Market correction teaches advisers valuable lesson

Kate Cowling

By

13/02/2018

Last week’s correction was an overdue reminder that professionals need continuing education about how markets behave and how to ensure clients stand by their investment philosophy when stress-tested.

That is the view of Scott Thayer, immediate past chair of the US-based Investments & Wealth Institute’s board of directors, who says today’s markets require a level of sophistication from both advisers and clients that goes beyond fundamentals. Behavioural finance has become a key part of the advice professional’s tool kit, he says, and tends to lead to sound decision-making.

“I may be able to do all the financial planning, but if I can’t earn your trust and educate you about the process, what is the point of me as an adviser?” Thayer asks. “The point of the adviser is to help you make good decisions and keep you in the game.”

Thayer is visiting Australia from the US with Investments & Wealth Institute chief executive Sean Walters, to share insights about the Certified Investment Management Analyst certification with advisers and investment managers.

As Investment Magazine reported earlier, the Australian chapter of the global Investment Management Consultants Association (IMCA) is rebranding to the CIMA Society of Australia, to reduce confusion.

The CIMA Society plans to expand its certification’s footprint in Australia and potentially go head to head with other global professional designations, such as Certified Financial Planner and Chartered Financial Analyst.

The CIMA certification’s point of difference, Thayer says, is its applicability to the day-to-day needs of today’s professional advisers, which comes via a fusion of theory and practice.

“We feel it takes the tenets of CFP further, with a sophisticated level of portfolio construction theory, interwoven with behavioural finance,” he explains; however, Rob Goodlad, head of the CIMA Society of Australia, says CFA and CIMA can also be complementary. Walters adds that about a third of CIMA graduates in the US are also CFPs.

Investments & Wealth’s US-based research found 4-in-5 clients want their advisers to have high ethical standards and 57 per cent expect them to hold more than the minimum education requirement.

Walters says that while the push for voluntary education reflects what clients expect of professionals, it is slow to gain momentum, especially in the US, where less than a quarter of planners have pursued a voluntary qualification.

“Clients expect a higher level of standards and they want to know they can trust the letters that follow their adviser’s name,” he says.

CIMA certification requires proof of continued competency through completion of 40 hours of ongoing education every two years. In addition, the CIMA Society enforces adherence to CIMA’s Code of Professional Responsibility through disciplinary rules and procedures, which a professional review board administers. Also, advisers must complete background checks before they can gain admission.

There are 140 CIMAs in Australia, Goodlad says, but there are slated to be 400 by the end of 2020. Globally, there are 7600 CIMAs and 1600 candidates.

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