The three hats of paraplanning

Written by Alan Gow

The three hats of paraplanning – professional paraplanner – view article

In recent years I’ve become more involved in paraplanner training, whether it’s helping our team with their personal development, or training our clients’ in-house staff. Although I’ve been paraplanning since 2005, this training has prompted me to take a different view of what makes someone an effective paraplanner.

Sometimes when working on a client’s case, a thought might rush fleetingly through your mind. Or you might get nothing more than a gut instinct that something doesn’t quite stack up. These little flashes of inspiration are the key to being a good paraplanner. As trainees progress to a more rounded paraplanning role, I would say ‘ok, now put on your paraplanning hat and tell me your opinion, your view of this case’.

This is different to the ‘Three hats of Financial Planning’ which are stages (life planning, financial planning and implementation). Instead, the three hats of paraplanning are interchangeable and I switch between them as I go about my work.

Hat 1: The Adviser Hat

I pop my adviser hat on first. I look at the client’s details and any recommendations the adviser has outlined. With my adviser hat on, I ask myself ‘Is this what I would do, if this was my client?’ and ‘If the full responsibility for this case was on my shoulders, would this business go ahead as it is?’ If I’m in any way uncomfortable, that’s a sure sign that something’s not right.

I wear this hat because it helps me remove myself from the ‘I do what my adviser says / I’m the employee / they know more than me’ headspace. It helps me look objectively at the scenario and come up with ideas, which might ultimately help both the client and the adviser. And if my input doesn’t lead to any change, that’s fine, because we’ve been robust in our assessment and we’ve worked as a team to achieve that.

Hat 2: The Compliance Hat

At regular intervals I swap over to my compliance hat. This is the hat that makes sure all aspects of the work are compliant. Some compliance rules, like the RU64 stakeholder comparison and arguably some of the MIFID II rules, serve no-one. But for the time being at least, they need to be taken into account.

I wear this hat to check all the necessary ‘boxes are ticked’ and to make sure everything is watertight. It’s a necessary part of the job, but this hat is my least favourite. Some firms have compliance rules over and above the FCA’s requirements. This makes the compliance hat get bigger. So big, in fact, that it covers your arse (or at least, I believe that’s the intention). I’m not keen on this approach to compliance, as it detracts from the other two hats, which I feel are more important.

Hat 3: The Client Hat

The third hat has arguably been underrated by many firms in the past, but consumer duty is changing that. I put on my Client Hat to re-consider the advice from the client’s perspective. I do this by thinking of someone I know who’s similar in age and position to the client. It might be my mum, a friend or a neighbour, for example. I’m an outsourced paraplanner; I never meet our advisers’ clients, so this approach helps make them into a ‘real person’ rather than just a name on a file.

This hat helps me consider how I’m communicating with the client, in terms of language, layout, presentation, diagrams etc. Everything is assessed with that client avatar in mind. ‘If I gave this report to my mum, would she read it? Would she feel overwhelmed by it? Would she understand terms such as ‘paid up’ or ‘crystallised’?’ Without the Client Hat, we might be doing the right thing for the client, but do they really understand how, why and what risks are involved?

The three hats are interchangeable out of necessity. No hat can be effective without the other two. As paraplanners, we need to become adept at switching between them. Or get a bigger head!

This article was first published in Professional Paraplanner magazine, February 2023