Professionalisation of financial planning in Australia,Canada,and South Africa

Abstract

Delivery of apt financial advice to the public has become a high priority in developed countries due to the increased complexity of personal finance. Using the theory of professionalisation and qualitative interviews, we investigate the common barriers that three apex financial planning professional bodies encounter as they create a jurisdiction for Certified Financial Planners^® (CFP). We show that a sales orientation, commission-based remuneration, membership entrenchment with financial product providers and other stakeholder lobbying impede the professional bodies’ progress. However, governmental willingness to regulate financial advice, coupled with technological advances, may enable professionalisation. Our article adds to research on the professionalisation of financial planning and offers practical insights into how other bodies around the world can progress CFP’s jurisdiction. Our research differs from the published work on other professions because it is happening even as we write.

JEL Classification: J44, L84, K23

1. Introduction

Financial planning is a very new field or occupation. Only recently have financial planners in general and Certified Financial Planners^® (CFP) specifically started to organise as an occupation seeking to become a profession. The first organisational meeting that led to the creation of the CFP designation or trademark started in the United States of America (USA) in 1969, resulting in the creation of the designation, a college to educate CFPs and an association (CFP Board, 2023). In 1985, the CFP organisation was transferred to a USA organisation now called the CFP Board. The organising bodies in the three countries in our study acquired the rights to the CFP trademark: Canada in 1996 (FP Canada, 2023); South Africa in 1998 (Financial Planning Association (FPA), 2023) and Australia in 1999 (Financial Advice Association of Australia (FAAA), 2023).

Simultaneously, there has been a push to make individuals responsible for their own financial retirement planning in an environment of greatly increased longevity, a declining number of employer pension plans and defined benefit pensions (Holzmann, 2013) and an increasingly complex financial services industry. These factors increase the need for individuals to seek professional financial advice. Despite the spread of the CFP designation and a growth in demand for professional financial advice, the CFP has not become an established profession yet.

Our research investigates the challenges the CFP credentialing professional bodies face in Australia, Canada and South Africa. Previous research on this topic has focused on only one country and looked more broadly at the financial services industry as a whole (Clarke, 2000; Cull, 2009; Richards et al., 2022b). Using in-depth interviews with participants working for or connected with the professional body and extensive documentary evidence, we focus on what jurisdiction these bodies are seeking to create for CFPs. Importantly, we elaborate on the shared barriers that inhibit, and shared enablers that could propagate, the professionalisation of financial planning in the three countries.

CFPs are situated in much broader industry structures. They are part of the financial advice industry, including more specific work like investment advice, portfolio management, insurance agents and consumer and mortgage lenders. The financial advice industry in turn is part of the much larger retail finance industry. Large banks, trust companies, insurance companies, investment management companies of various sorts and consumer and mortgage loan companies dominate retail finance (West, 2023). The great majority of CFPs work directly for these large companies or operate in smaller groups that are primarily agents for the financial products that these large companies sell. Only a few CFPs in each country offer exclusively comprehensive financial planning without selling any financial products. It is an inescapable part of a family’s financial plan that it will require specific products like mortgages, investments and insurance contracts to carry out the plan. The compensation for these products is not tied to the quality of any advice, but rather to commissions, employee salaries and bonuses and asset management fees. The conflict of interest is obvious, and it appears in our evidence.

The jurisdiction that CFPs want to own is the provision of comprehensive and holistic financial planning. However, this jurisdiction is not clear to those outside of financial planning, creating confusion. Barriers to creating a clear jurisdiction are the origin of financial planning as a sales-oriented occupation, remuneration models that do not suit professionalisation, a membership that cannot change to new ways of delivering financial planning, and counterclaims to the advancement of financial planning from other industry stakeholders. Despite this, some enablers of professionalisation exist. Regulators have an accepting attitude towards professionalising financial advice, technological advancement such as robo-advisors providing financial advice will edge out low-quality financial advice and the CFP bodies’ development of the knowledge base and educational standards supports their claim to professional status.

Overall, our research adds to the theory of professionalisation by showing a rich depiction of the struggles of a professional body trying to professionalise. We also make suggestions that CFP bodies should adopt to professionalise financial planning. These address the ethical issue of remuneration models by creating and researching alternatives, building a strong connection between research on financial planning and the CFP body of knowledge and adopting a strong client interest position by bodies themselves.

2. Literature review

The literature review starts with definitions of financial planning and profession before explaining a theoretical lens to situate our evidence in this enquiry. Let us start with financial planning, which is defined as:

a disciplined, multi-step process of assessing a client’s current financial and personal circumstances against their future desired state and developing strategies that help the client meet their personal goals, needs and priorities in a way that aims to optimize the allocation of their resources. Financial planning considers the interrelationships among relevant financial planning areas in formulating appropriate strategies. Financial planning areas include financial management, investment planning, insurance and risk management, retirement planning, tax planning, estate planning and legal aspects (FP Canada Standards Council, 2022: 2).

While this definition is from Canada, it is indistinguishable from those in most countries. It emphasises the comprehensive nature of financial planning as distinct from more narrowly-defined retail financial services like selling investments and insurance, personal loans and tax return preparation.

