My PA tells me I am booked to have a chat with a team from the Financial Planning Association who are interested in talking about how financial planners are perceived and treated in the media. I look forward to the discus­sion because I am a great fan of financial planning in principle — that’s why I opened Switzer Finan­cial Services — but the matter of principle is what the industry needs to focus on.

The trend of planners moving to a pricing method, loosely described as fee-for-service, is a good development but I think it is only a first step. My business charges by the hour, but I don’t insist this is the only way. It’s just my way.

The more I understand Australian consum­ers and their, dare I say it, scabby ways, the more I understand why in the old days some smart sales people influencing financial planning opted for the trailing commission stunt. Giving a plan away for nothing in order to suck in the business, with an often secretive payment structure to uninformed consumers, could have provided some material good. However, the abuses that followed, involving outrageous trails, helped to lower the reputation of the industry.

I know there were many planners who did not abuse their clients’ trust, played a fair game and made good money over the years for their supporters. On the other hand, there were lots of scoundrels who exploited people and got rich in the process.

Greater transparency is improving the industry but there is still a way to go. I have seen plans from well-known financial institutions where the exact cost of the plan is not adequately explained. In these cases, an example is provided that requires the customer, using a mathematical process, to work out the charge. The use of what looks like small amounts can hoodwink many consumers with poor literacy skills. Financial literacy is the mother of all challenges, as it involves reading and man’s greatest nemesis – mathematics.

Bad practices have been driven by the indus­try’s mantra that the funds under management determines the actual value of a business; this has led to actions that have lowered the reputation of financial planning.

The mantra needs to be that honest advice and transparent practices will build a second-to-none reputation, which then will build up the customer base, which is the basis of valuing any business. The ‘beauty’ of a percentage of funds under management is that it is viewed as a nearly auto­matic payment that a would-be buyer could rely on – and while a slight exaggeration, is seen that way by many.

Going forward, it would be ideal for financial plans to be made tax deductible, similar to a visit to an accountant, which would lead to more Aussies looking at that option. At the same time, the in­dustry has to keep cleaning up its act to build trust. This could mean that better regulation, rather than the kind we now work under, could evolve.

Right now regulation seems terribly anal in general; the precision of the filing method is para­mount while the pricing practices of planners go unchecked. Rather than being proactive, regulation hovers between being draconian and reactive after too many crimes have occurred.

I have highlighted numerous stories about what I think are bad practices in the industry and no one in position of power, except for the FPA, has called, written or emailed to find out what I know. It is clear that the regulators and Government don’t know what’s going on – because you couldn’t believe that they do and are simply ignoring it. To be fair, it is possible that they have read what I and others have written, are investigating these cases and will eventually get to me. But, I doubt it.

This is a great industry, with lots of potential, and I believe the forces for positive change are growing. But a big bang is needed.

Peter Switzer is the founder of Switzer Financial Services, a financial planning, accounting and coaching business.