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Behavioral Finance Or Bust!

By Patrick Canion, CFP

“Call ten people, make three appointments. One of them will cancel, one won’t be interested, and the third will make you a sale.”

That golden rule, along with some explanation of how to calculate premiums from the company rate book, was the essence of my first training course as an insurance agent in 1987 – the background of many of Australia’s financial advisers.

How far we have come!  For some time, financial planning representatives have worked with the Government and institutions to establish educational qualifications at Diploma, Advance Diploma and post-graduate levels to bring the necessary academic rigor to financial planning.  Of course, all of these integrate with the educational requirements of being a CERTIFIED FINANCIAL PLANNER professional.

This education is a necessary component of achieving recognised professional status.  More importantly, it is what our clients deserve.  Some of the poorest outcomes can result from well intentioned, but technically uninformed advice.

Bachelor of Financial Planning

It is the vision of the Financial Planning Association to have a recognised graduate degree, the Bachelor of Financial Planning, as a leading academic qualification for aspiring financial planners.

In 2011, the FPA established the Financial Planning Educational Council.  FPEC, composed of representatives of the Academic and Professional communities, was asked to review the existing programs on offer for financial planners and design a pathway to a recognised tertiary qualification.

This involved input from many tertiary institutions to develop a curriculum that:

  1. suitably prepared advisers for their responsibilities, and
  2. could be delivered consistently across a range of institutions.

Recently, FPEC announced it would be developing an Australian Curriculum for Financial Planning, as well as a framework for education providers and courses to be accredited.

Contemporary Research and Libraries of Learning

My hope is that along with this curriculum, a recognised research protocol, similar to academic journals, can be established. That way, students and professionals can access a deep library of learning and information with which to inform their advice.  With so much regulatory and economic change, it is too easy for planners to rely on ‘rules of thumb’ that can lose their veracity over time.  Our advice needs to be contemporary with the latest research.

I also hope that this body of knowledge about financial planning has a heavy emphasis on behavioural finance.  As corny as my sales training was, it contained enough elements of truth regarding how people act with money to make it useful, even today.  Every experienced planner knows that the single most critical element of success in a financial plan is how people act with their money. This element is more important than tax law, asset allocation, or changes of government. Unless our education recognises this, I believe that it will fall short of what is required.

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