Many authors have defined professions (Abbott, 1988; Larson, 1977; Willmott, 1986). However, we use Abbott’s (1988) definition: ‘. . . professions are exclusive occupational groups applying somewhat abstract knowledge to particular cases’ (p. 8). This definition accurately reflects the concept of a profession in our research as financial planning is an application of abstract knowledge to a person’s finances, and the professional bodies desire to have members providing these services exclusively. We combine both definitions together to focus specifically on the exclusive occupational group whose members provide holistic financial advice that meets personal goals, needs and priorities.

The competing claimants to the profession of financial planning differ somewhat by country, but there is one common occupational group across Canada, South Africa, Australia and many other countries. The organisations that licence the CFP trademark are the subject of our research as the leading claimant. The Financial Planning Standards Board Ltd. (FPSB) manages the CFP certification to organisations around the world outside of the USA. Individual not-for-profit organisations in each country manage the education and standards in their own country. Although the CFP started in the USA, the eight directors of the FPSB come from eight different countries.

Each country has other organisations whose members work as insurance advisers, investment advisers, bank financial advisers or in professions with finance connections. Some of these organisations also claim jurisdiction over financial planning, or over some part of it. For example, investment advisers and portfolio managers control trillions of dollars of investments on behalf of retail clients, directly or indirectly. Life insurance companies and agents sell insurance and have trillions of dollars of business in force. Lawyers and accountants are deeply involved in estate planning and tax advice. All these groups compete with the CFPs for the same clients but are more focused on a single aspect. At the same time, they also work with financial planners and do some or all of the work called financial planning. Lawyers and accountants have established and recognised professions, but others do not. However, all of them refer to themselves as professionals in their public discourse.

2.1. Prior research on the professionalisation of financial planning

An eclectic literature has investigated the professionalisation of financial planning around the world. Research in the USA, where the CFP designation was created, investigate the professionalisation of financial planning from a different perspective. Research has argued for the involvement of universities in creating a financial planning profession as universities can both educate, through teaching, and create theory, through research, to build financial planning into a profession (Warschauer, 2002). A theoretical review of financial planning research is provided by Bogan et al. (2020), and they outline many factors from academic research and practice which combine to form theoretical underpinnings of financial planning. For academic research, Altfest (2004) argued that the financial planning profession can be grounded in economic theory by Becker, life cycle theory by Modigliani, and modern portfolio theory by Markowitz. The theoretical basis of the financial planning should also include values and goals (Overton, 2008) because it is both the technical and behavioural benefits that bring value to the financial planning profession (Asebedo, 2024). This argument reconciles with research by Bruce and Ahmed (2014), who found that USA CFPs conceived of professional financial planning as having three aspects: acting in the client’s interest (by serving the client, listening and having standards), having technical competence (through education and certification) and following a financial planning process (applying the FPSB six-step process). However, research from the USA has not specifically undertaken investigation on how to develop the financial planning profession but implies that financial planning has achieved a profession status (e.g. Liu et al., 2023).

Clarke (2000) takes a sociological professionalisation perspective of the whole industry of financial advice in the UK. The research argues that the two conditions that increase the professionalisation of financial advice are public demand and the state’s desire for finance advice professionals. However, impeding professionalisation is the sales orientation of financial advice as it inhibits professional expertise and encourages profit-making rather than a professional service orientation. It also facilitates a gender imbalance within the financial advising industry (Richards et al., 2020). To professionalise, state regulators and the advisers must move financial advice from a commission-based sales approach to a fee-based independent approach, which would allow the creation of a unified professional body (Clarke, 2000).

Research has noted that the state has constantly intervened in financial advice to regulate the provision of financial advice (McInnes, 2020; Ring, 2016), yet the professionalisation of financial advice has stagnated (Richards et al., 2022b). Cull (2009) argued that collaboration between major institutions such as accounting professional bodies, financial planning professional bodies, financial service providers and regulators was needed to professionalise financial advice. Mid-tier auditors in South Africa have not only legitimised but indeed argued that their institutional logics of professionalisation and commercialisation are complementary, promoting sustainability in the auditing profession (Harber and Willows, 2022). However, collaboration between the major institutions does not occur when differing institutional logics are held towards financial advice (Richards et al., 2022b). The institutional logics within each major financial planning institution have stifled collaboration to raise the professional status of financial planning. State regulators were established with a belief in market efficiency and self-regulation. Financial service organisations view financial planning as a method of selling financial products matching their profit-maximising logic. Professional bodies’ focus was on attraction and retention of members due to a lack of mandate to be a member of a body (Richards et al., 2022b).

Cull (2009) and Richards et al. (2022b) use archival documentary data in Australia to draw conclusions. Our research enlarges extensively on their work by focusing on the apex professional body in the financial services industry in three countries and using primary interviews with knowledgeable subjects. Studying professionalisation of financial planning across three countries allows analysis of commonalities between the countries to get a perspective of the higher-level issues in professionalising financial planning without getting involved in the idiosyncrasies of each country.

