What is a paraplanner and what do they do?

In short a paraplanner is a person who works with a Financial Planner or Financial Adviser and completes a number of the non-client facing tasks involved in preparing and administering a Financial Plan or Report for a client.

Perhaps a little bit of history would help to explain this further.

Up to approximately 10 years ago paraplanners in the UK did not exist. Advisers had their clients and would tend to complete everything involved in the planning process with the exception of processing any applications though in many instances advisers did this themselves also.

Advisers realised that some of these basic administrative tasks could be undertaken by another person thus allowing them more time to see clients. At this time there were a number of Financial Advisers and Planners who felt that their strengths lay more in the technical/report writing aspect of preparing the financial plans rather than the explaining and discussing the plans with clients.

Also at this time a number of administrators were wondering how their careers would move on. Administrators did not necessarily want to become advisers and yet they wanted to put the knowledge they had gained over the years to more effective use.

This created a role almost sandwiched between that of an adviser and administrator. The role initially appeared to be a ‘Senior Administrator’ but it is this role that has developed over the years into the role of paraplanner.

A paraplanner then is a person who is variously described as:

• An administrator (we are much more than that)
• An Adviser’s secretary/PA (we should be equal to the adviser)
• A highly technical and qualified individual who can offer skills in addition to those of the adviser to provide the client with a positive professional experience.

What does a paraplanner do?

This is a very difficult question to answer as all Financial Planners and Advisers require slightly different things from their paraplanners, however there are some core financial planning skills that all paraplanners perform to a lesser or greater extent and would form the basis of any Paraplanning role. These are:

• Excellent report writing skills
• Ability to analyse statistics
• Ability to conduct research for appropriate providers and investments
• Good understanding of compliance issues
• Good time management skills
• Excellent interpersonal and IT skills

A paraplanner can and will be asked to undertake various other tasks depending on what is actually required by the adviser or the company for whom the paraplanner works so this list should not be seen as either exclusive or exhaustive.In addition paraplanners asked to undertake the tasks listed above will be at different stages of their careers, they will have different abilities both technical and personal and be able to perform these tasks to different standards.

Therefore, in much the same way as the role of the FP has changed to allow them more time to do the things they are good at (spending more time with clients) so, I feel, the role of the paraplanner should now be more clearly defined.

Different levels of paraplanner

A person who is new to the industry, perhaps a graduate, will not be able to offer an adviser the same level of support as a person who has worked in the industry for 15 - 20 years. And yet they could both be described as paraplanners as they ‘assist a Financial Planner’. For this reason and for clarity within the industry, I propose that we introduce 3 levels of paraplanner in addition to the highly important role of an Administrator. The different levels, along with a suggestion for the amount of experience each would have and the level of industry qualifications, are below:

• Support Paraplanner - 1 - 2 years experience, Certificate in Financial Planning
• Paraplanner - 3 - 5 years experience, some Diploma level Qualifications
• Senior Paraplanner - 5 years + experience, Full Diploma / Advanced Diploma / Certified Financial Planner

The specific skills and qualities required by individuals to fulfil these roles will be discussed another time however I believe that defining the paraplanners role in this way will have a number of benefits.Firstly there will be a much more clearly defined career path for those individuals who wish to pursue Paraplanning as a career. They will be able to follow the examination path from certificate level qualifications, through to Diploma level qualifications and then on to advanced level qualifications and their CFP licence. There is a career knowledge structure which would be enhanced by the experience gained through employment.

Secondly employers will be able to define more clearly the type of paraplanner they require (and budget for). Do they require a Senior Paraplanner who will be able to provide all the benefits of experience and knowledge but would be much more expensive or does the employer actually only require a Support Paraplanner who has some basic qualification and is able to change the name and address on a standard template letter.

Thirdly it will help the industry to become more attractive. People new to the industry who do not wish to become advisers and hope to become more than an administrator will be able to see a clearly define career path where their knowledge and experience is rewarded both financially and with professional standing in the industry. They will be able to work towards an internationally recognised qualification in the knowledge that it has taken time and effort to achieve this.

