Financial Planning is Coming of Age

David Lunn MSc, CFP®, Grad Dip, QFA, SIA, Director Foundation Stone Financial Planning Limited highlights the value of working with a financial planning professional. The below article is re-produced from The FM Report (October 2023) with permission from the author. Views expressed in this article are those of the author and do not necessarily reflect the views or positions of FPSB Ireland DAC. This article is for information purposes only and should not be construed as financial advice. Formal advice is advised in advance of taking any action.

In the early 1970s a distinct discipline called financial planning developed in the US. The imperative of advisors acting in a fiduciary capacity for consumers of financial services became a driver for developing a professional qualification known as the CERTIFIED FINANCIAL PLANNER® designation, also referred to as the CFP® designation. In 2004 the Financial Planning Standards Board Ltd (FPSB) took on the global responsibility for developing and delivering the CFP certification programme. This programme is now run by FPSB affiliates in 28 territories. Over 213,000 individuals have qualified as CERTIFIED FINANCIAL PLANNER professionals.

For many people money and its implications are an emotional subject. Are you a too little? Are you a just enough? Or are you a too much? Each of these money types is individual to that person. One persons too little may be another’s just right. All three money types can have stress, fear, and worry associated with their situation. A CFP Professional using their training, discipline, and experience will work with consumers to help identify how money can be used to live their best life possible with the money they have. They will help them put their money to good use. They will identify possible routes for their financial journey. A journey a CFP professional will take with them. Like a pilot (consumer) and copilot (CFP professional) they are travelling together. As the pilot makes changes, planned or unplanned, to their financial journey the copilot (CFP professional) is there to guide them back to their plan or advise them on a new route for their financial journey.

2024 will mark the 20-year anniversary for FPSB and to mark the occasion the board embarked on an ambitious quantitative study of 15,000 people around the world. Of the 15,000 respondents over 1,000 were based in Ireland.

The study included advised and unadvised participants. “Advised consumers are those who are currently working with a financial planner, those who seek financial advice as needed and those who have received financial planning advice in the past three years. Unadvised consumers, on the other hand, are those who have never received financial planning advice from a financial planner or have received financial advice  in over three years.” The study also had a focus on consumers that worked with a CFP Professional.

Some very clear findings were evident from the study.

Clients who work with a CFP professional say they are better off.

Clients of CFP professionals experience the best outcomes. 3 in 5 clients of CFP professionals are highly satisfied with their wealth versus 2 in 5 unadvised consumers. They enjoy a higher quality of life, more financial confidence, and experience less financial stress.

• 7 in 10 reports living with a strong sense of purpose.
• 7 in 10 say they are confident of solving most challenges.
• 9 in 10 feel financially secure.

Financial planning helps people fulfil unmet financial needs.

Unadvised consumers report many unmet financial needs including:

• enough money to live on (2 in 5)
• reducing financial worries and stress (2 in 5)
• the ability to live their desired lifestyle (1 in 3)

According to this study, these are the areas where financial planners can help most.

The top three ways financial planners have helped the advised are:

• building a realistic plan for a comfortable retirement
• making the most of their situation
• reducing financial worries and stress

Clients of CFP professionals experience the best outcomes.

• 9 in 10 feel financially secure
• 8 in 10 feel their finances are tangibly better off

Gen Y more likely to expect digital engagement.

Gen Y utilise financial planning services differently than Baby Boomers:

• Next Gen clients are triggered to see a financial planner under different circumstances when compared to Baby Boomers.
• 1 in 5 Gen Y have sought a financial planner due to starting or growing a family while 3 in 10 have done so looking to buy a property.

There are several myths or misconceptions that surround Financial Planning. The results of the study provided clear evidence to dispel these.

Myth 1: Financial planning is only for the rich.

• FACT: 8 in 10 clients earning €80,000 or less per year who work with CFP professionals feel financially secure and confident which is higher than unadvised consumers on the same level of income.

Myth 2: Financial planning is only needed at retirement.

• FACT: 9 in 10 Gen Ys who work with a CFP professional agree that financial planning has left them better off financially

Myth 3: Financial planning costs more than it’s worth.

• FACT: 9 in 10 clients of CFP professionals say the benefits of financial planning outweigh the costs.

Myth 4: Financial planners lack objectivity.

• FACT: Nearly everyone (96%) who works with a CFP professional report they trust their financial planner to act in the client’s best interests.

As a CFP Professional myself I feel very privileged to be able to help people with some of the most interesting questions they have about their lives and their futures. We are all unique in our desires. The days of simply having to work for 40 years and then put our feet up are well gone. Terms like active work sabbaticals, gig jobbing, and partial retirement all require good information on which consumers can base their financial decisions. CFP professionals are uniquely placed to help consumers develop strategies to allow choice. As it is only through choice that we can enjoy financial freedom.

Source: The Global 2023 Value of Financial Planning Research commissioned by Financial Planning Standards Board Ireland DAC