Research in financial planning has shown that ethics is a primary concern in financial advice (Bruhn and Asher, 2021; Richards et al., 2022a). Evidence from the USA identified 7% of financial advisors have some kind of misconduct in their career, with misconduct occurring more frequently when advisors work for large financial institutions (Egan et al, 2019). Our research focuses specifically on CFPs, and the extent to which they engage in misconduct, above or below the industry average, is debated. Earlier research showed that CFPs were less likely to engage in misconduct (Tharp et al., 2021), but more recent research found that CFPs were more likely to engage in misconduct (Camarda et al., 2023). Nonetheless, the image of misconduct can tarnish the reputation of financial advisors, including CFPs, and could impede professionalisation (Richards et al., 2022b).

2.2. A theoretical lens to examine profession and professionalisation in practice

A large literature already exists setting out theories of professionalisation and applying them to other professions, especially in sociology. Larson (1977) sees professionalisation ‘as the process by which producers of special services sought to constitute and control a market for their expertise’ (p. xvi). A critical perspective looks at the professionalisation process from a power-based perspective (Johnson, 1972; Willmott, 1986). Professionalisation is ‘understood as a strategy for controlling an occupation, involving solidarity and closure, which regulates the supply of professional workers to the market and also provides a basis for the domination of institutions, organisations and other occupations associated with it’ (Willmott, 1986: 558).

Our research uses the professionalisation theory of Abbott (1988), whose definition of profession we have already cited. A key concept for Abbott is ‘jurisdiction’. What is it, how is it attained, how is it maintained and how do competing claimants for professionalisation control jurisdiction? We define jurisdiction as control over a body of abstract knowledge that is foundational for the work that the profession or would-be profession does. Financial planners and the competitors in other occupations like investment advice work with a body of knowledge that is socially constructed. Abbott (1988: 70) states:

A full jurisdictional claim is normally made in the public, then later in the legal arena. It is based on the power of the profession’s abstract knowledge to define and solve a certain set of problems, which may or may not already be under the full jurisdiction of some other professional group.

There are three stages in Abbott’s professionalisation process: disturbances, jurisdictional contests and the transformation leading to balance or ‘settlement’. He explains how different professions act and react based on their professional skills and experiences. General perceptions of professions have been expressed as collective social mobility, which signifies common phenomena such as a legal monopoly, malfeasance and power bases. Thus, using Abbott as a research framework involves investigating a historical narrative that integrates disturbances, leading to jurisdictional contests and transformation, leading to balance or settlement. Full and final jurisdiction is the ultimate aim of a professional group; which is the CFP bodies in our setting. Settlement may take different forms, of which full and final jurisdiction is only one, and subsequent events can lead to transition to different settlements. Competing groups could divide the work by type of work or type of client, they could agree to share the work and/or jurisdiction in some way and they could merge. One group could become subordinated to another group or continue to work in some way under the supervision of another group (Abbott, 1988).

A key issue in winning the jurisdictional contest is having your area of expertise legislated and, therefore, supported by law. This brings in the relationship between the state and the profession as a quintessential aspect of development. Research on accounting, a cognate discipline, specifically indicates that historically the state has had a significant influence in creating a professional jurisdiction in developed (Chua and Poullaos, 1993) and developing countries (Yapa, 2022).

At the risk of oversimplifying Abbott’s rich and complex work, there are major themes that relate to our investigation. First, that competition for jurisdiction over an occupational field or work is ever-present. It is defining the jurisdiction as essential, malleable and subject to change. The professions and/or occupational groups do not exist in a vacuum. Different groups are interrelated and shifting constantly. In addition, professions exist in a social system that affects them and how they compete for jurisdiction. Abbott claims that most of the literature on the nature of professions focuses on single cases and how the profession is organised. He stresses the inter-relatedness and the importance of the actual work done. For our research, what financial planners do for their clients is a critical component of the competition for jurisdiction.

The sociology literature on professions does not examine the detailed methods of dealing with misconduct though. We have shown misconduct is a significant issue for CFPs and the much broader area of finance advice. An essential advancement for professionalising financial planning and establishing CFPs as the dominant professional group is a robust system for dealing with misconduct.

Finally, the great majority of financial planners in all three countries work for larger organisations that are not controlled or managed by financial planners and that primarily sell financial products and services. There is a significant tension between the loyalty of the financial planner to the employer and the responsibility to the financial planning profession. This ethical tension is most significant when the professional or organisational group to which the planner belongs has a code of ethics that includes a principle of placing client interests first.

In summary, this article focuses on the professionalisation of financial planning from the perspective of CFP organisations. The research documents the higher-level issues by addressing two research questions:

• What are the common barriers and enablers that the CFP-certifying professional bodies in Canada, South Africa and Australia face when creating a jurisdiction to professionalise financial planning?

• How could these professional bodies overcome barriers and enhance enablers?

