By now you’ve all read the releases from
the Government in response to Ripoll (now affectionately being called the “Bowen
reforms”). By now you’ve all considered the changes; and even though there are
a lot of questions without answers, you’ve no doubt thought through whether you’ll
be able to absorb them and how much your business will have to change to fit
into the Government’s Future
of Financial Advice world
view. I won’t sugar coat it: the changes are significant, not just in sheer
scale of reform, but also in their application in your business. Even so, I
have faith that professional financial planners are in this for the long haul.
I am heartened by the fact that FPA members have been on this journey for some time
now, and I have met too many people with a deep passion for their clients and
their business to believe anything else.
However, I also know that some people
have considered that it’s time to jump ship; that this is one change too many
in a decade of reform that has worn them out. While it’s inevitable that we
will lose some people through change, I’m worried that some people are telling
me that they’re leaving because they’re simply tired and angry at the way they’ve
been treated over the past few years by government(s), media and groups with
vested interests. It would be easy to dedicate this space to a deconstruction
of the reform proposals and their legal implications, but we will have plenty of
time over the next two years to digest those issues and to consider how
financial planning businesses and legislation need to change.
There’ll be consultation
(probably too little) and legal opinion to consider (probably too much); but my
concern at this point in the debate is that we need to keep the focus on
encouraging the Government (and media) to reflect on how it also needs to
change. and And it needs to consider the role it plays in building a culture
that values advice and that encourages Australians to take charge of their
financial future, to become a nation of self-empowered, educated participants. To
my mind, this is the most significant gap in the Government’s “culture war” on
advice. The current Government (just like the previous Government) appears to
believe that you can impose as much change and pain on our industry as you
like, because in the end you will do the right thing.
However, every piece of research
on basic change management and good government policy development also tells us
that you have to reward positive change when it occurs; but this is the piece
of the puzzle that always seems to go missing for the advice community, and
neither government has demonstrated much capacity for rewarding good behaviour.
I think this is the biggest battle we face – the cultural battle for government
respect of professional advice. “Advice” has become a convenient whipping boy
for governments of either persuasion. Unfortunately, the self-interest and
greed that one or two firms, and a handful of individuals, have demonstrated
have given the Government a convenient target to paint on the backs of the
entire profession.
It’s also unfortunate that the outraged noise that some
quarters of our own community continue to make, as an excuse for considered
professional policy, also doesn’t help convince the Government of our
seriousness; and it just means the FPA has to work twice as hard to ensure
yours is a voice to be taken seriously. I am concerned, though, that this is
too important a battle to be drawn on simple political or media convenience. The
opportunity for financial security and confidence of all Australians could rest
on it, if the industry and Government both play their cards right. We will
continue the work of legislative negotiation, cultural building and assisting
you in reform, but at the same time we will continue to hold the Government to
account for its part of the bargain. Reform should not only come from industry
changing, it must also come from Government changing the message it sends to
the community.
The professional community of financial planners, and FPA
members in particular, have already been on a substantial journey of change.
They already hold the highest professional standards for financial planners in
the world, and our CFP® professionals already hold the highest educational and
quality advice expectations in the world. The Australian financial planning profession
as a whole is the envy of governments and regulators across the globe and yet
the reform program assumes the same old stereotypes of financial planning,
tarring everyone with the same brush and in the process frightening more
Australians the key resource in their business, which are their senior people.
Are they managers or are they advisers, or are they directors of a large business
with some executive support around it? “So I think my personal view, and it has
been for some time, is that businesses are going to have to achieve some scale
to be as effective as they can to meet the increasing complexity. They need to
be very careful how they manage that growth. And growth for growth’s sake, as I
said, is pointless. If you’re growing profitability and you’re growing value,
and you’re growing liquidity in the equities that you hold, then you’re on the
right journey. But it’s going to need to be planned and executed effectively.”
Neill
says small practices, perhaps built around just one planner, are not
necessarily going to be unviable or unsustainable. “Don’t read into my comments
any denigration of the skill or the talent or the value that the individual interacting
with the client has,” he says. “The challenge is to ensure that you build the
capability to deliver that advice and leverage the skill set and talent that
individual has into other people that come through, because if you’re not able
to do that, then the client will clearly recognise that the attraction that the
business has for them to remain a client will dissipate when that person goes. “And
yes, businesses will always be highly dependent on the skill of their key people.
The challenge is ensuring that that skill is able to be delegated, and filtered
through your organisation, so the client perception is one that it’s the
business that delivers the service. Sure, it’s going to rely on skilled
individuals. It’s always going to do that. But the challenge is to ensure that
they don’t see it coming from one individual and one alone.” Neill says
businesses in regional areas “do face some really peculiar challenges”. “The
nature of them is that they are generally built, even more strongly than city
or suburban businesses, along the personal relationship characteristics of the
key person in that business. And they tend to be smaller in nature, so the capacity
to delegate that work to others who are skilled is limited. “The question is,
are they sustainable? I think they are sustainable, so long as the key
individual remains involved. The challenge of course is what happens when that key
individual may want to depart the operation. Can they convince someone else
that they are able to replace that person and give the clients the same
experience that they’re used to with that individual? And that’s not an easy
exercise.”
