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Smaller Firms Driving Growth of the Financial Planning Profession in the UK

By Nick Cann, CFP

Regulatory change is accelerating the growth of the financial planning profession in the UK. Over the past 25 years we have seen slow but solid growth in the profession. This has been driven by the smaller firms, consisting of between one and five advisers, rather than the larger firms, which have predominantly been responsible for providing more product-focused advice.

In the UK, financial planning has been characterised by small firms, which have been the early adopters of qualifications, fees, technology and client-centric, service-based propositions. This is how financial planning has been developed in the UK and one of the reasons that there are perhaps still just under 1,000 CFPCM  professionals in what is perceived as a very mature financial market. Regulatory requirements and market forces have not encouraged the financial planning model so far.

A Changing Regulatory Environment

This has, however, changed in recent years. It is anticipated that growth in this model will continue as the Retail Distribution Review driven by the Financial Services Authority (FSA) starts to impact the UK market. Put simply, retail firms now need to ensure that they have increased their knowledge requirements to a new higher base and, more importantly perhaps, changed their remuneration structure. Commission will be banned from the beginning of 2013 and remuneration will now have to be agreed with clients. This will mean that advisers need to be able to justify their value to their clients so that they are in a position to survive and hopefully flourish post 2013.

This is great news for financial planning and financial planners. To differentiate, we anticipate more embarking on the CFPCM certification programme. This is clearly a higher level qualification to the regulatory minimum but more importantly, it helps individuals understand and embrace the six-step process and use it to do a more effective job with their clients. In particular, it helps advisers shape their proposition so that they can confidently deliver value. Recent surveys confirm that CFPCM professionals feel that they do a better job for their clients and also earn more money as a result.

Professional Body Looks Forward to Growth

The Institute of Financial Planning (IFP) is gearing up for an increase in those embarking on a career in financial planning. This could result from some individuals who have, to date, been focused on the provision of product-related advice, but also by attracting new entrants from other professions. The UK has seen the emergence and growth of the paraplanner role in recent years. This is making a significant impact on financial planning businesses. Better understanding of the roles and the individual skill requirements is also creating better businesses as a result and that the consumer is better served by those giving the advice.

At long last the UK should now see more rapid growth within the financial planning profession. In the main, this will ensure that those consumers with wealth, or those from the mass affluent ranks with more complex needs will benefit because they will be happier to pay for this sort of service. The downside of the regulatory changes will currently prohibit the mass market accessing financial planners. This is not helped by the lack of sophistication in technology in the UK currently, to deliver engaging and compelling solutions to serve the mass market.

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