Jo-Anne BlochIn the midst of the various current industry reviews and inquiries, it’s very difficult to ascertain exactly where the regulation of financial planning is likely to go.

Whether it’s the Australian Securities and Investments Commission (ASIC) or Treasury, the Financial Planning Association of Australia (FPA) or the accountants, industry super funds or Storm clients, there is a multitude of stakeholders keen to progress some sort of reform agenda. It’s quite clear that doing nothing is not an option.

The challenge for the Government as it formulates its vision and policy frame- work for financial advice is to determine what is going to make the most difference, while at the same time achieving the necessary balance between consumer protection and a vibrant, innovative industry.

Amid all the submissions and suggestions, some common themes are emerging in relation to financial planning. Top of this list is entrenching a fiduciary relationship between financial planners and their clients. Remuneration reform follows, ranging from banning commissions through to banning all forms of remuneration, other than an hourly fee paid by the client. Raising the bar on entry levels and education for genuine financial planners, or those who are holding themselves out to be financial planners, is also often talked about.

The role of professional obligation and professional membership in a co-regulatory context is being discussed, along with a professional standards board or council, or some form of government/regulatory mandated body setting the standards, or possibly an “Approved Professional Body”. Improvements to the current law through better licensing, surveillance and enforcement, and the sorts of powers that ASIC has asked the Government to give it, just short of prudential regulation, are clearly a concern. Enshrining the term “financial planner” – and this is where the fiduciary responsibility could be linked, along with the professional obligations, education, training and so on – is very important to genuine financial planners who are tarred with the brush of a very broad and ill-defined group of “financial product advisers”.

And finally, closely linked to the previous point, is the issue that if you enshrine the term “financial planner” you then have to decide what you are going to call everyone else; and the propositions range from “brokers” through to “sales people”.

All of these issues break down into two main questions: Do we want far greater regulation; or do we want to define and recognise the role of a professional body in a co-regulatory context? If we want greater regulation we might be talking about fundamental reform of Corporations Law with a “Financial Services Reform Mark II”. But FSR Mark I hasn’t always worked perfectly either, so would further regulation make any difference or would we simply be adding costs and complexity?

If we recognise the role of a professional body, with appropriate rules as to what constitutes such a body, there is scope to address some of the issues relating to behaviour, and the role of individual financial planners, rather than just focusing on Australian Financial Services Licensees. A profession works best when professionals within act as peers who set and maintain their practice standards, and work to monitor and enforce them within a framework. Reputation is a most precious asset and professionals live or die by their reputation. Professionals need to own their profession and work fiercely to protect their

With all the options available, what would make sense would be to strength- en the law and fill the gaps, and toughen the rules of the game through a professional body. It’s not one or the other; it’s a bit of both. There certainly has to be a tougher minimum standard in the law but there also has to be recognition that the law cannot capture everything, and that there is a role for a genuine professional body to undertake the very difficult aspects of individual behaviour, ethics, integrity and professional endeavour.

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