Over the past decade, paraplanning has developed from providing simple administration support services into a profession, offering end-to-end, ‘turn-key’ solutions to financial planning firms. Arguably, paraplanning is still failing to communicate its real value; many advisers still perceive it as being centred on the provision of suitability reports and basic research.
Instead of firms using paraplanning to add tangible value to the client process, it is often perceived as simply completing the regulatory paperwork. The objective is normally to source internal or external resource to simply rid the business of those dull tasks, many of which have been thrust on the firm by the financial regulator.
Recent research has concluded the cost of paraplanning amounts to 8 per cent of a firm’s total turnover in terms of direct costs, second only to regulation at circa 10 per cent. It is possible that firms tend to look at paraplanning in simplistic cost-terms and therefore focus on the cheapest, most cost-effective options and not as an invaluable part of the value chain. If communicated effectively, unbundled from advice, implementation and meeting costs, the paraplanner’s services are extremely valuable for both the firm and its clients.
The paraplanning profession must take some responsibility for its own lack of brand awareness and promotion. The problem for many firms is not knowing what a good paraplanner looks like? If you need to build a wall, you need a skilled bricklayer, for a firm trying to integrate paraplanning they may need an: administrator, researcher, investment specialist, report writer, the list goes on. It is not a straightforward question, and this results in confusion in the recruiting process. Advice firms do not have a benchmark.
It has been suggested recently that to move paraplanning to the next level itneeds professional standards. Financial planning through the International Organization for Standardization (ISO) has developed ISO22222, surprisingly the uptake has been rather low and the qualification has possibly been overshadowed by the more favoured, chartered status. The implementation of paraplanning standards creates a plethora of issues. Who will build the standards? And will this alienate parts of the community who may feel it is elitist?
What would paraplanning standards include and who ought to implement them? If the paraplanning community devises and implements its own standards, it will only enhance the accusation of elitism and will perhaps further fragment the profession.
The low response to the (non-compulsory) IS022222 standard for financial planners suggests that any standards ought to be compulsory in order to use the designation, ‘paraplanner’. Both the PFS and CISI have failed to establish a core exam syllabus exclusively for the paraplanning profession, opting instead to integrate existing financial planning modules into an untidy paraplanning qualification.
Any standard implemented, ought to come from the ISO and be compulsory. Paraplanners should avoid collusion with the existing exam-boards and develop their own academic approach, possibly though local colleges or delivery though blended learning. It is time for paraplanning to develop into a stand-alone profession, backed by a clear ISO standard. Employers would feel confident in employing paraplanners and integrating their services into the firm, and this would drive demand and widen recognition.
Entry into the financial planning profession is fraught with complications, exam requirements, regulatory concerns and indemnity insurers continually concerned about the firm’s staff and processes, prevents firms investing in new blood. Paraplanning has a unique opportunity to provide a starting point into financial services for graduates. To attract them, the industry needs clear information on the skills a good paraplanner ought to hold and what standards will they adhere to and more importantly, implement in the firm.
Richard Bishop is a lecturer in financial services at Coventry University College and a practising regulated financial adviser
