What an individual has to do to be allowed to offer a personalised recommendation on financial products to a client is well defined. There are qualifications to obtain, and minimum requirements for businesses to meet in terms of things such as capital and indemnity insurance.

But what we should call the individuals who give those recommendations for a living is nowhere near as certain.

A plethora of monikers abounds in the market. Some financial advisers like to be called a financial planner; others prefer financial life planner, life planner, financial coach, financial consultant,  investment adviser, wealth planner or wealth manager.

Historically, there were tied and multi-tied descriptors to deal with. Now, within any of those categories we also need to be aware of restricted or independent status; and, within those, whether that restriction applies to the whole of the market or just part of it, and whether people want to call their service holistic or focused.

With the economic and market outlook still so uncertain, the public need advice more than ever, but they remain confused over the options. Never has there been a more important time to settle the debate once and for all — if, that is, a definitive answer even exists.

Polarised market

In the wake of (RDR), the financial advice market is said to have polarised.

On one side are ‘advisers’ whose mindset is stuck in the sales culture of the past. They have not progressed to earn additional qualifications, and their recommendations are mostly concerned with the product on offer.

Their focus is more on transactional issues than ongoing planning; on the performance of investments rather than a wider vision of a client’s financial life. They see their role as helping to pick the best fund managers for clients, not telling them how to spend their time or money.

They may not be as wedded to advanced questioning techniques that elicit clients’ deeper desires, or to elements of the planning process such as cashflow modelling, which can incorporate clients’ aims and objectives that are about more than just money.

Today, these ‘advisers’ are concentrated in some of the largest, vertically integrated firms in the market, or so the argument goes.

On the other side are ‘planners’ whose thinking has moved beyond this. They are more conscious of the emotional impact of money. They place real importance on coaching methods, listening skills and empathetic relationship building.

They may have technical skills and knowledge of markets but their bent is towards soft skills, on helping clients decide what they really want out of life and learn how their finances can help get them there. They may be much warier of how a client’s wider financial life is organised, and how their wants across family, work and leisure play into their thinking about money.

These ‘planners’ may charge more for ongoing services because this relationship is one where they will be a constant guide to keep the client on track.

To do that, the emphasis has moved away from which products are best; a question that is almost irrelevant because direct-to-consumer options have become so widely available and cheap. The value the adviser adds is in the plan, not the product, hence they feel entitled to adopt the ‘planner’ tag.

Rarely is the argument made that either way of thinking is inherently bad for clients. After all, transaction-led advice was exactly what the majority of advisers were providing before 2013, and what the bulk of advisers in the market today were weaned on as life offices provided the default route into the sector in years gone by.

Different offerings

But clearly there is a difference between what is on offer in each scenario. Those in the life planning camp have been clear that calling adherents of one approach ‘financial advisers’ and those  of the other ‘financial planners’ is the only way to enable prospective clients to differentiate what they are getting, and it is only fair that they can enter discussions armed with that knowledge.

The difference between a financial adviser and a financial planner is the difference between an industry and a profession, some claim, asserting the inherent superiority of the latter title because of the approach taken by planners compared to advisers.

To be called a planner, the person should be producing proper financial plans using scenario planning. If that is not what the individual does most of the time, their entitlement to be called a financial planner becomes less certain.

The problem is, pick any financial adviser and the chances are you will find elements of every tag in the way they go about their work. It would be a rare adviser who never discussed a client’s wider life, nor employed some of the same techniques used by someone with a formal coaching qualification — even if they were not consciously doing so. With suitability requirements as stringent as they are today, a sale without a thorough understanding of the client’s objectives is a one-way ticket to regulatory trouble.

Similarly, you can focus on the plan as much as you want but at some point you will have to touch the investment or platform solution that makes it a reality. Even clients that were most receptive to the life planning approach would be surprised if their planner’s knowledge of funds was noticeably sub-par.

One way to carve a dividing line between adviser and planner would be by giving no product recommendations at all. But it would be a crude division. Even if the bulk of their business was about coaching, a planner might want a couple of clients to whom they distribute products. Would their entitlement to call themselves a planner be revoked the second they put a product in the hands of a client?

Eye of the beholder

In a sense, it is immaterial with which side you agree. Planning is in the eye of the beholder; we have seen from the chequered history of sales-led advice that there are plenty of people within ‘advice’ firms who are adamant they are doing proper planning, despite the sales targets.

These salesmen would continue to brand themselves as financial planners, and other planners and consumers are currently powerless to stop them doing so.

It would take a very clued-up client to be able to identify those who were abusing the ‘planning’ title, even if a consensus was reached on who should be entitled to use it, or a standard was set out in law.

Individual qualification bodies can police the use of their titles. You cannot claim to be, say, a chartered financial planner with the Personal Finance Society (PFS) if you are not, and the PFS can strip people of the title if it is misused.

