Cary List EVP and COO Financial Planners Standards Council

1. …. The CFP Yesterday, Today and Tomorrow Cary List EVP and COO Financial Planners Standards Council

2. ….The CFP Yesterday, Today and Tomorrow Today’s discussion: • What makes a profession? • Does financial planning meet the test? • Should the CFP community strive for recognition as a profession? • If so, how do we get there?

3. What makes a profession a profession?

4. A Profession Defined – My Favourite Definition “A calling, requiring specialized knowledge…including instruction in skills and methods [and the] scholarly principles underlying such skills and methods, maintaining, by force of organization or concerted opinion high standards of achievement and conduct, and committing its members to continued study and to a kind of work which has for its prime purpose the rendering of public service.” 1 1 Webster’s New International Dictionary

5. A Profession Defined One Piece at a Time: • Is Financial Planninga Calling? • If so, what exactlyis the calling that is financial planning? • More in a few moments

6. A Profession Defined – One Piece at a Time • Do CFPs “require specialized knowledge”? • Clearly yes – but is it the “right” knowledge? • More on this in a few moments too!

7. A Profession Defined – One Piece at a Time • Instruction in Skills and Methods? • Yes, through FPSC’s rigorous education program, but…

8. A Profession Defined – One Piece at a Time • “High standards of achievement and conduct maintained by force of organization and/or concerted opinion?” • Yes, through FPSCs Examination and Ethics standards, and through enforcement of same

9. A Profession Defined – One Piece at a Time • Requirement for “continued study”? • Yes, through CE requirements.

10. A Profession Defined – One Piece at a Time • Are members of the greater CFP community committed to “a kind of work which has for its prime purpose the rendering of public service”?

11. A Profession Defined – One Piece at a Time • While many CFPs are committed to serving the public good, if it is to be a true profession financial planning must: • Not be seen as solely a marketing tool • Be recognized as serving the public good

12. Two more key pieces of the puzzle • Two key pieces are missing: • At its heart, a profession must include uniformity and consistency of service • That is, Financial planning is financial planning is financial planning

13. Two more key pieces of the puzzle • If a tree falls in the forest….that is, • Without: • Public recognition of the CFP • Perceived public value • Recognition of financial planning as a public service • Can we really call financial planning a true profession?

14. Before we proceed… • Where is the CFP Today? • 16,000-strong • Growth exclusively through its rigorous certification program • 97% annual retention rate • Brand awareness continues to grow • No credible alternative professional financial planning designation

15. How did we get here? • Commitment of key individuals and organizations to stay the course towards consolidation of “alphabet soup” of designations • Commitment to highest standards and 4E program • Commitment to serving the public interest • Commitment of dedicated CFP professionals ….But, our work is far from done….

16. A little reality check • Recent poll and survey • Very limited provision of comprehensive financial planning • Very few pay for financial planning service directly • Most Canadians feel having a financial plan is at least somewhat important to them, but… • Most don’t have a plan, and… • Of those that do have a plan, most didn’t use a financial planner to design it!

17. A little reality check • While most Canadians believe having a financial planning designation is important… • They don’t know what the designations are! • Most believe that financial planning is regulated, and therefore assume… • “If my advisor’s a financial planner, he must be qualified!”

18. A little reality check • Clearly, much work is still needed on: • Public understanding of what financial planning is, let alone the CFP • Perceived public value to using a CFP professional • Recognition of financial planning as a public service

19. FPSC MISSION • “FPSC benefits the public by leading the evolution of the financial planning profession in Canada through the development, enforcement and promotion of the highest competency and ethical standards in financial planning as identified by individuals who have earned the CFP designation.”

20. How do we achieve our mission? • We must: • Define “the calling” that is financial planning • Ensure that the “specialized knowledge” is appropriate for the delivery of professional financial planning • Ensure relevance of the “instruction in skills and methods”

21. How do we achieve our mission? • We must: • Help establish “concerted opinion” around standards of achievement, practice and conduct • Ensure relevance of requirements for “continued study”.

22. How do we achieve our mission? • We must: • Never lose sight of “rendering of public service” and the public good by: • Ensuring uniformity and consistency of service • Continuing to build public awareness about financial planning and the CFP, and the benefits that financial planning brings to Canadians

23. Four specific initiatives to help • Spread the word • Define financial planning • Establish clear standards of practice for professional financial planners • Establish extensive, clearly defined proficiency standards for CFP professionals

24. 1. Spreading the Word • “If you build it they will come” – or will they? • Thus, FPSC’s Brand Ambassador program • Leverage the message through the greater CFP community • Get the message out!

