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Are We Regulating The Wrong Person

There are two roles required when advising a client. Communication and technical. Are we regulating the wrong one?

The person who is in the meeting with the client needs strong interpersonal skills. They need to be able to listen, develop rapport, ask pertinent questions based on what they have heard (which is really just a great form of listening). They need a basic level of technical knowledge in order to be able to explore options, perhaps, although these mustn’t be brought in too soon in the discussion. More listening is often better.

After the meeting the person holding the meeting should be able to write up great notes about the clients’ objectives, dreams, motivations. If the client were to read those notes, they would respond “Wow, this person has really understood me.”

Those notes are then given to a person who has strong technical knowledge. Could be the same person in a one person firm, will often be a different person (could be outsourced). That technical clever person will then take the list of assets, the tax rules in place, and the deep knowledge of the individual from the first person, go away into a darkened room, and come back with a financial plan.

The first person will then take that plan and meet with the client again to present it. They will need those interpersonal skills again, but this time communication skills, taking perhaps complex rules and ideas and explaining them in a simple way that the client will understand. Perhaps choosing which technical bits to include and which to leave out. Turning the technical plan of the second person into something relevant to the clients’ lives.

It’s pretty clear what skill set these two people in the advice process need. The first – the adviser – needs to be a people person. They only need enough technical knowledge to guide the initial discussion and understand the plan. The second – often a paraplanner – needs to be technical clever, people skills are less important.

So why do we force advisers to take technical exams (at least beyond a basic level)? Why, even, are they regulated whereas paraplanners are not?

As is ever the case, we have arrived at this point from the past. The ‘My Client’ mentality, where one adviser does everything, even in a larger firm. The modern practice has moved on from this approach. Use of paraplanners is common, either in house or outsourced. They are technical, clever, and have a big say in the advice that is given.

I’ve written before about the importance of not having technical knowledge on show in the client meeting. I’m wondering now if we’ve actually got it all mixed up and the wrong person is being regulated.

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