cifps conference - june 11, 2007 stepping it up …the future of financial planning, and other...

CIFPs Conference - June 11, 2007

Stepping It Up

…the future of financial planning, and other stories


Today’s Agenda

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?


A Profession?

Is financial planning a profession? Why or why not?


Tenets of a Profession

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


More Tenets

Commitment to continuous learning

Prime purpose of rendering a public service – public accountability

Standards based on concerted opinion and force of organization


A Profession in the Making

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



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


Stepping it Up

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



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


FPSC’s Vision

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


Professional Recognition

Joint Responsibility

Whose responsibility is it? FPSC Your professional association YourselvesWe all have to do our part


Tenets of a Profession

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


A Profession?

The facts - The Good News

2006 independent survey of CFP professionals tells us:CFP is most important pursuitCFP validates skillsCFP improves knowledgeCFP gives competitive advantage


A Profession?

Facts – More Good News

Consumer survey tells us:One in three adult Canadians know the

CFPCFP has the highest unaided awareness

of all FS designationsHigh levels of consumer satisfactionAssociated with positive attributes

o“Cares about me”o“is accessible”o“is in tune with my needs”


A Profession?

The Less Good News

Consumer PerceptionsVery strong association with

“salesperson”Weak association with important

characteristics of a professionoConsistentoThoroughoUnbiasedoProfessional


A Profession?

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


Financial Planning?

Poor understanding of what financial planning represents, and its public value

Case in point…


Where are We Today?

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


Where are We Today?

More Not-so-Good

Still limited provision of comprehensive financial planning among the FP community – is this serving the public?

Very few consumers pay directlyMost Canadians don’t have a financial

plan Those that claim to have one didn’t use a

financial planner to design it!


The Gaps –

Who’s Going to Fix Them?

FPSC’s responsibilities CFP professionals’ responsibilities


FPSC’s Role Revisited

Establish appropriate requirements for entry to the profession consistent (“inputs”)Rigorous ExaminationAppropriate experience requirementsAppropriate, relevant education


FPSC’s Role

Establish and oversee standards that CFP professionals must meet (“outputs”)Standards of PracticeStandards of Ethical ConductStandards of Competent Performance


The Work Ahead

FPSC’s Ongoing Mandate

Enforce all standards Require and enforce relevant CPD Continue to define the profession,

but through you Promote the value proposition


The Outputs

Standards for CFP Professionals

Ethical conduct Practice Competent performance


Standards for the Profession

Ethical Conduct

Defined by Code of EthicsWell establishedWell definedWell adhered toRigorous systems in place to enforce


Standards for the Profession

Standards of Practice

Practice StandardsWell established?Well adhered to?Rigorous systems in place to enforce?


Practice Standards

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


Practice Standards

Reaction of the CFP Community

Generally embraced – recognition of benefits to the profession

Some see this as merely another “compliance” measureIf we are going to be recognized as a

profession, we need to overcome this attitude


Practice Standards

Implementation Issues

Greatest concern from practitioners regarding Standard 100How do I write an Engagement Letter?What should it look like?I need further guidance“We already have enough compliance

burden”


Practice Standards

FPSC’s response

FPSC guide to implementation of Standard 100 developedSeven scenariosSuggested phrasesDirect link:

http://cfp-ca.org/pdf/FPSC-Resource-for-Practice-Standard-100.pdf




Practice Standards

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


Practice Standards

Overcoming Challenges

Use all resources available to youWork with your organizationShare ideas with your peers – get involved in

your association and join or create a chapterFPSC will assist through ongoing guidance,

employer visits, etc. Understand the intent, scope and rationale

for the Practice StandardsAsk yourself – am I meeting my personal

obligations establishing the financial planning profession?


Standards of Competence

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”


Knowledge Syllabus

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”


Competency Analysis

FPSC’s Competency Profile

PrinciplesContent built and validated by

practising CFP professionalsFuture-focusedDesigned to help drive the professionShould be “job neutral”Should be “knowledge-independent”


Competency Profile

Defining the Profession

The ChallengeEstablish a cross-sectoral task force of

50 experts from across the countryCharge them with creating a one-page

document that defines the profession


Competency Profile


Likely ResultA one page document that defines the

profession, signed by the chairA 49 page appendix made up of 49

separate one-page dissenting opinions


Competency Profile


Next step – if we can get over that hurdle

Define the profession worldwide No small task!


