The new chief executive of the Financial Planning Association of Australia (FPA), Mark Rantall, has a message for members or former members who believe the association has caved in to pressure from regulators, consumer groups and the media: “The FPA is not rolling over.”
“We absolutely will be the advocate for our members, in terms of negotiating with Government and any other interest groups, for those members – and it’s the majority of those members, I should say – who are doing the right thing and moving forward in helping us become a professional organisation, and signing up to the code of conduct and the ethics and educational requirements that go with that,” Rantall says.
“However, having said that, as a professional body, we do need to move on.
“Where things are not in accord with the way we think a professional body should operate, then absolutely we will stand up for that, and we’ll stand up for our members and for the great job that they do.
“This is the fine line that a professional body walks, which is between, on the one hand, being an advocate for their members, and lobbying in that regard; and on the other hand, sometimes being the policeman who has to enforce the standards that professionals sign up to.
“We will fight for the right things. The other things, we need to build our position in consultation with Government. There is no use in just being totally aggressive towards a regulator or the Government. It does not get you anywhere.”
Rantall says the FPA is unapologetically evolving into a true professional association. And that is something quite different from a trade association, which some elements of its membership seem to want it to be.
“The real difference between an industry association and a professional association is the professionalism of its members and how they interact with their consumers,” he says.
“The differentiator is all about the professional standards that the membership is prepared to sign up to; the minimum educational and continuing educational standards that the membership signs up to; and importantly, the ethical behaviour that the membership agrees to adhere to.
“If you look at those three things, they’re a big differentiator between [a professional association and] a pure advocacy or lobby group, if you like. My sense is we’re the pre-eminent professional [financial planning] association in this country, and we’ve led the way in setting those standards and enforcing those standards.”
Rantall says that in situations where regulatory change is inevitable, the FPA has to work constructively with lawmakers. But where it believes change may be counter-productive, it will not hesitate to fight against it.
“I’m quite happy to come out and say I disagree with removing commissions on insurance in super, particularly given we’ve got the concession of not having commission banned on insurance outside of superannuation,” he says.
“It does not make sense to operate two systems. I think we’re in danger of throwing the baby out with the bathwater.
“I’m not so sure what the problem is we’re trying to solve with insurance. I don’t see that insurance has been a big problem, for the Government or consumer groups. Commission in products for insurance has been used to distribute insurance for decades – car insurance, house insurance, life insurance.
“Insurance is different because it’s an annual contract; the consumer has absolute control over that contract, and whether that contract continues or not, on an annual basis. That’s completely different to investments, where commissions were embedded in product, over which the consumer had no control.
“It’s an annual opt-in, the consumer has control, and provided those commissions are absolutely transparent and consumers know what they’re getting and what they’re paying, I don’t see what the issue is.
“The other big issue that I’m prepared to fight on is opt-in. I think opt-in has the danger of using a sledgehammer to break a walnut. Opt-in could potentially be inconvenient for clients. [Reviews don’t always happen] on an annual event, on a day when an opt-in certificate is going to have to be signed and sent off to a fund manager – or whatever, because we do not know how it’s going to operate.
“But more important, I think it could be potentially dangerous; because if Cooper is right, and most people are apathetic towards their investments, the time that a client might need to be opting in might be exactly the time that they decide not to bother. A great example is the GFC that we’ve just gone through. It can be disastrous for a client to get out at the wrong time. The consequences…can be catastrophic, and very hard to recover from.
“The final reason that opt-in, in my opinion, is not necessary, is that we’ve already moved on from commissions in investment, and we’re going to be operating in a fee-for-service environment. In a fee-for-service environment, the client has absolute control over a transaction; any fees are totally disclosed; and if a client wants to stop those fees, or not see a financial planner, at any time, they have the control to opt out. At any time. Why is an opt-in necessary? Once again, what is the problem that we’re trying to solve?”