A Higher Standard in Financial Planning

Financial planning matters

In fact, according to a recent poll completed for the Financial Planning Standards Council (FPSC), 81% of respondents who have completed a comprehensive financial plan with a Certified Financial Planner feel they are on track with their financial affairs. In contrast, only 44% of people who have not completed comprehensive planning feel they are on track.

Sixty-five per cent of those who have completed planning feel they are prepared to manage through tough economic times, compared to only 36% of people who have not done formal financial planning. Over twice as many people (60% vs 28%) who have a comprehensive financial plan feel they are prepared for unexpected emergencies and half of the people completing planning with a financial planner are confident they will be able to retire when they want to, compared to just 22% who have not done the necessary planning.

There is strong evidence that people working with a financial planner are more confident about their financial future, feel better prepared to manage through tough economic times or financial emergencies and are more likely to be prepared for retirement. However, there is a broad lack of understanding, and a real lack of regulation over who can, or cannot call themselves a financial planner.

According to the FPSC, anyone in Ontario call themselves a financial planner without having any qualifications to back it up. This can lead to a case of buyer beware, as there is no legislated standard in place for financial planners or for those who offer financial planning services.

Professional regulation is a provincial matter and the Ontario government is taking preliminary steps toward dealing with this important consumer protection issue and has appointed an expert committee to review regulations relating to financial advisors and planners with the goal of helping investors and consumers make informed investment and financial choices, as well as to enhance oversight in this sector. However, strict competency and ethics requirements, overseen by a professional standards-setting and certification body, do exist.

The title of Certified Financial Planner® professional is restricted by law to those who have met and continue to meet clearly defined and enforced standards of competence, ethics and performance. CFP® professionals have had to demonstrate their financial planning competence through extensive education, a rigorous standardized national examination process, comprehensive continuing education requirements and accountability to Financial Planning Standards Council for a code of ethics, practice standards and the rules and regulations of a professional body.

FPSC certificants, including CFP professionals, must adhere to the eight-point FPSC® Code of Ethics that emphasizes accountability, to the public, clients and colleagues, and are as follows:

Eight-point FPSC® Code of Ethics

1) Put My Clients’ Interests First

Top of the list is a written obligation to put clients’ interests first at all times—even if there are differences in compensation for selling one product over another. To maintain certification, every CFP professional must re-attest to this principle annually and agree to be bound by it and accountable.

2) Act with Integrity

Trust and confidentiality are cornerstones of integrity. A CFP professional must uphold the principle of integrity at all times, inspiring confidence and upholding a strong moral compass. You’re entrusting your financial future to your planner. It’s only right they be held to the highest ethical standard.

3) Be Objective

Objectivity means keeping emotions, personal bias and competing priorities out of the decision-making process. CFP professionals make recommendations based on sound knowledge, strong judgement and a full understanding of their clients’ goals and objectives.

4) Maintain Competence

It’s not enough to qualify for CFP certification just once in a lifetime. In addition to meeting demanding certification requirements, CFP professionals must keep their skills up-to-date and develop additional knowledge throughout their career. This enables a CFP professional to provide effective advice and service to clients as the financial environment evolves and individual circumstances change.

5) Be Fair and Open

Fairness is about impartiality and disclosure. CFP professionals must be honest and objective, providing advice and planning without regard to compensation, bias, employer or any other interests. They must also communicate at a level that’s understandable to clients. When you begin working with a CFP professional, he or she will clearly and transparently communicate to you the services to be provided, any potential conflicts of interest they’re aware of, how they’ll be compensated and what you can expect from the relationship.

6) Maintain Confidentiality

As electronic data storage becomes more pervasive, the protection of private information is critical. A CFP professional is bound to ensure the protection of all client data regardless of how it is stored or delivered. That includes digital and paper files and correspondence, as well as verbal discussion.

7) Act Diligently

Diligence is about being mindful when guiding, informing, planning and delivering financial advice and services to clients. Circumstances can change quickly in your life and the world around you. A CFP professional has the knowledge and ability to respond effectively to those changes and help motivate you to take actions that will help you reach your financial goals.

8) Act Professionally

Beyond the expertise required to practice in a field, it’s the high standard of ethics, behaviour and service, and the manner in which the service is delivered, that sets an individual apart as a professional. By following the FPSC® Code of Ethics, CFP professionals hold themselves to a level of professionalism that inspires confidence, respect and trust. The CFP designation is the mark of a professional that puts clients’ interests first.

The world of financial planning, insurance and investing is confusing enough without trying to understand the competency requirements of those providing financial advice. By working with a Certified Financial Planner professional, you are choosing to place your confidence in an advisor who has committed to a higher standard and a set code of ethics.