Paul Etheridge compares and contrasts the US and UK financial advice professions. As published in New Model Adviser in October 2014.
The US never does things by halves so on visiting its financial planning association conference I was expecting something bigger and slicker than anything in the UK. I wanted to know if we Brits were ahead of the game or whether it was time we woke up and smelt the coffee.
Just ahead of the UK’s Institute of Financial Planning (IFP) meeting in Wales, I flew across the Atlantic to attend the United States’ Financial Planning Association’s (FPA) annual conference in Seattle to find out what the latest developments are in American financial planning. I also wanted to spot which trends could or should find their way across the Atlantic.
Already in the US focus has shifted away from mere compliance and collecting continuing education credits, the country’s version of continuing professional development (CPD).
Instead, the focus of the conference was on training and experience. This contrasts with UK thinking, where recent emphasis has been on education and exams.
A range of more than 100 superb speakers focused in detail on practice management challenges and technical process matters.
A thought-provoking presentation came from US retirement specialist Tim Prosch. The session, based on his book The Other Talk, was a guide for clients to discuss their life plans with their adult children.
In the US, the younger generation tend to support their elders in later life. This contrasts with UK expectations, where people tend to make their own provision for things such as long-term care.
Ethics on the agenda
I attended the best ethics session I have ever been to. Led by Dan Candura, president of PennyTree Advisers, and involving substantial audience participation, it was good to see a high level of agreement on many answers.
Putting clients’ interests uppermost in our dealings sounds like a given on both sides of the pond, but sourcing appropriate training in ethics to meet the annual CPD requirement is a challenge in the UK.
Like the IFP conference, the US event’s emphasis was on professional development and networking, but with one curious difference that hinders US firms: anti-trust guidelines mean it is illegal to share information about fee levels and remuneration.
While it is not a new rule, it contrasts with the willingness of UK financial planners to share detailed elements of their firms’ activities. I cannot see, and would not want to see, this type of legislation crossing the Atlantic.
Visiting outsider firms
A new initiative for the event was the introduction of one-to-one business consulting sessions. These ran alongside the long-standing and popular scheme at FPA conferences in the shape of ‘practice visits’.
Again, regulated by anti-trust compliance guidelines, the visits do not look at financial information, but participants can learn a lot from the office location and environment, the systems in use and the personalities in the office. Talking about practice management is fine, but experiencing someone else’s office environment and seeing how it works is something that a number of professional, but commercially lonely, financial planners would find beneficial.
I took a personal interest in software development and the tools to support financial planners in providing the right services to clients. There were few exhibitors showcasing technology.
Cashflow definitions
The notion of cashflow was mentioned rarely in presentations and only in the context of providing clients with ‘a cashflow’.
In the UK, cashflow is viewed as a way of supporting scenario planning and ‘what if’ scenarios. In the US, a cashflow means part of the criteria to determine whether a client has the right level and quality of assets for a financial planner, rather than something used in ongoing modelling.
While the exhibition was smaller than in some previous years, the smaller scale improved the quality. It was noticeable that real experts were manning the conference stands.
In the US, the future of financial planning seems secure. Students from a number of universities attended, and there was evidence of internships as well as people gaining finance degrees.
The US financial planning community seems to have put a lot of energy into bringing good people into the profession. It is disappointing that UK graduates do not yet view it as an attractive career in quite the same way.
Next year’s event
At next year’s event, there will be an in-residence programme that is designed to give financial planners the skills they need to become confident practitioners.
The IFP used to offer fast-track tuition for financial planners to achieve certified status, but no longer does so. Although it can be difficult for learners to commit so much of their time to studying, that dedication can prove to be an absolute game changer to a planner’s career in the long run.
Financial planning is no further forward in the US than in the UK, but there are some outstanding initiatives that could propel the UK planning profession forwards faster.
