don’t address what
exactly a financial planner should be able to do
Previous approaches to certification were based primarily on knowledge – what must a CFP professional “know”
CIFPs Conference - June 11, 2007
Gaps
Students: “Why do I have to know that”
CFPs : “Getting the designation did not demonstrate my ability to perform financial planning.”
Employers: “We hire a CFP, who knows a lot, but we still have to teach them how to be a planner.”
The Public: “I don’t really understand exactly what a CFP professional can do for me.”
Internationally: “A CFP in Canada doesn’t mean the same as a CFP in Hong Kong/Australia/Japan”
CIFPs Conference - June 11, 2007
FPSC’s Competency Profile
Content built and validated by practising
CFP professionals
Future-focused
Designed to help drive the profession
Should be “job neutral”
Should be “knowledge-independent”
CIFPs Conference - June 11, 2007
Defining the Profession
The Challenge
Establish a cross-sectoral task force of 50 experts from across the country
Charge them with creating a one-page document that defines the profession
CIFPs Conference - June 11, 2007
Defining the Profession
Likely Result
A one page document that defines the profession, signed by the chair
A 49 page appendix made up of 49 separate one-page dissenting opinions
CIFPs Conference - June 11, 2007
Defining the Profession
Next step – if we can get over that hurdle
Define the profession worldwide
No small task!
CIFPs Conference - June 11, 2007
Good News!
We Did It!
CIFPs Conference - June 11, 2007
Premise – CFP Professionals Defined
Provide wide range of financial strategies
Unique breadth of competencies
Wide breadth of knowledge
Work across multiple domains
Unique ability to identify and analyze inter-relationships among objectives –
“integration” across multiple domains
CIFPs Conference - June 11, 2007
Distinction between CFP and Specialists
Specialists can provide expert advice within their areas of expertise
Only CFP professionals can identify and create appropriate strategies across all domains to match the client’s situation, circumstances and values
CIFPs Conference - June 11, 2007
Fundamental Premise
Competencies built on definition of financial planning:
“Process of creating strategies to help clients manage their financial affairs to meet life goals”
The profile applies to the practice of financial planning – not product sales and not specialization.
CIFPs Conference - June 11, 2007
Why the big deal?
Focus in FS industry shifting from “sales” to “advice”
While CFP leads the way, potential competitors still risk threatening CFP’s authority
After 15 or more years, no clearly-defined profile currently exists for professional financial planners
Provides pre-emptive measure to ensure ISO is complementary, rather than a threat, to the CFP
Provides regulators with clear distinction between CFP competencies and those of other financial advisors
Can fit neatly into any regulatory or political agenda
Can pave the way to professional self-regulation
CIFPs Conference - June 11, 2007
Competency-Based Approach
More than knowledge, More than proficiency
CIFPs Conference - June 11, 2007
More than just knowledge
CIFPs Conference - June 11, 2007
Profile Overview
Key to CFP professionals’ uniqueness is that competencies must be drawn upon concurrently, even across multiple domains
CFP professionals must be able to wade through the confusion and develop appropriate strategies
These are the truly distinguishing ability of a financial planning professional
CIFPs Conference - June 11, 2007
Profile Overview – Core Domains
Competencies broken down as follows:
Three broad functions:
Collection
Analysis
Synthesis
Six components:
Financial Management
Asset Management
Risk Management
Tax Planning
Retirement Planning
Estate Planning
CIFPs Conference - June 11, 2007
Profile Overview – Three additional elements
Fundamental financial planning practices
“Competencies that cut across all financial planning components, or that supersede the components and speak directly to that part of financial planning that cannot be broken down.”
Professional skills
“Skills that speak to acting as a professional with clients and colleagues, and to the financial planner’s responsibility to the profession of financial planning.”
Underlying knowledge
CIFPs Conference - June 11, 2007
Profile Overview - Knowledge
Knowledge elements were identified only after establishment of competencies.
11 Knowledge domains established
CIFPs Conference - June 11, 2007
International Applicability
Competency profile developed to be transferable from country to country
Core competencies are separated from knowledge
Competencies should be consistent from country to country
CIFPs Conference - June 11, 2007
Fundamental
Financial
Planning
Practices
COLLECTION
1.0 Collects the information required to create a financial plan.
1.001
Identifies the client’s objectives, needs and values that have financial implications