In summary, the paraplanner works as part of a team alongside the adviser and the administrator to provide the client with a professional ongoing Financial Planning experience. Having a team approach ensures that there is always a point of contact for the client, and ensures that by using each individuals strengths the sum of the whole is greater than the sum of the individual parts.

This article is sponsored by:

Write for us!

The success of The Paraplanner will be determined to a large part by your willingness to share your ideas and experiences. We are therefore looking for a select number of additional writers with stories to tell.

If you write for us, first and foremost we want you to understand the paraplanning role and the challenges it presents. Having said that, we are fully aware that other financial services professionals have plenty to offer and we would welcome contributions from you too.

Secondly, we would like you to be able to write interesting and informative articles. Our style is casual, we’re not writing literature. Humour is good. An opinion even better. We like you to have your own voice, feel free to let your excitement or annoyance come through it’ll make our readers appreciate your contributions more.

Ideally, we’re looking for people that can contribute semi-frequently - anything from once a month to once a week would be great. We would prefer to work with regular contributors as this helps to build a relationship with our readers.

As a contributing writer, your name will be published with every article you write. We’ll create a biography for you on the site to credit your work and contributions. At this point, we don’t pay other than with gratitude and the ability to be part of a great team. However, publishing articles on this site will raise your profile and professional standing amongst your peers and potential employers!

Check our about page for more information on our current team of editors. Don’t hesitate to get in touch if you’d like to know more - we would like to speak with you.

Using the site

We have now produced a guide to finding your way around the site to help you find all the content.  Just click here to go straight to the guide.

Inflation up to 2.5%

UK consumer inflation reached its highest level in nine months last month, due to a new method for calculating energy bills. The Office for National Statistics said the Consumer Prices Index (CPI) hit 2.5% on an annual basis in February, up from 2.2% in January. But without the change in methodology, the figure would have remained at 2.2%.

Retail Prices Index inflation, which includes mortgage interest payments, remained the same at 4.1% last month.

But core inflation, which excludes oil and food, fell to 1.2% in February, the lowest level since August 2006.

The annual rate of 2.5% is above the government’s target of 2% and highlights the challenge facing the Bank of England of tackling rising inflation as the economy slows.

Many analysts expect the bank to further cut interest rates before year end in a bid to boost the economy.

SIPPs - cost comparison

Never ones to miss a marketing opportunity, SIPPcentre has produced a SIPP Market Cost Comparison for five case studies where the total SIPP administration costs over the first two years are compared. Other SIPPs included within the comparison are from:

• Standard Life
• Suffolk Life
• Scottish Widows
• James Hay
• Alliance Trust
• Hornbuckle Mitchell

Unsurprisingly, SIPPcentre comes out very well in all five cases which are based on using discretionary fund managers, trustee investment plans and purchasing a commercial property. The analysis shows a huge difference of up to 230% between the cheapest and most expensive.

Cynics could easily argue that the case studies have been chosen to suit SIPPcentre’s charges in order to make them look good. You would not expect them to pick scenarios where they will look bad though!

I would like to have seen a comparison based on investment within their own fund supermarket to see how the total charges compare with those listed above. In my experience, this is how most SIPPs are being used and would be of equal value. However, having tried to do this myself I know how difficult it can be.

SIPPcentre remains one of my preferred providers although I have not yet tried them with a property purchase. Who do you like to use for SIPPs and why - please feel free to add a comment.

Download the comparison by clicking here.

Budget analysis

The Scottish Widows ‘techtalk’ editorial team have prepared a detailed Budget commentary which also includes an economic analysis.Issues affecting advisers include:

• Capital Gains Tax confirmed at 18% with no change to life bond taxation.
• Confirmation of transferability of IHT nil rate band between spouses and civil partners.
• Clarification of IHT rules for replacement interest in possession trust.
• Relaxation of trivial commutation rules for pensions.
• New allowances for income tax.

You can access the online guide by clicking here.

