Do qualifications matter?

In the tv show Suits, Michael gets a job as an associate in top law firm Pearson Hardman, despite not having a law degree. They get several series out of this before he and the firm gets exposed and the firm is almost ruined.

In professions like the law or accounting, you have to be qualified to practice what you do. You have to report to The Law Society or the ACCA, who will carry out inspections of your practice and have the power to fine you or even remove your designation and the ability to practice.

Anyone can be a financial planner

In the worlds of financial planning, not so much. Which brings me to a recent podcast of The Real Adviser Podcast. This excellent podcast is aimed at financial planners who give good advice to their clients and carry out cashflow analysis. In a discussion on qualifications, two of the said they didn’t have any formal financial planning qualifications, one is qualified while the fourth host said nothing (neither his website or his LinkedIn profile lists his qualifications).

This is not to denigrate the work that any of these financial planners do, they are certainly doing the right thing for their clients and help them make great decisions on their finances. They are certainly the good guys.

But anyone is able to call themselves a financial planner, even people who are out take advantage of people looking for advice on their money. It is impossible to distinguish the advisor who wants to give good advice and lifelong cashflow analysis and get paid from it from the guy who wants to sell you products all the time and maximise the level of commission they can get from it. While the former is certainly growing in number, there are plenty of the latter around and they aren’t a dying breed. I have come across a lot of cases where people were sold high commission products by young advisors.

One of the easiest ways to differentiate yourself from others is to be qualified and part of an organistation that imposes certain standard on its members.

Currently, the minimum requirement needed to call yourself a financial advisor is the Qualified Financial Advisor (QFA) designation. This is the qualification which meets the Central Bank’s Minimum Competency Code (MCC) requirements for selling and advising of financial products. It does not impose any standards and once you have the qualification, you can sell as many high commission products as you want.

A Certified Financial Planner has to be a QFA. They then have to complete a graduate diploma in financial planning and then sit a financial planning exam (it’s not that hard) to get the CFP® designation. You have to pay an annual subscription to the Financial Planning Standard Board (FPSB) which is responsible for making sure that people pay to use the designation. They have a code of conduct but there is no enforcement of the code.

Where do we need to be?

Financial advice needs to get away from the “salesman” tag. I have worked for two of the Big 4 accountancy firms and I am well aware of the constant demand to get in fees and new clients. Sales is as big a part as professions like accountancy and law as anywhere else, but it is fee based and not being paid commissions to sell products. As members of a profession, accountants and solicitors are able to charge big fees for complex tasks and solutions as well as the more run of the mill tax returns and conveyancy.

Changing from an “industry” to a profession will take a huge effort. There will also be a lot of resistance from those making a lot of money charging big commissions and lobbying against change from the likes of Brokers Ireland.

  1. Minimum qualifications for anyone to be a called a financial planner.
  2. No grandfathering to become a financial planner. You get the qualification if you want to be a financial planner, experience doesn’t exempt you from doing the course and getting the exams.
  3. An authority with equivalent powers like The Law Society or the ACCA to ensure that their standards are being enforced.
  4. Restriction by life companies on the contract structures that a CFP® can use for their clients i.e. no high commission, high cost structures allowed.

But to start, advisors should have the minimum financial planning qualifications and in Ireland that’s the Certified Financial Planner designation.


27 February 2023