CANADIANS STILL HOLD MISCONCEPTIONS ABOUT FINANCIAL PLANNING say CFP® professionals, but more new clients have it right than three years ago
October 12, 2005, Toronto — Canadians still hold misconceptions about financial planning, but the CFP® professionals they go to for help note new clients today come to them better informed than those of three years ago.
Sixty-five per cent of the 803 Certified Financial Planner® (CFP®) professionals who responded to a recent survey conducted by Financial Planners Standards Council (FPSC) said that more than half of new clients initially harbour many misconceptions about financial planning. One-quarter of respondents said that between 26 and 50 per cent of their new clients hold these misconceptions. However, the majority (84 per cent) of the CFP respondents said the proportion of new clients that come to them with an 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," says FPSC VP Communications & Corporate Relations, Ann Bowman.
"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."
Bowman says there is also a need for Canadians to take responsibility to find out for themselves what they need to know and, "there is no better place to start learning about financial planning than at the FPSC website at www.cfp-ca.org."
"There is a different level of general knowledge and engagement in the planning process than I saw even three years ago," says Laurie Stephenson, CFP, of Freedom 55 Financial in Halifax. "However, 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. No matter where they start, clients appreciate the broader scope and value that financial planning provides."
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.
Statement: "I see clients who at first…."
Rated 7 or higher in agreement
1. Confuse financial planning with investing
.................
79%
2. Think financial planning is the same as retirement planning
.................
78%
3. Don't set measurable financial goals
.................
76%
4. Are afraid of planning or don't plan in general
.................
72%
5. Neglect to evaluate their financial plan periodically (think it's a one time event)
.................
71%
6. Don't understand that good professional planning advice is largely dependent on good information from the client
.................
70%
7. Don't understand how advisors are compensated
.................
69%
8. Are looking for quick fix instead of a long-term strategy
.................
64%
9. Have no idea what a financial planner does
.................
63%
10. Expect unrealistic returns on investments
.................
60%
Other mistakes made and misconceptions held by new clients:
About 10 per cent of the CFP respondents provided other examples of mistakes and misconceptions held by new clients. A select list follows:
CFP respondents said: "I see new clients who at first…."
"Think that everyone in the financial services industry is a financial planner."
"Think financial planning is for the rich people."
"Do not take personal responsibility for their financial affairs."
"Aren't willing to make the changes necessary to be successful."
"Think because they have substantial assets, planning is not required. They feel things will take care of themselves and often give no consideration to tax planning."
"Are afraid to take a close look at cash flow."
"Do not know the value of advice."
"Think about personal taxes only at tax time."
"Believe financial planning is only about the assets they have and don't consider mentioning their liabilities."
Methodology:
FPSC conducted the online survey during the month of September using SurveyMonkey.com, an online survey software program. The total number volunteer respondents represent approximately five per cent of the total population of CFP professionals in Canada. The results are accurate within +/- 5 per cent, 19 times out of 20.
FPSC shares the results of this third survey of misconceptions held by clients of CFP professionals during Investor Education Month to heighten industry and public awareness of the importance of encouraging Canadians to empower themselves with the knowledge to make informed decisions about their own financial affairs.
About the Council for Investor Education
The Council for Investor Education (the Council) is a national forum of not-for-profit organizations and regulators interested in empowering Canadians with the knowledge to make more informed financial decisions. The Council shares, coordinates and promotes ideas and initiatives that facilitate the best and most efficient use of its collective expertise.
Financial Planners Standards Council (FPSC) is a not-for-profit organization established in 1995 to foster professionalism in personal financial planning. FPSC develops and enforces the highest standards in financial planning competency and ethics for individuals who hold the CFP® (CERTIFIED FINANCIAL PLANNER®) in Canada. There are currently more than 16,000 CFP professionals in Canada and more than 94,000 individuals who have earned CFP certification in 18 countries around the world. See www.cfp-ca.org for more information.
FPSC conducted this survey in follow-up to previous similar surveys. See the FPSC website for the 1999 and 2002 releases for the Misconceptions Surveys.
Media Contacts:
To Arrange interviews contact: Eileen Chadnick/Chadnick Communications for FPSC at 416.631.7437 or eileen@chadnick.com; Reed Hilton/FPSC at 416.593.8587 ext 235 or rhilton@cfp-ca.org; or Ann Bowman/FPSC at 416.593.8587 ext 225 or abowman@cfp-ca.org.
CFP®, CERTIFIED FINANCIAL PLANNER® and are certification marks owned outside the U.S. by Financial Planning Standards Board Ltd. (FPSB). Financial Planners Standards Council is the marks licensing authority for the CFP marks in Canada, through agreement with FPSB.
are certification marks