UPDATE: Winterthur has produced a summary with a focus on pensions which you can download by clicking here.

UPDATE 2: Vantis has produced a detailed guide which you can download by clicking here.

UPDATE 3: The PFS has produced one of the best summaries I have seen so far which you can download by clicking here.

New ISA rules

The new rules harmonising PEPs and ISAs together with the huge increase in limits come into force on 6 April. Invesco Perpetual has produced a very good guide to these rules which you can download by clicking here.

How long have I got?!

Knowing how long a client can expect to live is very useful when considering most types of financial planning issues yet, apart from in some unfortunate cases, most of us cannot really say for sure when we are going to die. Despite this we still need to make a realistic assumption regarding longevity and some of the most common cases where this is required are:

• When preparing a lifetime cash flow forecast. Underestimate and the client may well find out that they run out of money. Over estimate and the client may die sooner than expected having not spent as much money as he or she could have done.
• Retirement options - will ASP be an issue? Is a fixed term annuity good value for money? Should a spouse’s pension be included?
• Long term care planning.
• Capital erosion when drawing an income; i.e. how long will this money last, how much income can I take, what investment return is required.

I know many people who apply a default longevity period to age 99, especially when preparing a lifetime cash flow.

This is certainly the case for many users of the Truth system which, along with its parent Prestwood, is the most popular financial planning tool amongst advisers I know. I think the idea is that it is better to die with some money left than to live longer and run out.

Many clients take the view that the last cheque they write out should be to the undertaker and it should bounce!! It is rather difficult to plan with that much accuracy but there are tools and resources available to help us apply a bit more of a scientific approach.

The GAD Mortality Tables provide a free to use reference table based on the average life expectancy of males and females across the UK. You can make things a bit more interesting and interactive by using some of the tools available online. A very good article with several good reference links can be found on the BBC here.

Citywire and New Model Adviser have a tool on their site known as the Deathometer. You can enter your client’s date of birth and thoughts as to their own life expectancy (pessimistic, neutral and optimistic) in the box shown here. This is a fairly simplistic approach and it is difficult to know the basis of the client’s own opinion on their chances of living to a ripe old age. However, it is better than guessing.

The results are shown in an attractive chart which shows how your life expectancy changes in five year bands. Based on the information I entered in the box above, a 40 year old male with a neutral outlook will live to age 83.

If I change my outlook to positive I get an extra four years; a pessimistic approach means that I have three years less. The results are very similar to the GAD tables and appear to be based on historic average data. The chart looks good and graphically demonstrates to a client what the average trend will be. My main concern here is that there is no allowance made for:

• Regional variances
• Lifestyle
• Current state of health
• Occupation
• Other risk factors

The BBC has produced a very good guide on BBC Health which takes into account many of these issues and tells you what to change. This could be of use to some clients although I am not sure how you would document this in a report!

The University of Wales Institute has produced another tool with several variables on their site. This is rather basic with a simple form to be completed which you can see by clicking here. Based on my answers I only have 35 years to go. I don’t know if that says anything about regional variances in Wales but that is not good news for me!

Other sites I have found on the same issue are:

• Tiscali - yes them!
• Northwestern Mutual - This is possibly my favourite tool as it asks some good questions about lifestyle and history and is presented in the form of an online game. As each question is answered, the results produce changes to the image of ‘me’ and my life expectancy (called the ‘Age Tabulator’).

My results are shown below. In case you have not worked it out, I don’t smoke (legal or illegal substances), don’t drink much, have normal blood pressure, take a little bit of exercise and had an insurance claim in the last three years. Despite all this, my life expectancy is 84 which is very similar to the Deathometer. In preparing a financial plan for me, I would factor in the likelihood that further medical advances will come along over the next 40 years extending my life a bit further in times of time if not quality. I would therefore choose a mortality age of 90 and be happy if I get there in reasonable condition.

Perhaps the most extreme site out there is The Death Clock which tells me I am going to die on 30 November 2040 - one for the diary then!