Financial Planning is a Profession, Financial Intermediation is an Industry: Why the CII and PFS are in Trouble

The Chartered Insurance Institute (CII) and the Personal Finance Society (PFS) have long stood as pillars in the world of financial services. Yet, their recent struggles indicate a fundamental misunderstanding of the evolving landscape of financial planning and intermediation. As a Chartered Insurer since 1989 and a Chartered Financial Planner since 2017, I have witnessed firsthand the shift in these professions. Despite my continued dedication to financial planning, I was asked by the CII and PFS to surrender my title in 2019 upon retiring from intermediation, highlighting their conflation of financial planning with intermediation.

The Core Issue: Misunderstanding the Professions

Financial planning and financial intermediation are not synonymous. Financial planning is a profession grounded in advising clients on managing their financial futures through comprehensive planning. It involves understanding clients’ needs, goals, and aspirations and crafting tailored strategies for achieving those goals. On the other hand, financial intermediation is an industry focused on facilitating transactions between parties, primarily selling financial products and services.

The CII and PFS’s insistence that members must be on the FCA’s register of intermediaries to retain their titles underscores a critical oversight. By equating financial planning with the sales-driven world of financial intermediation, they are alienating professionals dedicated to holistic financial planning advice. This misalignment not only undermines the integrity of financial planning as a profession but also discourages new entrants from pursuing careers in this essential field.

Declining Membership and Interest

The repercussions of this misunderstanding are evident in the dwindling numbers of individuals taking CII exams and joining the profession. Gen Z, in particular, is dissuaded by the perception of financial services as a sales-oriented career, compounded by the increasing role of AI and regulatory complexities. These factors contribute to heightened anxiety and drive professionals to seek alternative careers.

Three out of four financial service professionals are considering career changes , driven by the automation of tasks traditionally performed by intermediaries and the burdensome regulatory environment. The traditional model of financial intermediation, reliant on product sales, is becoming obsolete in an era where information asymmetry is rapidly diminishing due to the proliferation of information and advancements in AI.

The Path Forward: Embracing True Financial Planning

The future of financial services lies in recognising and nurturing the distinct profession of financial planning. Unlike the transactional nature of intermediation, financial planning emphasises human skills—empathy, communication, and personalised advice. These are qualities that AI cannot replicate and will continue to hold significant value for clients seeking trustworthy, tailored financial guidance.

For the CII and PFS to remain relevant and effective, they must pivot towards supporting and promoting financial planning as a distinct and essential profession. This involves:

1. Redefining Membership Criteria: Allowing professionals who are not active intermediaries but still engaged in financial planning to retain their titles and recognition.
2. Educational Focus: Shifting the focus of exams and professional development towards comprehensive financial planning rather than product-centric knowledge.
3. Advocacy and Support: Advocating for regulatory frameworks that support financial planners rather than intermediaries, reducing unnecessary burdens that drive professionals away.
4. Engaging the Next Generation: Promoting financial planning as a career that offers meaningful, impactful work, appealing to the values and aspirations of younger generations.

Conclusion

The writing is on the wall for the CII and PFS. To avoid obsolescence, they must distinguish between financial planning and financial intermediation. By championing financial planning, they can attract new talent, retain experienced professionals, and ensure the profession thrives in an AI-driven future. The future is bright for true financial planning, where the human touch remains irreplaceable and invaluable.

Steve Conley Founder, Academy of Life Planning

Questions & Answers

Q: What is the main difference between financial planning and financial intermediation?

A: Financial planning is a profession that focuses on providing comprehensive advice to clients on managing their financial futures, based on their individual needs and goals. Financial intermediation, on the other hand, is an industry centred on facilitating transactions and selling financial products.

Q: Why did the CII and PFS ask you to surrender your title after retiring from intermediation?

A: The CII and PFS asked me to surrender my title because they require members to be on the FCA’s register of intermediaries. This indicates their misunderstanding of the difference between financial planning and financial intermediation, conflating the two and failing to recognise that one can still be an active financial planner without being an intermediary.

Q: What impact has this misunderstanding had on membership and interest in the CII and PFS?

A: This misunderstanding has led to a decline in the number of individuals taking CII exams and joining the profession. It has particularly put off Gen Z, who view financial services as overly sales-oriented. Additionally, many professionals are seeking alternative careers due to the increasing role of AI in their jobs and the burdensome regulatory environment.

Q: How is AI affecting the financial services industry?

A: AI is automating many tasks traditionally performed by financial intermediaries, reducing the need for human involvement in transactional roles. This shift is driving professionals to consider alternative careers as their roles become obsolete. However, AI cannot replicate the human skills essential to financial planning, such as empathy, psychology, and personalised advice.

Q: What steps should the CII and PFS take to remain relevant and effective?

A: The CII and PFS should:

1. Redefine membership criteria to include professionals engaged in financial planning, even if they are not active intermediaries.
2. Shift the focus of exams and professional development towards comprehensive financial planning.
3. Advocate for regulatory frameworks that support financial planners.
4. Promote financial planning as a meaningful and impactful career to attract younger generations.

Q: Why is financial planning considered to have a bright future?

A: Financial planning is considered to have a bright future because it relies on human skills such as empathy, communication, psychology, and personalised advice—qualities that AI cannot replicate. These skills are invaluable to clients seeking trustworthy and tailored financial guidance, ensuring that financial planning remains relevant and essential.

Q: How can financial planning attract younger generations?

A: To attract younger generations, financial planning should be promoted as a career that offers meaningful and impactful work. This involves highlighting the profession’s emphasis on helping individuals achieve their financial goals and improve their overall well-being, aligning with the values and aspirations of younger generations who seek purposeful careers.

Q: What are the benefits of distinguishing between financial planning and financial intermediation?

A: Distinguishing between financial planning and financial intermediation allows for a clearer understanding of each role’s unique value. It ensures that financial planning is recognised as a profession dedicated to holistic advice and long-term client relationships, rather than transactional sales. This distinction can help attract and retain professionals who are passionate about providing meaningful financial guidance, ultimately benefiting clients and the industry as a whole.