On June 30 2010, Institute of Financial Planning (IFP) officially launches the Certificate in Paraplanning, the first qualification in the UK to test the specific knowledge and skills relevant to the role of Paraplanner.

The launch will form part of IFP’s “Financial Planning in Practice” Conference, taking place on 30 June at the Village Hotel, Solihull.  The press release from the IFP continues…

The qualification brings well deserved recognition to this important role and will differentiate successful candidates from other Paraplanners carrying out a more administrative function. It has been developed by IFP over the past couple of years during which time it has consulted broadly within the Financial Planning community. The support of Scottish Widows with this development has been invaluable.

The qualification builds on the Paraplanner Job Role already developed by IFP. It will be set at QCF level 4 and awarded to candidates who have successfully passed the Principles of Financial Planning examination. The examination is available to candidates at convenient locations across the UK, with the first sittings taking place in November 2010. One section of the examination will be multiple-choice in format, with the remainder being case study based with candidates being required to produce highly focussed answers including calculations and recommendations.

Nick Cann CFPCM, CEO of IFP comments:

“For me this new qualification is the most important development yet within the Financial Planning profession. By working with the core of the Financial Planning community, IFP has defined and set out the Paraplanner role and requirements, and can now offer appropriate testing for those individuals who fulfil this important role. I am very excited by the prospect that we will now see a thriving Paraplanner community develop very quickly as a result of this. IFP looks forward to serving all the professional requirements of Paraplanners as well as others working within Financial Planning firms, to help them deliver an increasingly valuable service for their clients.”

Simon Massey, Intermediaries Director at Scottish Widows, says “Paraplanners have a growing role to play in the modern IFA business. There is an abundance of support available to IFAs including our own academy but, as yet, nothing in our industry specifically for Paraplanner development. This Programme and Qualification from IFP fills this gap and we are delighted to be supporting it.”

A new e-learning programme is available to candidates studying for the examination, as well as a two day Paraplanning workshop, which will help candidates to focus on the standards required to pass the examination. For full details of the examination as well as the training options developed by IFP to support candidates studying for it, visit www.financialplanning.org.uk

Day 2 of this informative and well received conference is today.  I was not able to make it but, due to the wonders of the internet (and Twitter in particular), was able to follow the event throughout yesterday and have written a review together with a list of the main points, tips and links which you can read here.

Citwire reports that pilot paraplanning examinations will be held by the Institute of Financial Planning (IFP) in the coming months as the professional body prepares to roll out the country’s first level four-based qualification for paraplanners. Two pilot schemes will take place for the certificate in paraplanning before the first public examinations go live at the end of June and the IFP expects as many as 100 paraplanner candidates to have completed the exam process by the end of the year.

The rise of the paraplanner marks a step change in the way the industry views those in support roles to financial advisers with increasing numbers of financial planning practices hiring or taking on full time paraplanners to help with day to day work.

The assessment will comprise an online, multiple choice examination as well as a written paper in which candidates will have to supply responses to questions based on case studies.

Scottish Widows has confirmed it will support the development of the IFP’s paraplanner qualification and offer it to intermediaries through the Scottish Widows Academy.

George Andrew, head of market relations at Scottish Widows said the decision to support the IFP’s initiative followed a marked change in the way support staff were viewed within financial planning practices.

‘Our research shows that many intermediaries are changing their business models and this includes some advisers recruiting and working with paraplanners. So we’re delighted to make the IFP’s new paraplanner qualification available through the academy,’ he said.

Nick Cann chief executive at the IFP, said. ‘This additional support from Scottish Widows enables us to complete this exciting development on schedule in 2010. We have already seen strong demand from the market place as adviser businesses look in more detail at the value that the paraplanner role can add to their growing business.’

The launch follows the IFP’s creation of the paraplanner job competence profile and its recently published syllabus for the qualifification.

Just a year ago, you would be forgiven for thinking that Social Networking websites were just for kids, but all of sudden the business world is using them as a powerful new tool for networking, marketing and sharing best practice. And yes, even the financial advice industry is getting on board too – because according to IFA Life around a third of all IFAs now have a Facebook page, with many also using LinkedIn and Twitter on a regular basis.

Paraplanners too are getting on board and are using social networking sites to attract new clients to their employers’ businesses, whilst others use these sites to add value to and communicate with existing clients. So it’s very exciting that in January 2010 there is a special Social Media conference for IFAs, Paraplanners and Providers where you’ll learn from the likes of Google, YouTube, LinkedIn and others exactly how you can use social networking sites in your day-to-day work.

