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The issue of professionalising financial planning is never far from the collective consciousness of our community. Debates spring up regularly about fee structures, delivery models, client propositions and even what an authorised planner should call themselves. Regularly, the cry goes up, “It is no wonder that consumers are confused!”
However, there tends to be a common theme in many of these debates. They often take place on a public forum but seldom actually involve any consumers or include any real reference to the consumer. If we are to properly professionalise and make a lasting difference to society I believe we need to break down the asymmetry of knowledge between the profession and the consumer. In essence, we need to fully democratise financial planning. By empowering the consumer to really understand what they should expect from a great financial planner, we in turn support the advancement of professionalism within financial planning.
To date, much of the work that has been done by various stakeholders has been inwardly focused by attempting to create standards of professionalism. This has been delivered in a largely top-down fashion by the organisations who are appointed either by consensus or by law. As we have seen over the years and continue to see today, this has a limited level of success, restricted to those who are willing and able to do the prescribed right thing.
I believe that with only a very few exceptions, everyone knows when they are doing the wrong thing. For those planners who are in a good place financially and achieving their goals, it is relatively easy to do the right thing. However, when there is pressure or threat, priorities shift, and it often becomes a case of whether doing the wrong thing can be justified.
So, whilst some people don’t require rules and set parameters in order to mark the boundary of what the right thing is, others do in order to ensure that they stay on track.
There is of course a third group who will only obey the rules if they are likely to be punished or if their self-interest is served.
When someone who is inclined to break the rules is better served by doing so with limited consequences, the course of action seems obvious. Applying more rules, stronger punishments or amplifying the noise of moral outrage will only have a limited effect on reducing client detriment in these circumstances. We regularly hear that client detriment is perpetrated by a small minority and that this undermines the profession. However, public trust in our profession is low and if we are to move the dial, we need to apply new thinking.
Don’t get me wrong, I am not saying that we should dispense with rules, professional bodies, regulators or any of the governance that comes with the establishment of a profession. I am saying that this can only go so far in eliminating poor practice. For us to move the dial on public trust we need to give the power to the consumer. It is often argued that if customers aren’t happy, they will vote with their feet.
However, too many people are disenfranchised when it comes to accessing basic information before we even consider financial advice. There are of course guidance bodies that provide excellent consumer facing information but we have to ask what the chances are of the disenfranchised being able to access this information. Just step back and think of the stories that emerged throughout lockdown of parents struggling to home school their kids on the single web-connected device they own.
As a profession, I believe we need to look outwards. We need to provide access to information and the tools people need in order to hold advisers and planners to account. We operate under the false pretence that consumers have choice. All too often they have options but how can you make a choice if you don’t understand the options?
For those advisers and planners who are already doing the right thing, they know that their clients trust them. However those clients who haven’t engaged with financial planning trust them far less due to the many actions that undermine trust in the sector.
By empowering consumers to understand the minimum standards that they should expect, they will be more able to hold their adviser to account. In turn, this will give greater incentive and motivation to those who would otherwise have been tempted to do the wrong thing, those who are morally routed in self-interest and fear of punishment, to actually do the right thing. This will in turn, I believe, increase public engagement and improve public trust.
Achieving this is no small task and it is not something that one organisation or a small number of organisations can do alone. In order to create lasting change we need to bring together a guiding coalition representing all stakeholders. Only by allowing these stakeholders to air their views and challenge the possible solutions can we gain the collective buy-in that will facilitate the changes needed. The top-down approach has got us so far and we should pause and recognise the progress made. It is time however for a new approach, to hand more power over to the consumer and allow ourselves to be held accountable.