3. Methodology

Most finance research uses quantitative data, but our research questions call for qualitative research (Bettner et al., 1994; Kaczynski et al., 2014). We completed 15 semi-structured interviews with 13 industry professionals; five participants from Canada, four from Australia and four from South Africa. The interviewees selected to participate in the research came with vast experience in financial planning and cognate fields such as accounting, law and education. Ten of the 13 respondents had previously worked as financial planners and had now progressed to senior positions in the industry. The respondents worked in a variety of positions at professional bodies including chief executive officers, vice presidents, directors and managers. Some respondents had also worked for regulators and on various ombudsman’s panels. They had nine to over 40 years of experience working in financial services, the majority with more than 20 years. Of the 13 respondents, 12 had completed their CFP designation. The research complied with ethical requirements’ prescribed by the researchers’ universities to ensure anonymity of respondents. We cannot provide more specific information about the interviewees without a risk of them becoming identifiable.

We asked the participants to reflect on the state of professionalisation of financial planning more broadly and specifically about CFPs. The structure of the interviews ensured that certain topics, such as the creation of a jurisdiction, the influence of product providers, legislative changes in financial advice and education and ethical standards were covered. The unstructured aspect of the interview gave free reign to participants to cover the topics they deem most important to professionalisation of financial planning.

Analysis of the interview data followed a thematic methodology (Braun and Clarke, 2006). The analysis started with generating and refining a coding framework for the interview data. Themes were generated and refined in an iterative process until the final coding framework outlined in Supplemental Appendix 1 was developed. Coding of the interview data was completed by one researcher and reviewed by the other researchers. Finally, themes were constructed through an analysis of coded data and triangulated with evidence from other sources. Specifically, to triangulate findings, we verified the claims in the data using public documents and public statements recording what the CFP bodies did and also what governments regulating financial planning and financial advice have done. The researchers acknowledge the subjective nature of this research, where meaning is socially constructed during interviews through to analysis and writing. To address bias in the research (Roulston and Shelton, 2015), we incorporated reflexivity (Hammersley and Atkinson, 2019) through reviewing each other’s interviews, discussing emergent themes and editing each other’s writing when producing this research output.

4. Findings

We recall our initial definition of financial planning as a holistic and integrated process; this signals what jurisdiction they are seeking to claim. Interviewees within professional bodies from all countries focused on the importance of defining financial planning as a holistic approach with different specific areas that integrate into a solution to deal with the entire family’s needs. Financial planning considers all the aspects of financial advice, a client’s current financial situation, risk management and insurance, investment planning, tax planning, retirement planning, estate planning and psychology of finance, to deliver financial advice. Consider these quotes:

Financial planning is about the holistic person, and the holistic plan around your financial needs. South Africa 01

It’s a multi-step process so that it is not the giving of one-off advice in any particular area. So, those are components of financial planning but more speaking of financial planning, more generally as a profession, it’s the multi-step process. Canada 01

Financial planning professional bodies know this, but others do not. This leads to confusion in many domains and a lack of jurisdiction. It does not allow them to distinguish CFPs from others in industries providing financial advice and calling themselves financial planners.

I think it (definition of financial planning) was made clear in the financial planning community . . . If you were to ask a person who works in financial services in some capacity but is not directly exposed to financial planning to articulate the distinction, they would be hard pressed to do so reliably. Well I think planners know the difference but I don’t think the public or other people in finance do’. Canada 04

. . . when we talk about financial planning as a profession, I think it has come a long way. Probably, the biggest disadvantage of it is having all these other tag-alongs, which call themselves financial planners, which aren’t financial planners. South Africa 02

A large concern with the ambiguity of defining financial planning and financial planners is that clients do not understand the difference between financial planning and financial product sales or advice on specific items like investments. If potential clients do not understand financial planning, they cannot choose between competing service providers and to see the value that financial planners deliver. The consumers’ and public awareness of financial planning will be a large aspect of the legitimacy of this profession.

Consumers think financial planners sell products, consumers think financial planners are probably more stockbrokers, consumers don’t necessarily have a lot of trust in financial planning, because there are a lot of bad stories out there. Australia 01

Respondents noted that the professional body has engaged in many public campaigns to raise awareness and understanding of the CFP^® designation and financial planning in general. Respondents rated the success of these campaigns as modest to non-existent. Instead, the financial planning professional bodies have changed tactics and focused on the relationship with the state to legislate a jurisdiction and legitimise the financial planning profession.

But what I would say is, the more you have the legal binding accoutrements of professionalism, the more likely . . . the street credibility will follow. So it’s almost like a chicken and egg. And I think the legal aspects has to be done first in order for the general public to accept it. Canada 04

Why does it need legislative protection? Well . . . for the consumer to [not] be confused. South Africa 01

In specific provinces in Canada, the CFPs advocated successfully to get title protection in the law, (so that those people calling themselves financial planners could only be those coming with a set of required education and credentials (FSRA, 2023)). In Australia, the focus was to get legitimation of the work where personal financial planning could only be provided by those with financial planning education and affiliation with financial planning professional bodies (Australian Securities and Investment Commission (ASIC), 2023). In South Africa, the FPI is seeking the protection of the title ‘financial planner’ via their response to the Retail Distribution Review (RDR) paper on the advisor categorisation discussion document as well as the Conduct of Financial Institutions (COFI) Bill. The FPI asks the regulator to acknowledge the global FPSB standards and by default CFP professionals of the FPSB affiliate in South Africa, which is the FPI (Financial Planning Institute of Southern Africa, 2021).

