Financial Planners in Australia: An Evaluation of Gaps in Technical and Behavioral Skills

Article excerpt

Abstract

Industry based studies in Australia have highlighted the gap that exists between client expectation and skills of financial planners. The objective of this study is to investigate the importance of technical and behavioral skills required of financial planners and the level of perceived skill gaps exhibited by recently qualified planners. The results suggest that there is a need to more effectively incorporate specific behavioral skills such as listening and questioning skills in financial planning educational programs. Overall, the findings have implications for curriculum development, monitoring of professional standards and provision of continuing professional development programs to maximize the quality of financial planning advice. © 2007 Academy of Financial Services. All rights reserved.

JEL classifications: 121; 122

Keywords: Education of financial planners; Generic skills; Technical skills; Professional development; Expectation gap

1. Introduction

The Australian financial services sector is experiencing a period of sustained growth. In the 10 years since September 1995, the assets of approved deposit taking institutions have grown by nearly 300% (Reserve Bank of Australia, 2006). A major determinant in this growth has been the introduction of compulsory superannuation in the early 1990s. With 9% of an employee's salary [for those earning more than AUD 450 (USD 350 per month)] invested in superannuation, Australia has superannuation assets in excess of AUD 596 billion (USD $472 billion) (ABS, 2006). The creation of compulsory superannuation has created a savings pool within Australia that is significant relative to the size of its economy. In 2005, Australia ranked as the world's fifteenth largest economy, however, had the world's fourth largest pool of savings in managed funds (Axiss Australia, 2006).

In addressing the changing financial needs of Australians, a new sector of the finance industry has evolved. Formed in 1992 to develop financial planning as a profession, the Financial Planning Association (FPA) today has 12,000 members who manage the financial affairs of more man five million Australian investors whose combined investments total almost AUD650 billion (USD $505 billion) (FPA, 2006a).

The FPA's goal is to improve the standards of financial advice through education, continuing professional development and by developing and enforcing high standards of ethical and professional behavior. FPA practitioner members must be licensed to provide financial planning advice and are required to abide by a Code of Ethics and rules of professional conduct (FPA, 2007). Based on the educational model of me profession in the United States, financial planning education in Australia has grown significantly during the past decade and it continues to grow rapidly (FPSB, 2006). A more comprehensive study of the historical development of financial planning education in Australia is provided by Cowen, Blair, and Taylor (2006). Their study highlighted the need for further research in financial planning and the importance of education in the process of professionalization.

Despite the developments in the industry in recent times the FPA as the industry body representing financial advisors, has received criticism regarding the quality of professional advice offered to clients in devising financial plans related to investment options. In particular, the Australian Securities and Investments Commission (ASIC) and the Australian Consumers Association (ACA) have conducted surveys on the quality of advice offered by financial planners (ASIC, 2003; ASIC, 2006). These surveys have been critical of the standard of advice in the financial planning industry when compared with good practice standards, consumer expectations, and regulatory obligations.

Given the importance of the financial planning industry to the Australian economy and in particular the increased proportion of Australians that will be dependent upon effective and efficient investment in the future, the objective of this study is to examine the professional skills that are considered to be the most important for effective operation as a financial planner. …