CompaniesJul 1 2015

Your critical friend

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Your critical friend

Although a relatively new position within the financial planning industry, paraplanning has since grown exponentially, with a host of IFAs making room in their firms for their own in-house paraplanners, while others opt to use the depth of expertise of outsourced paraplanners.

Describing the practice as of “fundamental importance” to a successful financial planning firm, Sue Whitbread, communications director at IFP said: “Today, one of the consistent features we find within leading financial planning firms, including all of IFP’s accredited financial planning firms, is the use of paraplanners. I don’t think that this is a coincidence.

“We’d never even heard the term ‘paraplanner’. Initially it was all a bit mixed up with administration, and at best they were generally seen as people who wrote reports and dealt with product providers. How things have changed.”

With a host of sweeping changes announced in the 2014 Budget speech and the more recent pension freedoms, it is vitally important for advisory firms to adapt to an ever-changing market.

The need to make cost efficiencies, as well as to make a high level of customer service in the post-RDR environment is a timely reminder of the importance of paraplanners.

The adviser’s partner

Trained to scrutinise the most intricate pieces of information and deliver personalised recommendations, paraplanners are often referred to as ‘critical friends’ to the advisers they work with.

They come in all different shapes and sizes, allowing firms to choose the candidate with the right skill set for their current structure.

Paul Lindfield, director of wealth management at Manchester-based Sedulo Wealth Management, said that hiring a paraplanner was a fundamental part of the plan for the business, which launched in April 2013.

He said: “I often joke with our paraplanner that she does all the hard work and I take all the glory.

“Paraplanners are worth their weight in gold. They undertake work which doesn’t just simply involve admin functions, but highly specialised and complicated matters. Their invaluable behind-the-scenes work allows us advisers to concentrate on developing our professional relationship by spending more face-to-face time with clients, which is the key to good business.”

However, the role of the paraplanner is often ‘muddied’ by company chiefs who can give the title to an individual whose tasks accord with those of a glorified administrator rather than a paraplanner, according to Mr Lindfield.

He added that the role of a paraplanner is not merely restricted to research and number-crunching, but also to work with advisers to ensure recommendations are the most appropriate to their clients.

The IFP claims that the role of paraplanner has not been clearly defined but can be broken down into four key parts.

The first step is the preparation and maintenance of the client’s file, which involves the collation of qualitative information – such as client attitudes and life goals – required to compile a financial plan.

This may require the paraplanner to attend client meetings and undertake various activities, including obtaining the information necessary to compile financial cash flow forecast and draw up a draft net worth statement.

Step two is the preparation of the recommendations, involving undertaking research both independently and with the financial planner to identify solutions to meet the client’s needs. Draft recommendation reports would be discussed and/or signed off by the planner.

The next part is the implementation of these recommendations, and finally a review of the suggestions – which may require a paraplanner to establish a strong relationship with the client, with whom he can organise future planning meetings.

Blurred lines

For some paraplanners, their role is a stepping stone to becoming a bona fide financial planner, while for others it is a career in its own right.

Authorised paraplanners still only account for 25 per cent of UK professionals in the role, according to Kim Bendall, director at The Paraplanners, based in Abingdon, Oxfordshire.

It is easy to see why there is a blurred line between ‘career’ paraplanners and advisers, she added.

A large and growing number of paraplanners are at least chartered or certified financial planners, and many have themselves previously worked as IFAs.

“Paraplanners and advisers largely now ‘job share’ the role. Both parties are normally experienced and well-qualified financial planners; it’s just the emphasis of who does what parts of the job that differ,” Ms Bendall said.

“Paraplanners do more of the ‘back office’ work – the research, report writing, number-crunching, analysis and organisation. Advisers manage the client relationship, specifically give the advice, and take responsibility for the client and the overall service and advice delivered to them.”

She continued: “It’s as much about your personality, your ability to cope under pressure, excellent all-round communication skills, numeracy, literacy and a healthy dose of common sense that will make you a successful paraplanner.”

Facing the future

In the years ahead paraplanners face a difficult task in juggling the needs of the adviser, the client, the FCA, the administration team and the compliance consultant, Ms Bendall said.

The implementation of RDR has introduced a wealth of new guidelines and regulatory changes which will undoubtedly result in the need for more paperwork and further scrutiny of client reports.

RDR has created a surge in demand for paraplanners, according to Petra Griffiths, director of East Sussex-based PSG Financial Solutions, who is currently in the process of hiring an in-house paraplanner.

“With more regulations being put in place, particularly post-RDR, and with a growing demand for IFAs, paraplanners have become increasing necessary to IFA firms. Advisers just cannot do all the work required by themselves.

With an estimated 2,000 to 2,500 paraplanners in the UK, there is insufficient supply to meet growing demand for them, according to Ms Bendall. Given that high level of demand, there has been a suggestion of making the practice more clearly defined. There have also been calls for practitioners to be more formally regulated to reflect their pivotal role in the advisory process.

Vehemently opposing these suggestions, James Eden, business development manager at Herefordshire-based paraplanning firm The Timebank, claimed that more regulation would be bad news for the practice.

“I would question whether the prospect of regulating the role would put off, or even force out, certain individuals who are in paraplanning as they do not want to hold a controlled function,” he said.

“I see paraplanning as a collegiate task rather than a specific role. Whether this is data harvest, data cleansing, analysis, research or report writing, the additional regulatory burden caused by regulating this would be unnecessary.”

Whatever the future holds, as the industry braces itself for more changes in legislation and policy, the value of paraplanners cannot be understated.

And with the proliferation of training workshops and seminars specifically for paraplanners, the growth of paraplanning is showing no signs of slowing down.

Myron Jobson is features writer at Financial Adviser

■ The IFP launched a certificate of financial planning in 2010, while the CII launched their equivalent the year after. Both are QCF level four qualifications.

■ Those who achieve the IFP’s qualification can then call themselves accredited paraplanners, whereas those who attain the CII qualification can append it to their names