What conclusion can we draw when we get agreement on key issues from the heads of two of Australia’s largest financial institutions, a senior representative from the largest consumer group in the country, the head of the peak financial planning professional body, the chair of a Parliamentary inquiry, a key technology supplier to the industry, a couple of practising financial planners and a representative from a very large sector of the superannuation industry?
Should we conclude from the consensus that there’s some shady conspiracy in place to control financial planning in Australia? That there’s some undisclosed agenda to destroy the fabric of financial planning and the livelihoods of its participants?
Or should we conclude that maybe – just maybe – the way of the future is actually quite clear?
Because it was clear from a roundtable hosted by Professional Planner that there’s substantial agreement from the parties mentioned on many of the key issues facing financial planning.
Paramount among them is that structural corruption – it is not too harsh a term – must be eliminated before any of the industry’s other substantive improvements can be acknowledged.
And the reason for that was neatly summed up by the chair of the Corporations and Financial Services Joint Statutory Committee, Bernie Ripoll, when he astutely observed that one of the biggest problems facing the financial planning industry is, simply, that the public believes it’s corrupt.
“When the accountant goes bad it’s on the front page, ‘Accountant rips off …’ and everyone goes, ‘Bad individual’,” Ripoll said.
“When a financial planner does it, they go ‘Bad sector and industry.’ “
That insight, from the man chairing an inquiry into the structure and delivery of financial products and services in Australia, is as telling a comment as you’re likely to hear.
In short, despite the many thousands of highly professional and ethical practitioners, the public’s mistrust of financial planning exists at a sector or industry level.
There are bad apples in accounting, medicine, the law – name any profession at all – but the reputations, and the public’s perception, of those professions transcend the actions of any individual. That is the status financial planning should aspire to.
Remember that only three in 10 Australians currently receive financial advice. Of the other seven, some have no need for the industry’s services. But there is a large group that don’t, or won’t, use its services simply because they do not trust it.
This magazine was founded to promote the ideals of professionalism, integrity and quality within Australia’s financial planning community.
And while we can’t take credit for Bernie Ripoll’s inquiry, the FPA’s Financial Planner Remuneration consultation paper, nor any of the other reviews and inquiries that have happened or are yet to be announced, we make no apologies for agitating for change and the pursuit of professional excellence.
However, it is clear that until public trust and confidence in the industry are achieved – among all Australians, not just the three in 10 that already use it – then claims of professionalism will fall on deaf ears. It makes not a jot of difference what the industry thinks of itself if its clients don’t also think of it that way.
The roundtable was a fascinating event. This edition’s cover story is an edited transcript of the discussion, and it begins on Page 15.
In Professional Planner’s very first edition, in October, 2007, the magazine’s publisher wrote: “The separation of advice and product represents a hallmark of professionalism.”
We know the mantra: Advice before product; client before self. These are building blocks of all professions. But, in fact, a true profession puts the public interest ahead of everything else.
On page 41 of this edition, Robert MC Brown, who authored the paper Reinventing Financial Planning on behalf of the Institute of Chartered Accountants in 2007, lays out what the essential ingredients of a profession are.
Is financial planning there yet? How do you think your clients might respond to reading Robert’s article?
Of course, there are other issues that the industry must grapple with as it strides towards its goal of recognition as a profession.
If I may borrow from some recent correspondence with a planner who is not entirely enamoured of Professional Planner’s focus on the structural conflicts issue, these include: The quality of advice; access to advice and encouragement for consumers to seek advice; financial literacy of consumers; underinsurance; the failure of governments to promote and encourage savings; a lack of specialist skills within the industry; and the failure of SMSFs (they are, for example, inappropriate in some cases for the people to whom they’re being recommended).
Financial planning has a new code of ethics that comes into effect on July 1 – the same time that a new professional development regime begins. Together, these developments have the potential to reshape how the industry grows, evolves and serves its clients, and how it tackles the issues that lie ahead.
Looks like there’s going to be enough to write about for a little while yet.
