CFPs still face client misconceptions

(October 12, 2005) Despite some success in promoting the CFP designation as a brand, the Financial Planners Standards Council admits the general public still holds misconceptions about financial planning.

In a survey of 803 Certified Financial Planner (CFP) professionals, a quarter of respondents said between 26% and 50% of new clients are unclear about what financial planning really is. But the misconceptions appear to be declining, as 84% said the number of new clients with incomplete or inaccurate understanding about professional financial planning is less than it was three years ago.

“That clients of CFP professionals are better informed now about the financial planning process and what to expect of a planning professional than they were three years ago, suggests the consumer knowledge needle continues to move in the right direction,” said Ann Bowman, vice president, communications and corporate relations, FPSC. “However, consistent with the conclusions we drew from FPSC’s 2003 consumer survey, there is a real need for the financial services industry to deliver clear, unbiased messages about what is and isn’t true about financial planning.”

Among the most common client misconceptions is the tendency to equate financial planning with investing or retirement planning. Of those surveyed, 79% and 78% said they regularly face this confusion. Seventy-six percent of respondents agreed that clients don’t set measurable financial goals, while 72% said clients were afraid of planning in general and 71% say clients seem to consider financial planning a one time event.

“Many folks still start out not realizing that planning is a process, not an event — and that it encompasses more than just the investment and retirement planning elements,” says Laurie Stephenson, CFP, at Freedom 55 Financial in Halifax. “No matter where they start, clients appreciate the broader scope and value that financial planning provides.”

The survey also found that professionals holding the CFP designation face many of the same problems as non-CFP advisors, with 69% agreeing that clients don’t understand how advisors are compensated. Sixty-four percent of FPSC’s survey respondents agreed that clients at first are looking for quick fix instead of a long-term strategy, and 60% said clients expect unrealistic returns on investments.

About 10% of respondents said that clients at first believe everyone in the financial services industry is a financial planner.

Conducted in September, CFP professionals were asked if, in their experience, new clients come to them with misconceptions about financial planning. The respondents rated their agreement with the following statements about misconceptions held. The statements are ranked according to the percentage of CFP professionals who responded with seven or higher on a scale from 1 to 10, 10 indicating very strong agreement.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com