25. Brand Ambassador Program – 4 Key Messages • What is financial planning? • Who can benefit from financial planning? • Who are qualified to offer professional financial planning? • Where can they learn more? • www.cfp-ca.org

26. The Brand Ambassador Program It’s a heavy load….. We can’t do it alone!

27. 2. Defining Financial Planning • Until now, we have not had a clear and concise articulation of exactly what financial planning is • How can we expect others to embrace financial planning as a profession if we don’t all speak the same language?

28. Financial Planning Defined • “Financial Planning is the process of creating strategies, considering all relevant aspects of a client’s financial situation, to manage one’s financial affairs to meet life goals.”

29. Financial Planning Defined • Definition underlies all other projects, including: • Practice Standards • Competency Profile

30. 3. Establishing Clear Standards of Practice • What will Practice Standards accomplish? • Help establish “concerted opinion” around standards of achievement, conduct and delivery • Ensure uniformity and consistency of service • Build on the definition of financial planning

31. CFP Practice Standards – the Building Blocks Code of Ethics • Identifies what is the expected behaviour of all CFP professionals in all aspects of work • Mandatory for all CFP professionals, but not necessarily specific to the practice of financial planning

32. CFP Practice Standards – the Building Blocks Financial Planning Process • Lays out what planners should do when performing financial planning

33. CFP Practice Standards – the Building Blocks • Financial Planning Process • Code of Ethics

34. What are CFP Practice Standards? • Bring together process and Code of Ethics • Serve to ensure consistency and uniformity of practice, while still leaving room for creativity and professional judgement • Assist CFP professionals by providing guidance and clarity

35. Applicability of the CFP Practice Standards • Apply, at least in part, to both comprehensive financial planning and to components thereof • Some professional judgement involved

36. Definition of Financial Planning - Revisited Financial Planning: • Includes all components of a comprehensive financial plan: • Financial Management • Asset Management • Tax Planning • Risk Management • Retirement Planning • Estate Planning

37. Financial Planning Components Defined • Financial Management • Strategies and techniques to optimize short- and mid-term cash flows, assets and liabilities • Asset Management • Strategies and techniques to optimize returns on assets in consideration of the client's requirements and constraints

38. Financial Planning Components Defined • Risk Management • Strategies and techniques to manage exposure to financial risk • Tax Planning • Strategies and techniques to maximize present value of after-tax family net worth

39. Financial Planning Components Defined • Retirement Planning • Strategies and techniques for accumulation of wealth and for withdrawal during retirement years • Estate Planning • Strategies and techniques for preservation and distribution of accumulated assets

40. The CFP Practice Standards The “applicability” test: • Are the creation of strategies involved? • Are all relevant aspects of the client’s financial situation to be considered?

41. The CFP Practice Standards • Desired Outcomes • Clarify expectations, both for CFP professionals and the public • Result in better-informed public • Raise confidence in CFP professionals

42. The CFP Practice Standards - Development • Development began three years ago • 10 draft standards were introduced in September 2002

43. The CFP Practice Standards - Development • Beginning in fall ‘02, focus groups solicited feedback from CFP professionals • Revised draft document in January 2003 • Over 30 CFP professionals involved in the creation of the revised draft

44. The CFP Practice Standards - Development • Revised draft posted on web for comment in January 2003 • Dozens of comments analyzed and synthesized into a new revised draft released in September 2003

45. The CFP Practice Standards - Development • Launch in October 2003 • Comments considereduntil October 31, 2004 • Final standards January 2005 • Mandatory implementation April 1, 2005

46. The CFP Practice Standards - Development • New draft late July or early August • www.CFP-CA.ORG

47. The CFP Practice Standards - Comments • Comments received on: • “Modular/Segmented” financial planning • Non-financial-planning activities • General applicability • Nature of engagement letter • Disclosure requirements • Prescriptive versus principled nature of standards • New draft will reflect comments as appropriate

48. 4. Establishing Proficiency Standards • Professional Competency Analysis Project • Re-evaluate the knowledge, skills and abilities required of CFP professionals • Develop a new competency profile for CFP professionals • Leads to a new test blueprint • Sets the foundation for new pre-certification requirements • Lays the groundwork for new CE requirements

49. Establishing new Proficiency Standards - Why? • First time a “competent financial planning professional” is being defined • Competency be based on performance, not knowledge • “It’s not about what you know, it’s about what you do”” • Based on the clear definition of financial planning and on the Practice Standards

50. Competency Analysis - Anticipated benefits • Provide yet more clarity as to what a CFP professional does, and expectations for competent performance • Better relate the real world of financial planning to Education and Examination