The Power of Paraplanning

By: Sian Davies Cole
Director
Plan Works

“There is this new thing called Paraplanning which you might be interested in…” said a colleague to me back in 2011 when I was facing redundancy … and I’ve never looked back!

As with many people that I’ve met and worked with in Financial Planning, I fell into the financial services industry whilst looking for a career and found there to be so many options but with a bit of guidance I found Paraplanning, and for the first time – it felt like a natural choice of career.

Paraplanning has been around for many years now, although it has definitely become more mainstream since I’ve been working in the industry. That said, because there are no specific qualification requirements nor a definitive job description, many different tasks can fall under this title. Although there is nothing wrong with that, I think this does make it challenging to understand exactly how a Paraplanner can provide support.

What qualifications does a Paraplanner need?

The simple answer is none. There is no formal exam or qualification needed to use the title of Paraplanner and this has been recognised by both the CII and the London Institute of Banking & Finance with them both launching Paraplanner specific qualifications which I feel has helped form a road map for those coming into the industry.

It is common place that a Paraplanner will either have or be working towards their Level 4 diploma and also have experience in Financial Planning practice or administration.

It’s all about experience

I feel lucky to work in an industry where I still feel young but have also been around long enough to see some important milestones like life before RDR which included lots of interesting things like commission on investments and Maximum Investment Plans.

In my opinion, experience is much more important in a Paraplanner than qualifications. I’m lucky enough to have both so I feel qualified to say that! Unfortunately, and maybe more obviously, experience is something that cannot be read in a book or by taking an exam and this is where I see a lot of potential Paraplanners struggle. The right kind of guidance, support and coaching is needed to achieve good well rounded experience.

Often it is Financial Planning administrators that move in to the role of Paraplanner after gaining valuable experience – processing new business, letters of authority and valuations as well as the detail that no one can teach you about such as which platform can accept a scanned copy of a form or which provider will only talk to you by email!  Often administrators will study alongside gaining this valuable experience which I believe is the perfect grounding for a new entrant into the wonderful world that is, Paraplanning.

In many practices there will be an individual or a team that do both the Paraplanning and administration without the need to have those tasks separated. The main issue, as I see it, is that there is no clear path for progression – unless it is moving into a Financial Planner role, which isn’t for everyone.

Is Paraplanning a stepping stone or a long term career?

Maybe less common now, but previously the paraplanning role was seen as the perfect starting point for progression into becoming a Financial Planner and often this was assumed as their final objective. However, it is important that an individual’s skills guide them towards a role that is best suited to them and I feel that there has been more focus in recent times and self-understanding is a big part of this. That said, I believe there is no better grounding than working in Financial Planning administration and Paraplanning before becoming a Financial Planner but it is right that it is no longer the assumed route.

What do Paraplanners do?

In my experience, Paraplanners are detail orientated, pretty obsessive about getting things right and very inquisitive. I have always found that working with Financial Planners as a collaboration has worked best for both parties. ,The firm and the end client benefits from getting at least two experienced individuals looking at their situation to determine the best recommendations for them.

Suitability Reports

Suitability report writing is most associated with being  the task that Paraplanners undertake, however with templates and report writing software more available than ever before – this has become increasingly more efficient especially on simpler cases. As suitability reports are an FCA requirement (in some form) they will always be part of the Paraplanner role, however in my experience the report writing is more of a final piece to the whole puzzle rather than the main event.

Also, the availability and design of templates is usually dependent on the size (and budget) of the firm and sometimes this also falls to the Paraplanner to put in place and keep updated.

Cashflow planning

Using a cashflow forecasting tool has quite rightly become commonplace with financial planning as it is an invaluable tool when testing whether or not a client will be able to meet their objectives. As these tools can be fairly complex, especially with more complex financial planning arrangements and clients, I believe it is more efficient for Paraplanners to become experts with these tools to free up the Financial Planner’s time to spend with their clients. Although in most cases loading a client onto a cashflow planning tool takes only a matter of minutes – when trying to add in some “what if” scenarios or a more complex income strategy – suddenly many hours have passed!

Paraplanner / Financial Planner discussions about a client’s cashflow have always confirmed for me why it is so important to work in a collaborative way.

In my experience I have found that Financial Planners can view a client’s circumstances and see the best course of action when they are able to look at the cash flow objectively – which is much more difficult when you are creating it yourself.

Research

The use of Centralised Investment Propositions (CIPs) has removed the need to conduct research on every recommendation, however it is still often required for products and solutions that fall outside of a firms’ CIP such as more complex arrangements like VCTs or estate planning solutions.

Although many firms are moving towards using a CIP, there are still many firms that undertake fund switching and build and run their own portfolios – for these firms, the Paraplanner will often spend most of their time considering asset allocation for portfolios, researching existing and potential funds.

The kitchen sink

Although suitability report writing, cashflow planning and research are the bread and butter for the Paraplanner role (and often there is little time for anything else) there are many other tasks and responsibilities that are also commonly within the Paraplanner’s remit. It is more and more common to see Paraplanners joining Financial Planners in meetings, being part of a firms’ Investment Committee or working in a hybrid role involving administration and or being a Financial Planner.

All in all, Paraplanners are there to support Financial Planners to ensure that they can spend as much time as possible doing the thing that clients value the most, which is typically providing reassurance that they have a professional on call to deal with the ever complex financial world.


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