4.1. Barriers to professionalisation of financial planning

Our research target is CFP bodies achieving professional status through the jurisdiction of financial planning. The barriers to this objective are identical for any group that tries to gain that jurisdiction, and so we refer to financial planning broadly in this section.

A major problem to legitimisation of financial planning stems from its origins as a sales-based occupation. Financial planners originated from organisations that created financial products, needing a sales force to sell these products. Professionalisation of financial planning creates a higher level of ethical standards that conflicts with the sales orientation of the financial advice. Consider these quotes:

it (financial planning industry) grew out of financial companies needing to distribute their products. But, they didn’t want to call it sales, so they called it advice. And so, it wasn’t a very clear fact, where it grew up, and it said; this is the activity of financial planning. South Africa 03

I think that they (financial product providers) were the ones that were getting the financial advisors together, incentivizing them, you know. When you’re in – I guess having commissions to me is not a sign of profession. Australia 02

The sales-based origin of financial planning as a barrier to professionalisation is inherently related to a second barrier, which is the remuneration model. Most financial planners are compensated via commissions or must meet quotas to hold their jobs, achieve promotions and receive salary increases. They will recommend products that gain these rewards rather than undertake the holistic financial advice that is the jurisdiction of financial planners. Even though there have been changes to reward structures provided by financial product providers to financial planners in all three countries, there is still a belief that selling products rather than giving financial advice would be as lucrative, if not more so, than providing holistic financial planning. It creates an ethical issue because a financial planner is biased towards selling a product rather than giving the best advice (Bruhn and Asher, 2021; Richards and Morton, 2020). This conflict of interest is endemic to all retail personal finance services, whether the service provider is called a planner, adviser, broker, portfolio manager or other title. Thus, financial planners struggle to differentiate themselves from other occupations when being remunerated in the same method.

In addition, the commissions are somewhat hidden or difficult for clients to understand, and clients perceive that financial advice is provided for very little cost. This led to impediments of changing remuneration models to a fee-for-service model which would increase professionalisation of financial planning (Clarke, 2000; Cull, 2009). Consider these quotes:

If all you’re doing is trying to sell a particular product and justify why you are selling that product, it’s easier to just operate in that manner. And you get remunerated . . . reasonably well for doing that. Australia 01

The problem is many advisors still compete in that space, because the margins are. . . because the compensation is hidden. So the reality is the profitability is really there . . .. Canada 03

A third impediment that CFP-certifying professional bodies encounter is the ability to change the behaviour of their membership. Many of the people who are members of the financial planning bodies are employed in profit-making organisations that have delivered financial planning services using certain remuneration models. They will have a reluctance to change the way financial planning is delivered. It is noted that professional bodies have established codes of ethics in all three countries, which have been adopted and adapted from the Financial Planning Standards Board (2023b). Frequently, respondents pointed out the code of ethics as a key aspect of the professional body.

When you belong to a professional body, you subscribe to a code of conduct, you subscribe to a code of ethics . . . Your professional Body is not about protecting you. I firmly believe, that the professional Body is about protecting the profession firstly, and the people that use this profession to better their lives. South Africa 04

While respondents frequently spoke about the importance of a code of ethics, they seldomly spoke about the enforcement of the code of ethics and did not specifically link enforcement to professionalisation. The link between addressing misconduct and professionalisation of CFPs was less clear. One reason is that not everyone who provides financial advice is a CFP, and therefore, the professional body has limited ability to remove misconduct from the industry. In Australia, a code of ethics was legislated and when asked about this, one respondent stated:

We don’t believe that a code of ethics should be legislated but we’re also conscious of the fact that not everybody voluntarily signs up to be a member of a professional association, here to a code of ethics. And therefore, if the only way to get everybody to comply with the code of ethics is legislated, then that’s kind of what you need to do. Australia 01

A second reason is that the ability of these codes of ethics to change the members’ behaviour comes secondary to organisational needs (Bruhn and Asher, 2021; Richards and Morton, 2020). This is exacerbated by the fact that some members of the financial planning professional body may only do a small amount of holistic financial planning, with more of their business focused on other more profitable aspects of delivering financial services.

It is very difficult to pull them apart. Because, if you have a certified financial planner professional, who does have a contract with a provider. The provider pays commission for the products that they sell. But, the commission, we have to bear in mind, is regulated. Because, the product house that is paying commission, is regulated by the Financial Services Conduct Authority. But, yes. So, the fee is not. . . the fee that you charge is not for the product that you sell. It is for the professional service that you deliver. Because, when you do a holistic financial plan for a client, it is a lot of hard work. It really is a lot of work. South Africa 01

If, however, the problems are, are mostly based on your making recommendations with regard to investment products and the financial planning portion is an ancillary part of your job description, it is difficult to have the tail wag the dog. Because the registrants who are financial planners are being guided in, regulated primarily, by their firm, and by the SRO [self-regulatory organisation] that regulates their firm . . .. And as a result of that, FP Canada is relatively constrained. Canada 04

In addition to the CFP members of a professional body being reluctant to change, there was also an industry-wide reluctance to change. The professional bodies would propose reforms to professionalise financial planning, but other industry stakeholders would equally lobby to marginalise these claims. This played out in an ongoing nature where wins would be made and then conceded as different groups sought to influence politicians, regulators and the general public.

