Tom Hegarty: Should paraplanners be Level 4 qualified?

By Tom Hegarty

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Oct 26, 2018

There is currently no minimum qualification level, but the majority of advisers think this needs to change

The role of the paraplanner is a relatively new one and its definition and responsibilities can differ hugely between firms. According to the Chartered Institute for Securities and Investment, the role can be broken down into four key parts:

  1. Preparing and maintaining the client file. Confirming risk profiles and client objectives with the adviser, identifying information to compile a cashflow analysis.
  2. Preparing recommendations. Identifying areas for planning, undertaking research to find appropriate solutions to present to the adviser, considering asset allocations and investment strategy, and preparing draft recommendations and reports to be signed off by the adviser.
  3. Implementing recommendations. Preparing suitability letters, completing application forms, ensuring all compliance paperwork is in order, and implementing investments or financial plans as appropriate.
  4. Reviewing client files, portfolios, products and processes. Attending and organising client meetings, reviewing portfolios, allocations and risk profiles, and initiating review meetings.

A paraplanner’s responsibilities may include some, or all, of the above. These core areas necessitate a number of different skillsets, of which advisers cite the most desirable being high technical proficiency, and strong research and report writing.

The paraplanner’s average salary in 2017 was between £18,000 and £36,000, according to Salarywise – a wide band, indicating the spectrum of responsibilities.

Experience over exams?
Each month, we survey our members to explore the views of the adviser community on a hot topic in the profession. This month we asked: do paraplanners need to be Level 4 qualified?

There is currently no minimum qualification requirement for paraplanners, as they are not authorised, but there are recommended routes available. These include:

  • Chartered Insurance Institute Certificate in Paraplanning – R01 to 3 and J09 (Level 4)
  • CISI Certificate in Paraplanning – financial planning and advice and tax for UK individuals and trusts (Level 4)
  • London Institute of Banking & Finance Certificate in Paraplanning and Administration (Level 3)

Seventy one per cent of the survey respondents said paraplanners should be Level 4 qualified. One commented: “Without the full diploma, you are simply not a paraplanner.” If the paraplanner is making recommendations to the adviser around client solutions, they should be as qualified, if not more so.

Twenty nine per cent said there was no need, as they did not have any liability for the advice given. As one respondent said: “If they are diploma qualified, paraplanners may as well be the adviser.” That is not to say this cohort saw exams as completely unnecessary.

While most respondents thought experience was just as important as qualifications, there was agreement that a lot of the required skills and competencies were best taught through exams.

One concern raised was the blurred definition of a paraplanner and that levels of required qualifications could depend upon responsibilities held by each individual. Those writing suitability reports and constructing model portfolios may require a higher level of technical knowledge and ability, for example.

It was broadly agreed that the continuing professional development requirements for paraplanners should be the same as for an adviser, with it being vital they are always up to date with key changes in the industry.

A minimum qualification requirement has been talked about often, but this is currently down to the individual or their firm to decide.

There has also been growing emphasis on the possibility of paraplanning being thought of as a profession. Could formal qualifications be the only way to prove this? The government-approved apprenticeship standard for paraplanners requires one of the Level 4 qualifications mentioned above to be achieved.

We hope to help new entrants in this area through the paraplanner apprenticeship programme, pending government funding.

Tom Hegarty is managing director of New Model Business Academy

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