We’ve also negotiated a great deal for Paraplanners who are going to attend – just £150 plus VAT for two-day pass saving £££s on the standard prices! Visit www.ifalife.com/socialmediaFS for further details – but if you want to reserve one of the special tickets for Paraplanners please send an email to philip@ifalife.com.  Act quickly to reserve your place and to beat the VAT increase!

Here at The Paraplanner we have been involved with the IFP in developing the new qualification for paraplanners.  The syllabus has been published today and you can read it here.  We would really like to know your thoughts so that we can pass these on.  It would also be good to know what title you would like to be able to use once the exam has been passed.

The IFP Conference starts on Monday and for the second year will have a dedicated paraplanner track including a session from Martin Vaughan.  The Paraplanner of the Year winner will also be announced on the Tuesday morning and we are looking forward to meeting Svenja.

If you are going to be at the conference please add a comment below as it would be great to meet with as many readers of the site (not just paraplanners) as possible.

If you are not going you can follow us and many other attendees on Twitter using the #ifpc tag . You can find out more about this here.  I will also be posting reviews, pictures and interviews on my own blog which you can find here.

This is a guest post from Cathi Harrison of Para-Sols Outsourced Paraplanning which was originally published in Citywire New Model Adviser, Issue no: 176, 17/08/2009.  Cathi started her freelance paraplanning business in the North fairly recently and we are pleased to welcome her as a contributor to The Paraplanner.

Put Younger People in the Target Zone

A friend came to me recently in a bit of a muddle. For the first time, he had been inspired to consider how he was going to support himself in retirement (he’s 28) and had approached an advisory firm belonging to one of the large networks for advice. What they told him, and presented him with, left him a) in utter panic that he would be unable to survive in retirement and b) completely confused about what they were actually recommending.

It appears, despite so many positive moves to the contrary by many firms, that some are still hoping to maximise their income by bamboozling those who they are ‘advising’.

A jazzed up spreadsheet was used to show just how apparently desperate his situation was and he was advised to put all of his spare cash each month into a pension (no details on what type) – with no consideration for savings/emergencies. He was then presented with some overly complex information on the recommended funds and their past performance. And that was it! No report, or even letter to explain exactly what they were recommending or how a pensions works or what they would charge.

I broke down some of the information for him and told him what other questions he should be asking. I also explained in layman’s terms what a pension was and gave him some factors for consideration. And then I got thinking… is it simply a case of an ‘independent, new model adviser’ seeing a potentially easy target and trying to get as much as possible out of them for as little effort as possible? Or is it that they are so used to dealing with an older generation who are already comfortable with the mechanics of a pension and so do not automatically elucidate these basic features?

We’re all aware of the problems with the ageing population and the struggle the younger generation are facing in retirement without adequate funding. It seems to me that people need to be addressing their pension provisions much earlier than they historically have done – and it may be down to advisers to highlight this. The vast majority of 20-somethings still perceive financial planning as something ‘older’ people do and, of course, by the time they are ‘older people’ it may be too late to build up adequate provision. Or, at the very least, it will be more of a challenge.

So – there’s a problem with retirement planning being left until too late. And this could be improved by the under 30’s market looking at financial planning earlier. So why don’t they? In part, many advisers are still typically targeting older, wealthier clients who can be more profitable to advise. Also, to younger people, the concept of drawing a pension is an intangible, unquantifiable action which will need to be taken in the very distant future. They often do not realise what an issue it may be for them. Which is partly because advisers aren’t telling them as they’re focus is elsewhere. Catch 22!

Having identified this, I researched where young people could go for advice, and what was being done to encourage them to consider their financial planning needs. The answer is very little! The majority of articles and websites aimed at the under 30’s focus on helping them to reduce their debt or buy their first car/home. This is probably with good reason – these are the types of financial problems many under 30’s would be facing. Many under 30’s – but not all.

When I started up Para-Sols I attended various workshops and seminars aimed at entrepreneurs. The majority of people on these courses were in the 20 something group. Of course, they’re not all going to become successful to Bill Gates proportions overnight! But these are all people who are aiming to be more financially successful than they could have achieved on a standard salary (most of them were concurrently holding down a full time job). In addition, I met successful accountants, legal and other professionals – all of whom were under 30 and earning comfortable salaries.

Retirement planning, in particular, is such an important issue, and does not require high levels of capital. So why is this market not being targeted?