There has not been a lot of resistance around the proposal for the Protection of Financial Planning. You also have the one or two bodies that, maybe, want to go ahead from a competitive point of view. South Africa 01

In general, my experience with regulators is that they’re incredibly well intentioned, they’re pretty well educated . . . they are sometimes misguided but typically it’s industry stakeholders misguiding them intentionally. Canada 03

The present status in the ongoing struggle for jurisdiction in Canadian provinces finds title protection laws in place but regulations being created that allow a very large number of allegedly unqualified existing practitioners to call themselves financial planners or financial advisers (Boughton, 2023). In Australia, the law requiring a high level of education to provide financial advice is being reduced by a subsequent government (Gill, 2022). Finally, in South Africa, the contest for jurisdiction was being paused at the time of writing as the legislation to create a jurisdiction has not yet been passed by government.

4.2. Enablers to professionalise financial planning

Despite the barriers to professionalising financial planning, many of the respondents noted that progress has been made. In this section, we present the current enablers to professionalise financial planning. The first of which is a change in perspective from various government officials and regulators towards financial advice. Respondents in all countries acknowledged that they are more understanding of the need to reform and regulate this industry. This seemed to differ to previous research, which outlined that governments and regulators took a laissez-faire approach to financial services based on a free market ideology (Richards et al., 2022b). However, these quotes illustrate the change in the perspective of regulators.

But I think the Royal Commission and the actions that are taken after the Royal Commission, and these remediation programs, licensees are kind of seeing the writing on the wall that we either have to really do this properly and professionally, or we run the risk that this is going to blow in your face. Australia 01

Like I say, I think there was a broad consensus that consumer protection was needed. It wasn’t even a hard sell . . .. It was not a sell of ‘do we need this?’ It was a broad recognition of ‘yes we do need it’. The only question is what form will it take? Canada 04

How did this change come about? It seems that there were two major catalysts for progressing these issues. First, the professional bodies built close relationships with politicians and engaged in clear lobbying to achieve their objectives. This is no small feat, as the industry stakeholders lobbying the opposite direction have far greater financial resources than the professional bodies. However, as the professional bodies positioned themselves as acting in the consumer interest, rather than the interest of their members, this lobbying became more successful. Consider these quotes:

I think Ontario did it, was not because of pressure from Quebec, or really because of superior lobbying. But because the financial services industry is such a big part of the Ontario economy, that there was a recognition on the part of both major parties in Ontario, and for that matter the third party in Ontario as well, that we need to put some teeth behind who can call themselves this, because we need to protect consumers. So, there was a broad consensus that consumer protection was at stake. Canada 04

So, regulators themselves are regulating the product advice space. . .. So, part of the changes we are going through now, we are pushing to say; there should be a differentiation between product advice and financial advice. With product advice around selecting the best product . . . and, financial advice is around the strategy of helping people achieve their financial goals. . .. It took six years. And many, many hours of discussion, to get to a point to say; this is the difference. South Africa 03

An additional catalyst for a change in the government and therefore the regulators’ perspective on financial planning is that media has highlighted some major problems with some aspects of the financial advice industry. Especially in Australia, it seems that the media’s coverage of problems with financial advice led to calls for a Royal Commission in Banking and the major reforms that followed thereafter. One respondent noted that politicians were getting pressure from the public for change.

And I think politicians were sick of people you know constituents knocking on the door saying ‘this is what happens’, ‘this is what happened to me’. Australia 04

The CFP professional bodies have recognised the need for a robust response to misconduct, although this response did not appear a lot in our interviews. A system to deal with misconduct should include a code of ethics; detailed practice standards that reflect the code and provide practical benchmarks against which to assess a planner’s conduct; an easily-accessed way for a client to register a complaint; a quasi-judicial process to determine the validity of a complaint; a set of appropriate consequences for misconduct and publication of the planner’s name and misconduct when the process determines misconduct occurred. Because the professional bodies are not courts, the consequences are fines, suspensions of the right to use the CFP title and ultimately removal of the CFP title. Without going into exhaustive detail, the CFP professional body in each country has established all of these aspects of the system to deal with misconduct, and they are readily observed on their websites. The regulators of financial services are coming to rely on these systems to enforce ethical behaviour of financial planners and, in Canada and Australia, to enforce ethical behaviour of practitioners with broader titles like financial adviser.

A second enabler of professionalisation of financial planning is technology, especially robo-advising. While robo-advice is not at a level to replace sophisticated financial planners, it does have the ability to deliver basic financial planning advice for those who need it and particularly to structure investment portfolios.

How does robo-advice lead to the professionalisation of financial planning? The view of some respondents was that robo-advice is competing in the market where financial advisors are simply selling investment products. As robo-advice becomes more mainstream, the ability of financial planners to offer investment services to a robo-advice platform will be eliminated as robo-advice will deliver portfolio management cheaper and better. The financial planner/adviser will be forced to become a holistic planner to add value and compete for clients (Fernandes and Robinson, 2020).

