Six standards all advisers must meet

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      Six standards all advisers must meet

      When I first started advising, back in the last century, the six stage financial planning process was very much the preserve of the International Financial Planning Standards Board.

      The implementation of the six stage financial planning process in the UK was closely monitored by the Institute of Financial Planning.

      Now these standards are applied much more widely, and are reflected in most statements of good practice in financial advice and planning.

      Indeed, it is tempting to suggest that when HM Revenue and Customs uses the terminology of the six-stage process in order to determine VAT liability on advice charges we know they are truly in the mainstream.

      However, I should say that while the stages used by HMRC are indeed elements of the advice process that will be very familiar to advisers, they are not those which are commonly set out by professional standards boards.

      The standards set out in the HMRC VAT guide are a useful summary of the elements of the advice process, but they are much more focused on translating the modern advice process into the older rules regarding VAT liability on financial services.

      As such the HMRC stages of advice are very much more focussed on products, research, agency and sales and much less focussed on the very specific skill of financial planning.

      For the purposes of this article I will focus on the generally accepted financial planning standards, not least because in my experience it is precisely the planning part that engages the client.

      Products without planning are no fun at all. Current spending is fun, whereas deferred spending, also known as saving, is much less inspiring.

      This is after all why everyone was so concerned about the rush to buy lamborghinis, or other more affordable vehicles, with newly released pension cash.

      Products without a plan are just very complex (usually) and risky (usually) ways of depriving yourself of current cash-flow, which is probably why the savings ratio is so low.

      Advisers and planners who have the skills to help their clients to paint a picture of what their future will look like when they have garnered enough resources to lead the life they want to lead, will find that the same products take on a quite different aura.

      Equally, planning without products is unlikely to achieve very much in the long term.

      This is not a discussion around the relative importance of planning or products.

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