But things are changing. Another barrier is the perception of financial services being an ‘old’ industry – with the average age of an adviser being 55, to the under 30’s it can seem like another world. However, advisers are now qualifying at a younger age and the average is beginning to shift. This in turn should impact on the target client base. I am also developing a website aimed at under 30’s, highlighting the need for planning and aiming to answer some of their questions and break down some of the barriers. It may be time to make the intangible, tangible.

I was lucky enough to be able to attend the Morningstar Investment Conference this year and it again confirmed my opinion that this is for me one of the most worthwhile conferences of the year.For those that don’t know the conference is two days of intensive presentations discussion and debate by some very high profile figures within the investment world and included alongside this are a couple of sessions presented by Morningstar analysts giving insight into their latest developments and explaining the methodology they use when researching funds. If you regularly use Morningstar’s statistical research or their fund ratings then having this insight allows you to better understand how they have given the fund the rating they have and what they have done to arrive at that decision.

One of the main benefits of the conference is that the fund managers who present are invited. Morningstar stress that the speakers are not paid to speak, in addition they are not there to ‘sell’ their new fund which therefore means as a delegate the fund managers presentations are focussed much more on their style, their methodology for stock selection, their processes and their justification for doing what they are doing and taking the approach that they are.

There were some very interesting speakers this year including Richard Buxton (Schroders) Sanjeev Shah (Fidelity) and Stephen Snowden (Aegon) amongst others. They were all very different, they all operated in a different space and all provided a great insight into their thoughts, their style how they work and what they believe will happen over the next few months and years.

By being able to listen to the fund managers you are also able to get some idea of how they think, you are able to start to understand what they have done previously, how much they use technical analysis and what other influences they have on the selection of the stocks in their portfolios.

The conference was also very interesting not least because of the current economic climate. We have just seen the stock market increase by over 30% in recent months are there was much discussion about whether this means the recovery to is on its way or whether this is just an opportunity for some shareholder to get rid of stock they don’t want.

For any paraplanner who wanted to get a better understanding of Morningstar’s methodology or wanted to have the opportunity to listen to and question leading fund managers this was a fantastic conference and one which I would recommend to you for next year.

A short while ago here at Brand Financial Training, we had a telephone call from somebody studying for CF2 Investment and risk.  They were querying at what stage higher rate tax becomes payable and revealed a fundamental misunderstanding of how income tax is calculated.  We did of course explain the topic to them, and helped them to understand the calculation process, but it brought up such an important issue that we decided we’d write this article about income tax.  Note that this relates to tax year 2008/09 which is examinable by the CII up to the end of August 2009.We’ll start by looking at the basics, before delving a little deeper.

In the 2008/09 tax year anybody under 65 – including children – has a personal allowance of £6,035.  This means that the first £6,035 of income that they have is FREE of income tax.  For anybody over the age of 65 there is an additional age allowance.  If you are between the ages of 65 and 74 the personal allowance increases to £9,030.  And for anybody over 75 this increases again to £9,180.  However, if you have income of over £21,800 and are aged over 65, the age allowance is reduced by £1 for every £2 that income exceeds £21,800.  This can never be reduced below the normal single person’s allowance.

Any income over a person’s personal allowance is subject to income tax.  There are 3 separate bands – starting rate, basic rate and higher rate tax.  

Let’s look at earned income first – that’s income from work or pensions.

The starting rate tax band where you only pay 10% is only relevant for people where their taxable non-savings income is under £2,320.  For income between £2,320 and £34,800 above their personal allowance their income is charged at 20% which is the basic rate tax band, and anything over £34,800 above the personal allowance is charged at 40%.  Anybody with income in this band is a higher rate taxpayer. 

Here’s an example.

Mrs Lindam earns £45,000.  Assuming she has no other income, calculate her tax liability for 08/09

Mrs Lindam earns over £40,835 so is a higher rate taxpayer.

Her personal allowance is £6,035.  This amount will be free of tax.

The next £34,800 will be taxed at 20%.

For the remainder, she will be taxed at 40%

Already accounted for £6,035 + £34,800 = £40,835

£45,000 – £40,835 = £4,165 taxed at 40%

Interest on Bank Accounts

Now let’s look at interest earned on bank accounts.  This is taxed at 10% for starting rate taxpayers and is only relevant for people where their taxable non-savings income is under £2,320.  Interest is charged at 20% for basic rate taxpayers and 40% for higher rate taxpayers.  20% tax is deducted at source, however non taxpayers can reclaim this or can fill out HMRC form R85 which so that the 20% tax is not deducted at source.  Starting rate taxpayers who have taxable non-savings income under £2,320 can reclaim 10%, basic rate taxpayers have no more tax to pay and higher rate taxpayers have a further 20% to pay through their self assessment tax return.  This means that higher rate taxpayers pay a total of 40% tax on interest.  