Again, for those people who are both financial planners and people who charge a fee or earn a commission for managing money. If your value proposition is just managing money, you’re under attack from the Robo’s. So if you’re a fee based planner the robo is neither here nor there because you are doing the planning and the robo is managing the portfolio. Canada 04

The world of robo-advising is still in the development stage in financial planning. As artificial intelligence begins to improve, technologies’ influence on financial advice will continue to grow.

A final enabler to professionalise financial planning has been the educational requirements, including exams and the required number of years of practice experience and the creation of a body of knowledge.

So, a certified financial planner – we call it the five E’s. It used to be the four E’s but, it is the five E’s. So, it is education – you need to have a post graduate diploma in Financial Planning, and BCom, or any other relevant qualification that is on a NQF8 or higher. Then, you need at least three years of holistic financial planning experience. Then, you write the professional competency exam, which is known as the Board Exam. And then, you have the ethics declaration that you do every year. So, before you become a member of the professional body, we actually do a background check on you. South Africa 01

In most professions, the body of knowledge to which they claim jurisdiction is created outside the professional group itself, although members of it contribute to the research that defines and recreates it over time. The value of creating a body of knowledge and attempts at using theory to achieve this has been highlighted in research in the USA (Altfest, 2004; Overton, 2008; Warschauer, 2002). While there is a body of research external to the CFPs, they compete explicitly to define the entire field of knowledge. In Australia, several universities and CFPs work together to create the body of knowledge. They hold an annual conference of both practitioners and researchers. They have created a refereed academic journal, The Financial Planning Research Journal. FP Canada established the FP Canada Research Foundation which funds original research in financial planning with a strong emphasis on publishing the results. FP Canada has also developed its Book of Knowledge (BOK) which summarises all knowledge areas that financial planners are expected to master. The BOK is not static; it is continually revised as new knowledge develops, such as behavioural finance and bitcoin experience, in the development of a body of knowledge.

All FPSB affiliates, including Australia and Canada, must incorporate the FPSB Standards into their curriculums. Affiliates of the FPSB are allowed to localise the content to its specific territory/country as all affiliates have different economies, regulations, fiscal and monetary policies. In South Africa, the FPI formed part of 16 other territories that participated in the Global Job Analysis Survey in 2020. They are in the process of consulting with all recognised educational providers to ensure that the new content (BOK) is included into the Postgraduate Diploma in Financial Planning, as well as in the BCom Honours in Financial Planning. All affiliates have until January 2025 to incorporate the new standards into their local curriculums (Financial Planning Standards Board, 2023a). Advocacy efforts have focused on the FPSB standards and the fact that the FPI is the only South African Qualifications Authority (SAQA)-recognised professional body for financial planning. The FPI governs this via their membership regulations where only individuals who are certified as CFP professionals may use the designation. Their Conduct and Ethics arm acts against individuals who call themselves CFP professionals but are not certified as such.

5. Discussion

The analysis so far has focused on the first research question, where we have outlined the barriers and enablers that the CFP-certifying professional bodies in Canada, South Africa and Australia face when creating a jurisdiction to professionalise financial planning. The discussion now turns to the next question where we answer how these professional bodies overcome barriers and enhance enablers to professionalise financial planning. One aspect that needs to be stated is that the jurisdiction for professional services needs to be constantly fought for and maintained by professional bodies and their members. As the financial planning profession is still new, having been established in 1969, this is an issue worldwide. As noted in the literature review, academics in the USA have not extensively researched how to develop the CFP into a profession, and our research serves to highlight issues that countries outside of the USA incur on the path to professionalisation.

We can observe a constant fight occurring in Australia where strong educational reforms to financial advice have since been rolled back after a change in government. In Ontario, Canada, a change in the legislation of title protection appeared to be a big step forward for professionalisation of financial planning, yet subsequent lobbying has watered down the legislation, allowing more occupations to call themselves financial planners. Conversely, in South Africa, the fight for title protection and jurisdiction has been strong as indicated by the COFI Bill. However, these changes have not been implemented at the time of our writing, and the specific details remain unknown. Even in the USA where the CFP was created and there are large associations of financial planners, academic journals and educational programmes right to the doctoral level, the competition continues. The Financial Planning Association has decided to engage in political action in the USA to seek title protection for financial planners. ¹

The most important part for financial planning professional bodies to address is the remuneration models used in financial advice. A key aspect that stymies professionalisation is that only a handful of financial planners can work on a fee-for-service model. The task of creating different remuneration models is not easily solved. However, the CFP-certifying financial bodies have not specifically addressed this issue. In interviews with subjects who work for the certifying bodies, their language becomes much vaguer and more unfocused when the interviewer raises the challenge of compensation models. An issue with remuneration models is that the amount of work to create holistic and comprehensive financial plans, which is the jurisdiction of financial planning, involves significantly more work than providing advice on specific products or single topics like insurance or investments. This comes at a time when the price of financial advice has escalated and is essentially pricing many clients out of the market. Thus, having some research-based insights into alternative remuneration models in financial planning would allow financial planners to modify business practices and professionalise. FP Canada has created the Qualified Associate Financial Planner® (QAFP) designation, for advisors who engage with less-complex financial advice. However, the benefit of the QAFP designation for remuneration models remains yet to be seen.