Competency Profile

Good News!

We Did It!


Competency Analysis

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


Competency Analysis

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


Competency Analysis

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.


FPSC’s Competency Analysis

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


Competency-Based Approach

More than knowledge, More than proficiency

“Competencies provide a description of the abilities that a CFP professional must possess and represent not just the tasks, but also incorporate the job-related skills, knowledge, attitudes and judgements required by members of the profession.”


Competence

More than just knowledge

A competent professional must demonstrate the inherent characteristics of a professional, not just knowledge and skill

Knowledge, abilities and professional skills all contribute to competence


Competency Analysis

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


Competency Analysis

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


Competency Analysis

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


Competency Analysis

Profile Overview - Knowledge

Knowledge elements were identified only after establishment of competencies.

11 Knowledge domains established


Competency Analysis

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

CFP PROFESSIONAL COMPETENCY PROFILE FINANCIAL PLANNING FUNCTIONS

COLLECTION ANALYSIS SYNTHESIS 1.0 Collects the information required to create a

financial plan.

2.0 Identifies potential opportunities and constraints and assesses information to formulate strategies.

3.0 Synthesizes information to formulate and evaluate strategies to create a financial plan.

Fundamental Financial Planning Practices

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

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

1.1 Collects the quantitative information required to create a financial plan

1.2 Collects the qualitative information required to create a financial plan

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

Finan

cial

Man

agem

ent

1.101 Collects information regarding the client’s assets and liabilities

1.102 Collects information regarding the client’s cash flow, income and/ or obligations

1.103 Collects information necessary to prepare a budget

1.104 Identifies the legal issues that affect financial management

1.105 Prepares statements of the client’s net worth, cash flow and budget

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

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

3.101 Develops financial management strategies 3.102 Evaluates advantages and disadvantages of each financial management strategy 3.103 Optimizes strategies to make financial management recommendations 3.104 Prioritizes action steps to assist the client in implementing financial management recommendations

Ass

et

Man

agem

ent

1.106 Collects information necessary to prepare detailed statement of investment holdings

1.107 Determines the client’s current asset allocation

1.108 Identifies cash flows available for investment

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

2.105 Calculates required rate of return to reach client's objectives

2.106 Determines the characteristics of investment holdings

2.107 Determines the implications of disposing of assets

2.108 Identifies potential investment vehicles

2.205 Assesses whether investment return expectations are consistent with risk tolerance

2.206 Assesses whether asset holdings are consistent with risk tolerance and required rate of return

3.105 Develops asset management strategies 3.106 Evaluates advantages and disadvantages of each asset management strategy 3.107 Optimizes strategies to make asset management recommendations 3.108 Prioritizes action steps to assist the client in implementing asset management recommendations

Finan

cial

Pla

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ponen

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Ris

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anag

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1.109 Collects details of the client’s existing insurance coverage

1.110 Identifies potential financial obligations

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

2.109 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

3.109 Develops risk management strategies 3.110 Evaluates advantages and disadvantages of each risk management strategy 3.111 Makes risk management recommendations 3.112 Prioritizes action steps to assist the client in implementing risk management recommendations


CFP Competency Profile

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


Competency Profile

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


The Competency Profile

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!


Financial Planning and CFP

What Next?


Where from Here?

FPSC’s Vision – for the CFP

The Gold Standard of Financial Planning

Truly desirable professional pursuit In high demand Influential by virtue of its stature


FPSC’s Strategic Plan

Desired Outcomes

Respect in the profession and CFP professionals

We’re not quite there yet…


Trust in the Profession

Our Plans - 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


FPSC and CFP Certification

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


Evolution of the Profession

Changes Ahead

Develop government and regulatory relations

Enhance certification system and pathways

Enhance our governance structure Hear more from you


Evolution of the Profession

In Closing

We can lead, but ….Professions are built from within

Get involvedWith FPSCWith your association

Believe Our standards are your standards!


Thank You for Your Time and

Patience

…now let’s go step it up!

cifps conference - june 11, 2007 stepping it up …the future of financial planning, and other...

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