1.002
Identifies the information required for the financial plan
1.003
Determines client’s attitudes and level of financial sophistication
1.004
Identifies material changes in the client’s personal and financial situation
1.005
Prepares information to enable analysis
CFP PROFESSIONAL COMPETENCY PROFILE
FINANCIAL PLANNING FUNCTIONS
ANALYSIS
2.0 Identifies potential opportunities and constraints and assesses information to formulate strategies.
SYNTHESIS
3.0 Synthesizes information to formulate and evaluate strategies to create a financial plan.
2.001
Analyzes the client’s objectives, needs, values and information to prioritize the financial planning components
2.002
Identifies inter-relationships among financial planning components
2.003
Identifies opportunities and constraints and assesses collected information across financial planning components
2.004
Assesses the impact of economic, political and regulatory environment
2.005
Measures the progress towards achievement of objectives of the financial plan
3.001
Prioritizes recommendations from the financial planning components to optimize the client’s situation
3.002
Consolidates the recommendations and action steps into a financial plan
3.003
Determines the necessity to revise the financial plan
CORE FINANCIAL PLANNING COMPETENCIES
2.1
Identifies potential opportunities and constraints
2.2
Assesses information to formulate strategies
3.1
Formulates and evaluates strategies to create a financial plan
1.1
Collects the quantitative information required to create a financial plan
1.101
1.102
Collects information regarding the client’s assets and liabilities
Collects information regarding the client’s cash flow, income and/or obligations
1.103
1.104
Collects information necessary to prepare a budget
Identifies the legal issues that affect financial management
1.105
Prepares statements of the client’s net worth, cash flow and budget
1.106
1.107
1.108
1.109
1.110
Collects information necessary to prepare detailed statement of investment holdings
Determines the client’s current asset allocation
Identifies cash flows available for investment
Collects details of the client’s existing insurance coverage
Identifies potential financial obligations
1.2
Collects the qualitative information required to create a financial plan
1.201
Determines the client’s propensity to save
1.202
Determines how the client makes spending decisions
1.203
Determines the client’s comfort with debt
1.204
Determines the client’s experience, attitude and biases with investments
1.205
Determines the client’s investment objectives
1.206
Determines the client’s tolerance for investment risk
1.207
Identifies the client’s return expectations
1.208
Identifies the client’s time horizon
1.209
Determines the client’s risk management objectives
1.210
Determines the client’s tolerance for risk exposure
1.211
Determines relevant lifestyle issues
1.212
Determines health issues
1.213
Determines the client’s willingness to take active steps to manage financial risk
2.101
Determines whether the client is living within financial means
2.102
Determines the issues relevant to the client’s assets and liabilities
2.103
Determines the client’s emergency fund provision
2.104
Identifies potential cash management vehicles
2.201
Assesses whether the emergency fund is adequate
2.202
Assesses the impact of potential changes in income and expenses
2.203
Identifies conflicting demands on cash flow
2.204
Assesses financing alternatives
2.105
Calculates required rate of return to reach client's objectives
2.106
Determines the characteristics of
2.107
investment holdings
Determines the implications of disposing of assets
2.108
Identifies potential investment vehicles
2.205
Assesses whether investment return expectations are consistent with risk
2.206
tolerance
Assesses whether asset holdings are consistent with risk tolerance and required rate of return
2.109
Determines characteristics of insurance coverage
2.110
Identifies potential risk management vehicles
2.207
Assesses exposure to financial risk
2.208
Compares the client’s risk exposure to current coverage
2.209
Assesses the implications of changes to insurance coverage
2.210
Prioritizes the client’s risk management needs
3.101
3.102
3.103
3.104
3.105
3.106
3.107
3.108
3.109
3.110
3.111
3.112
Develops financial management strategies
Evaluates advantages and disadvantages of each financial management strategy
Optimizes strategies to make financial management recommendations
Prioritizes action steps to assist the client in implementing financial management recommendations
Develops asset management strategies
Evaluates advantages and disadvantages of each asset management strategy
Optimizes strategies to make asset management recommendations
Prioritizes action steps to assist the client in implementing asset management recommendations
Develops risk management strategies
Evaluates advantages and disadvantages of each risk management strategy
Makes risk management recommendations
Prioritizes action steps to assist the client in implementing risk management recommendations
CIFPs Conference - June 11, 2007
Relevance to Building the Profession
Financial planning, perhaps more than any other profession, has unique country-specific knowledge requirements
A profession cannot exist solely within a single country
Financial planning competency is universal – only the underlying knowledge changes from country to country, and even there, the domains of knowledge remain consistent worldwide
CIFPs Conference - June 11, 2007
Relevance to the CFP Planner
Serves as reminder of expectations for competent performance
Helps employers better understand and market the value proposition
Gives clients firm understanding of what you can do for them
Serves as basis for continuous professional development
Further distinguishes you
CIFPs Conference - June 11, 2007
What’s it to you?
Read it
Understand it
Use it to validate your own competence
Paraphrase it to help your clients understand what you can do for them
Believe in the value of its contents
Make your clients understand the value
Be proud to be a CFP
!
CIFPs Conference - June 11, 2007
What Next?
CIFPs Conference - June 11, 2007
The Gold Standard of Financial Planning
Truly desirable professional pursuit
In high demand
Influential by virtue of its stature
CIFPs Conference - June 11, 2007
Desired Outcomes
Respect in the profession and CFP
professionals
We’re not quite there yet…
CIFPs Conference - June 11, 2007
What can FPSC do?
Partner with universities
Partner with allied professions
Focus promotion efforts on the FP value proposition
Focus more on employers
Better-align education and continuous professional development
CIFPs Conference - June 11, 2007
Changes Ahead
Build and leverage external relationships
Attract new high quality candidates to the profession and develop students
Help to ensure appropriate support and development structures to help CFP professionals develop professionally and contribute to the growth of the profession
CIFPs Conference - June 11, 2007
Changes Ahead
Develop government and regulatory relations
Enhance certification system and pathways
Enhance our governance structure
Hear more from you
CIFPs Conference - June 11, 2007
In Closing
We can lead, but ….
Professions are built from within
Get involved
With FPSC
With your association
Believe
Our standards are your standards!
CIFPs Conference - June 11, 2007
…now let’s go step it up!
CIFPs Conference - June 11, 2007