A second issue for financial planning bodies to address is to become even more active in the creation of a body of knowledge (Bogan et al., 2020; Warschauer, 2002). The professional bodies are financially constrained in their ability to administer and conduct this research. However, they should pursue means to have academic research more actively occurring on financial planning. Furthermore, having a clear mechanism to classify research and then integrate research findings into a body of knowledge is needed. This will allow knowledge created from research to be incorporated into curricula used for training to ascertain the CFP designation and continued professional development. This will further the professional expertise of financial planners.

A third proposal the professional bodies could escalate further is to position themselves as acting in the client’s interests. The accounting profession has long had a position where it aims to work in the public interest, regardless of whether this was actually the case or not (for a recent review, see Killian and O’Regan, 2020). To a certain extent, the professional bodies in all three countries purport to act in the clients’ best interests with all of their engagements. However, a critical review of their practices shows that this initiative could be taken further. They do not take a public stance against inherent conflicts of interest such as the remuneration models. They take an ambivalent stance towards active fund management, despite academic research consistently showing that active management underperforms passive asset management (Elton et al., 2019).

A fourth action they can support is legislation and regulation to force the financial institutions providing financial products to disclose fully the hidden costs of the products to allow a proper comparison of the explicit costs of formal financial plans. This work is underway in the three countries in our study, but so far, it has not raised public awareness very much. This may occur because disclosure by financial product providers is arduous and lengthy so is not understood by consumers (Richards and Safari, 2021).

6. Conclusions and future directions

Our research into professionalisation of financial planning is unusual because the process is in the middle of a competition for jurisdiction with no clear settlement in sight. Works like those of Abbott (1988), Johnson (1972) and Larson (1977) analyse the historical process of professions that have reached some form of settlement, although challenges and changes will continue with them.

The barriers to the CFP-certifying bodies, or anyone else, gaining a full and final jurisdiction over financial planning are formidable. The field itself is almost impossible to totally disentangle from specific subsets like investment advice and product sales, insurance sales and debt management. The CFP bodies explicitly aim for jurisdiction over holistic financial planning, but outside their group, very few people understand the difference between financial planning and the specific subsets, and even legislators do not understand the distinction. The remuneration model, the public unawareness of the hidden costs and the serious conflict of interest between the financial institutions that employ most financial planners, CFP or otherwise, and the best interests of the clients all militate against full jurisdiction.

The most likely outcome seems to be a settlement that will involve CFPs owning jurisdiction over comprehensive financial plans and sharing jurisdiction with other groups and the financial institutions generally over the implementation of the plans with investment, debt, tax and insurance products and services. Governments may grant title protection of ‘financial planner’, but none of the legislation enacted or proposed prevents many people who are not CFPs from continuing to operate in all the single-subject fields and acquire most of the available compensation.

Since this process is changing as we write, the entire topic needs a revisit within the next few years to see what has occurred. This situation creates an opportunity for sociologists to study an occupational group competing for jurisdiction and professional status as it is happening, rather than as an historical investigation.

Our work has some limitations. We selected interview participants who we believe to have good knowledge and insight, but they are very small in number compared with the large number of CFPs. We did not interview anyone who is or could be considered to be in a group that is competing with the CFPs for jurisdiction. In particular, we did not interview senior executives of large financial institutions.

Each country in our study has a commonality in the widespread use of English as a language and common law. But underneath, there are many cultural and institutional differences. We have far more information on the detailed history and situations in each country than we can capture in a research article, and perhaps we have not chosen to focus on all the salient evidence we possess.

This competition for jurisdiction is occurring in quite a few other countries that we have not discussed – notably the USA, the UK, Korea, China and New Zealand. How it progresses in those countries could provide different insights into the issues we have presented. We have opened a topic that merits much further investigation, both for sociologists looking at a competition as it happens and for the field of financial planning and everything associated with it. Other researchers suggested to us promising directions for further research that go beyond the scope of our article.

The social identity of financial planners and how they see themselves in society, and how society views them, would be interesting to investigate. The sociological literature on professions identifies the value of the prestige of belonging to a profession, but could we go deeper into how social identity interacts with professionalisation and membership in a profession? Does the nascent financial planning profession have an identifiable professional culture that affects how they behave in the workplace and how they interact with other professions? Could or should the financial planning bodies try to develop a culture that is more than just the sum of codes of ethics and professional skills to perform financial planning tasks? Abbott, for example, is silent on the topic of professional culture. Financial planners, advisers of every nomenclature and the financial institutions deal with the future financial success of hundreds of millions of people. The stakes for making their work more professional are enormous.

Supplemental Material

sj-docx-1-aum-10.1177_03128962241246679 – Supplemental material for Professionalisation of financial planning in Australia, Canada, and South Africa

Supplemental material, sj-docx-1-aum-10.1177_03128962241246679 for Professionalisation of financial planning in Australia, Canada, and South Africa by Daniel W Richards, Chris Robinson and Gizelle D Willows in Australian Journal of Management