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 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 away from the single best service they could access to ensure their financial future.
We will do our bit for reform, but we will also ensure the Government does its bit. And we will communicate our recipe for government reform in this area, including challenging them to:
1. Deliver on the promised reform of barriers to advice in all its scalable forms. We want the Government to go beyond intrafund advice and into a review of the Corporations Act and the compliance burden that discourages flexible, affordable advice.
2. Encourage Australians to seek professional advice. By all means allow product advice for the simplest of needs but also clearly communicate the difference between product advice and professional advice.
3. Ensure that advice is affordable and accessible for all Australians – tax deductibility would be a big step in this direction.
4. Stop the public vilification of financial planning and instead acknowledge what the rest of the world already knows – that the Australian financial planning profession is the best in the world.
It’s important to acknowledge that the Minister has recognised some of these issues and promised reviews and consultation to support these issues; but we will be holding the Government to account for the cultural leadership role it must play in delivering these reforms, just as we encourage you to do your bit to ensure consumer confidence and trust in the profession.
Deen Sanders is deputy chief executive and head of professionalism for the Financial Planning Association of Australia.