Making sure your financial adviser is a real expert

4th January 2008

Appointing a financial adviser with expert qualifications should be easy. The alphabet soup of designations that exist today in the world of financial planning can look impressive, but many consumers are relying on expert guidance from an adviser that has earned his or her qualifications from a set of simple exam papers equivalent to a GCSE module.

The benchmark qualification for financial advisers in the UK is the Certificate in Financial Planning. The papers required to pass this Certificate develop a broad-based knowledge and understanding of core financial planning topics. The contents of these exams are not particularly complex and passing these papers is not evidence of any detailed financial planning knowledge or ability. Advisers who complete this Certificate can use the designation 'CertPFS', subject to membership of the Personal Finance Society and Continuing Professional Development requirements.

More appropriate qualifications exist for financial advisers who want to demonstrate their competence in different areas of advice. These include the Certified Financial Planner (CFP) certification from the Institute of Financial Planning. This is an international qualification with around 105,000 CFP professionals around the world. In the UK there are only around 700 advisers who hold this qualification, representing the top 4% of Financial Planners.

A newer designation for financial advisers is Chartered Financial Planner. This is described as the pinnacle for the financial planning professional in terms of professional qualifications. In order to obtain Chartered Financial Planner status, an adviser must have at least five years experience, gain relevant personal finance qualifications equivalent to first degree level, follow a strict code of conduct and be able to demonstrate at least three years of Continuing Professional Development (CPD).

Other qualifications exist which demand far less than the Certified Financial Planner certification or Chartered Financial Planner status, but are still important when seeking certain types of financial advice. In order to provide advice in the area of care fees planning, an adviser must hold the mandatory long-term care qualification called CF8. Someone providing advice on equity release has to hold a similar 'appropriate' qualification.

Certain areas of pensions advice also require a mandatory qualification before a financial adviser can impart their knowledge to the consumer. As a minimum, someone advising on occupational pension transfers will need to have first passed an advanced pensions exam such as 'G60' or 'AF3'.

When choosing a financial adviser to work with, it is essential that you do your homework first and ask some searching questions about their experience and qualifications. Never simply accept that a string of letters after their name means that they are highly qualified. An adviser can look like an 'expert' by passing only basic exams and then joining several professional bodies to benefit from use of a number of designations.

Always ask your financial adviser what was required to get the letters after their names. Never rely on the excuse that their experience means they do not need to hold any professional qualifications. The most competent financial advisers have a combination of valuable experience and demanding qualifications.

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