The FPA has called on the Government to restrict the term financial planner to only those who have the highest level of education, competency, ethics and standards and who are members of a regulator-recognised professional body.
Why? Because it is our strong belief that this change is paramount to strengthening consumer protection and continuing our journey towards creating a true profession.

The Government has responded and has asked Treasury to look into our proposal.

The FPA believes consumers deserve a clear delineation so that when they are seeking services currently open to them under the broad name of “financial planning”, they can transparently assess the market differences. There are good parallels in other professions that help to illustrate this point.

You have a sore throat and fever and visit your chemist for some relief. The pharmacist briefly asks you about your symptoms and recommends an over-the-counter cold and flu preparation, giving you the choice between the generic brand and the known brands, stating that they are essentially the same but the house brand is cheaper.

You know the pharmacist is not a doctor, you accept their product choice and limited advice and understand the difference.

The problem with the medical analogy is that consumers, regulators, government and media can distinguish between the pharmacist and the doctor – and they understand what services and expertise each provides. In financial services it is very difficult to tell the difference between a professional financial planner and those who sell financial products.

This is the problem – so how do we differentiate?

The Financial Planning Standards Board (FPSB), which issues the global licence for the Certified Financial Planning (CFP) designation, defines Financial Planning as “the process of developing strategies to assist clients in managing their financial affairs to meet life goals, which involves reviewing all relevant aspects of a client’s situation across a large breadth of financial planning activities, including inter-relationships among often conflicting objectives”.

However, in Australia, what is defined is Financial Product Advice, which under s766B of the Corporations Act 2001 refers to “a recommendation or a statement of opinion that is intended to influence a person in making a decision in relation to a particular financial product or class of financial products”.

It is no wonder there is a high level of confusion about the definitions and roles of financial planners and those who only sell financial products. Some incorrectly represent themselves to consumers as “financial planners” without holding the specific competency, training, licence or professional standing. This significantly erodes consumer protection. The lack of constraint on individuals calling themselves financial planners puts consumers at risk of receiving restricted or limited advice from those who may not have adequate qualifications.

The term financial planner is also increasingly being used in marketing and promotional material by persons who provide non-traditional ancillary services, such as realtors, stockbrokers, financial counsellors, mortgage brokers, property brokers, sales agents of various investment vehicles, and unlicensed advisers. Such use further erodes the specific professional meaning of the term, adds to consumer confusion and increases the risk for consumers to be confused as to the type of advice they are receiving and from whom.

However, much like the medical profession, there is a role for all types of service providers. What is important is that consumers are aware of who they are dealing with and the scope of the advice that is provided.

Dante De Gori is general manager, policy and government relations, for the Financial Planning Association of Australia (FPA).