Fixed Interest Securities

What about tax on fixed interest securities?  This is classed as savings income and is subject to the same rates as tax on bank and building society deposit accounts.  So, if an investor has non-savings income of less than £2,320 which is the starting rate limit for savings, then their savings income will be taxed at 10% up to the savings limit of £2,320.  Tax is then charged at 20% for basic rate taxpayers and 40% for higher rate taxpayers. 

Interest is usually paid gross unless the security is a Gilt, in which case the investor may have chosen to have 20% tax deducted at source.   Where tax is due and it hasn’t been deducted at source, the investor must pay this through their self assessment tax return.

Equity Income

Income from equities is called dividend income.  Any dividend paid is paid with a 10% tax credit.  So if Joe Bloggs receives a dividend of £90, he has already had 10% tax deducted.  So the actual gross dividend amount was £100.  If you are a non, starting rate or basic rate taxpayer you cannot reclaim this 10%.  If you are a higher rate taxpayer you will have an additional 22.5% to pay through your self assessment tax return.  This is because the full amount of tax due on dividends for higher rate taxpayers is 32.5%. 

Another Example

Raymond is aged 61 and earns £56,000 per annum.  He receives net bank interest of £3,400 and net dividends of £2,910.

Calculate his income tax bill for tax year 2008/09 (including any tax deducted at source).

Raymond is a higher rate taxpayer.

His personal allowance is £6,035

His bank interest has been paid net of 20% tax.  As a higher rate taxpayer, he has to pay an additional 20% to bring the total tax paid on interest to 40%.

His gross bank interest is £3,400 / 0.8 = £4,250.  He therefore has already had £850 tax deducted at source.

He owes an additional 20%.  £4,250 x 0.2 = £850

His dividend has been paid net of 10% tax.  As a higher rate taxpayer, he has an additional 22.5% to pay to bring the total tax paid on dividends to 32.5%.

His gross dividend is £2,910 / 0.9 = £3,233.33.  He therefore has already had £323.33 tax deducted.

He owes an additional 22.5%.  £3,233.33 x 0.225 = £727.50

His income tax calculation is as follows:

His total income was £63,483.33 giving a total tax bill of £15,776.83

Note: He has already paid 20% tax on his savings interest, and 10% on dividends

£850.00 + £323.33 = £1,173.33

He therefore owes £15,776.83 – £1,173.33 = £14,603.50 in tax.

I hope that helps you out. 

Need more help with calculations?  We have available workbooks for CF1, CF2, CF5 and CF6 with workbooks for J01, J04, J05 and J06 due at the beginning of April 2009. 

For more information visit www.brandft.co.uk/cf/all.asp for Certificate level exams, or www.brandft.co.uk/df/all.asp for Diploma level exams.

Don’t forget that all readers of TheParaplanner can get hold of free mock exam questions by visiting us at www.brandft.co.uk/TheParaplanner.asp    All our mock questions are delivered as downloadable PDF documents which allows you to print them out and complete them whenever and wherever you wish – no need to sit at a PC and no waiting for the postman!

Good luck with your studies,

Catriona.

Catriona Brand

Brand Financial Training

Catriona@brandft.co.uk

http://www.brandft.co.uk/

Follow Brand Financial Training on twitter at www.twitter.com/CatrionaBrand

When you’ve been in Financial Services for more than 5 years you will have heard the phrase ‘it’s time in the market not timing the market’ and this is usually followed by ‘if you missed the best 10 days….’This particular statistic has always fascinated me (probably something to do with being a paraplanner), I’d always wanted to understand what people actually meant when they said ‘if you had missed the 10 best days……’ so imagine my joy when I noticed Keith Robertson’s latest article in Financial Solutions – the magazine of the Personal Finance Society.

It starts on page 22 of the January/February 2009 edition and is titled ‘the best days of your life’ and in it Keith discusses the above statement and asks whether it is actually possible to miss the 10 best days. He also asks what the situation would be if you had missed the 10 worst days and whether there is any correlation between the best and worst days.

The article is excellent and well worth reading. If you haven’t got a copy yourself find a colleague who’s a PFS member and read theirs – you won’t be disappointed.