But financial advice itself is not a protected term; anyone can claim to be a financial adviser. This has led to a worrying uptick in social media stars reinventing themselves as independent financial advisers, and reams of unwise ‘financial advice’ spewing from social media platforms.

This is one of the instances where what an adviser is called could actually matter; the term adviser could be used to describe regulated, highly qualified, trustworthy professionals, as opposed to chancers who were simply hijacking the title.

Only those with senior management functions were described as authorised in the first version of the register revamp. Certified staff were listed under the heading ‘Regulatory approval no longer required’, leaving consumers understandably perplexed as to whether these advisers were even permitted to give advice.

A more straightforward taxonomy that divides professionals from amateurs could be a huge step in driving savers in the right direction while the regulatory resources remain mired in confusion for even the most seasoned market watchers.

The ability to display professional body membership on the new FCA Register is a positive change but, again, these bodies confer a variety of titles on members.

A chartered financial planner and a chartered wealth manager are two different examination standards, majoring on different skillsets.

Arguably, there is still a solid demarcation between the two that clients should be aware of. But listing either title carries more weight than just the headline ‘financial adviser’, which should help drive more new recruits and clients to the profession’s door.

Cutting to the quick

Plenty of advisers do not believe that rigid policing of titles is necessary. Suggesting one type of adviser is more evolved than another will not endear the profession to the general public. It can also be used to inflate the standing or competitive position of a particular firm above potential rivals.

But those who make the case for separation argue that there is a bigger divergence than ever between the offerings of different types of adviser.

The aftermath of the RDR has seen the biggest firms get even bigger. They have also started to control more of the value chain. Nowadays, there is barely a provider that has not moved towards vertical integration in one form or another.

While independent advisers have splintered away from tied models, advisers at firms backed by household brands nearly always sit within the same company that owns the funds, the discretionary management or the platform they recommend.

This is all the evidence some need to argue that putting the word independent in front of adviser is not just a semantic flourish.

It cuts to the core of a cultural gulf that exists between small, genuinely independent businesses and restricted behemoths nudging their advisers in a particular direction to suit the group’s commercial ends.

But, critics claim, it is only right that staff within such a framework are called, say, wealth managers, and the independent label remains sacred to those who truly are free from potential bias.

Suitability review

FCA data has found that there is no difference in charges, for example, between independent and restricted advisers.

At its last suitability review, the regulator found that restricted advisers, those within a network and those in firms with 25 or more advisers had marginally higher scores than independent advisers, directly authorised advisers and smaller firms respectively.

That will not stop many continuing to baulk at the notion that restricted ‘wealth manager’ salespeople are being put in the same bucket as IFAs.

This is hardly a new debate. It has been hovering around for years, borne of the way we talk about financial planning as a fresh and distinct profession from anything that preceded it.

Again, the key is not to conflate financial planning with anything else. As a consultation the previous year alluded to, this could also potentially rule out putting words such as wealth or retirement in front of planner.

Where next?

Undoubtedly, calls will grow to protect it from intrusion as financial ‘experts’ of all shapes and sizes try to trade on the knowledge and experience of the regulated profession , without earning a fraction of the qualifications.

Fighting over whether someone should be called an adviser or a planner may look like an internecine conflict. But it is a battle that matters to so many who have studiously ploughed through tough exams and professional development courses in recent years. It is up to the regulator to decide where the matter goes from here.

The majority of advised UK clients now desire ethical investing due to the Covid pandemic, according to a new report from Prudential. 

The report looks at intergenerational planning and wealth transfer between advised families amid the financial volatility and insecurity of the pandemic.  

It found that Covid-19 has increased appetite for sustainable investments across all generations among 60% of millennials, 44% of Gen X and 35% of Baby Boomers. 

The report shows that 61% now care more about the environment and the planet than they did before the pandemic.  

More than a quarter of respondents admit they are more concerned than they have ever been. And one in five say they are more worried now that they have children and grandchildren. 

According to the report, the pandemic has shifted the financial priorities for many adults who now seek financial advice.  

One in two respondents said they had either already sought advice or were planning to because of the pandemic.  

And just over one in five were seeking advice to ‘begin their ‘investment journey’, potentially fuelled by individuals who had built up savings, not having the traditional outlets for spending their income.  

The report also shows that while the trend is common across the generations, it is millennials who are leading the charge. 

Experts say “With £5.5trn in personal wealth due to be passed to the next generation by 2047, the role intergenerational planning advice played, prior to the pandemic, was already a significant one. Yet the crisis has reframed financial priorities. Not just for those later in life with IHT liabilities, but for all generations. 

“Once perhaps viewed as a fad, sustainable investing is becoming normalised, making it a fundamental building block within intergenerational financial planning. It also enables clients to leave their children more than just a financial legacy in terms of planet, environment, and society. 

“With two in five advised clients surveyed confirming they expect to increase the amount they invest in ESG investments over the next five years, incorporating responsible investments into recommendations will become increasingly critical and provides advisers with an exciting opportunity.”