One way to assess the merits of a financial planner is to see what industry or professional associations they belong to and what standards, qualifications, education and support are offered.
Other key measures are codes of ethics and dispute resolution schemes which can vary between the major associations covering those in the sector.
It counts because in deriving a score for planners Adviser Ratings puts emphasis and points on being part of a professional organisation for compliance and quality reasons.
Looking at these groups is a bit of an alphabet soup of acronyms but here’s an easy guide in alphabetical order of who represents what in the financial planning world.
The Association of Financial Advisers (AFA) has been going for 68 years. It has recently drafted a code of conduct called Principals of Practice to be unveiled soon.
Its members are guided by six principles of professionalism. These principles relate to integrity and professional conduct, best interests, conflicts of interest, informed client consent, service standards and professional expertise.
Their highest qualification is that of the Chartered Financial Practitioner of Australia, which require a minimum Masters in Financial Planning and appropriate Chartered course.
The Financial Planning Association (FPA) states outright it’s NOT an industry but a professional association and as the largest player in the field has spearheaded efforts to improve standards and education.
It has 7,500 practicing planners of whom 5,500 have the top certification called a CFP or Certified Financial Planner.
The FPA’s website says: “ FPA financial planners are 11 times less likely to be banned from practice than non-members, and 36 times less likely to be banned from practice if they are CERTIFIED FINANCIAL PLANNER professionals.”
CPA Australia, which stands for Certified Practicing Accountants (CPA), is a major body for a profession increasingly making inroads into financial planning.
A CPA is an internationally recognized qualification and to use the designation any planner must complete a recognized degree or postgrad awards, finish a CPA program including three years of relevant experience and comply with a code of conduct.
Its CEO Alex Malley works hard on TV and online with ventures, such as The Naked CEO book and shows, to make he says the brand of accounting as a more exciting career than it’s made out to be.
The Institute of Chartered Accountants Australia (ICAA) established a Financial Planning Chapter in 1999 to give its members a way to engage with planning and wealth creation. It provides information on standards and are subject to various conditions of membership.
Members of both the ICAA and CPA are capturing a larger slice of the financial planning sector, especially in the growing SMSF space, as consumers start to fell more empowered in making their own investment decisions.
The Financial Services Institute of Australasia (FINSIA) is designed purely for financial services professionals. Its code of conduct ha been developed to promote high standards of professionalism and ethical conduct.
As an associate of higher member of FINSIA, an undergraduate degree is a minimum requirement with more than 3 years applicable experience in financial services.
The Independent Financial Advisers Association of Australia is tiny but seeks to stand out from the rest of the industry/ profession by stressing its members’ independence. It has what it calls a Gold Standard of Independence which stresses how its ownership and payment conditions, ie a strict fee for service regime, benefit consumers more.
In short the associations a financial planner belong too does not say everything about them but it’s a good indication of the regimes of compliance and values they must subscribe to.