Jordan Vaka

The debate about professionalism continues to permeate the financial planning industry, with much discussion about what it might involve.

I want to make it clear that this shift is something that I wholeheartedly endorse – as advisers we have a duty towards our clients’ wellbeing. The steady progression towards professional status will only assist us in meeting this responsibility.

But what I am questioning is the form of professionalism that we choose to adopt – or the mechanics, if you will.

What is a Professional?
In their paper Reinventing Financial Planning (March 2007), the Institute of Chartered Accountants of Australia (ICAA) defines what makes a profession, and proposes the idea that a profession is a group of like-minded practitioners engaged in the “disinterested pursuit” of social good.

In return, the public allows them a degree of self-regulation, the right of exclusivity in areas and a ‘special status’ within the community. As a result, there are significant personal, professional and ethical benefits to belonging to a profession.

Moving towards the operational aspects of a profession, Gale describes in his article that, at a high level, there are three main elements of a professional structure – the cognitive, or the specialised knowledge required, the normative, or ethical aspect, and finally the organisational component, which is designed to promote and uphold the first two.

What I would like to discuss, however, is the functional reality of professionalism for financial planners – how it might work at the coal face, so to speak.

“We can improve on the models being employed by today’s professionals. None of them are perfect and we need to avoid making the same mistakes”

If we look to the three primary professions for guidance in this area, I argue that each model has some serious flaws at present and it is time for us to start asking, what shape should professionalism take in financial planning?

Three Groups – Three Models
Consider the three groups commonly accorded professional status – accountants, lawyers and medical practitioners. At an operational level they are each facing significant challenges and, in some cases, those challenges are undermining basic assumptions.

Do we want our professional compact with society to take on these same issues? Or do we want to avoid the pains they are currently experiencing to blaze the next steps of the professional path?

For instance, ask a newly-qualified doctor working in a busy emergency department how they feel about the workload they have in their first years. It has become accepted that the first years of experience involve incredible hours, stress, fatigue, education and financial constraints that, anecdotally, nearly breaks the spirits of many medicos.

While the cognitive requirements of what we do cannot approach their burden, I still ask, is that what we want for new planners once we are classified a profession? Or do we want to find a compromise between technical absorption and other, human, considerations?

Perhaps consider the legal profession.

Again, the technical aspects of their role cannot be disputed. But can it not be said that in the operational pursuit of justice the human element has nearly been lost? Can we really say that they have the trust of the wider public? Is their contract with society as sound as it could be? As strong as it needs to be? Or has their technical knowledge and ability to read and use the law, perversely, undermined the public’s faith?

If so, what does this mean for their professional position? What lessons can our professional journey take from their experience?

Then there are the accounting practitioners who, I would argue, have most successfully established a level of trust with the public. As we would have all seen, there is no professional relationship like the accountant’s relationship.

So, we should ask, what is it that makes an accountant such a central part of life for most Australian’s? Is it the service, the complexity of our taxation system, the difficulties of running a business today?

Some would reflexively argue that it is the professional standards upheld by the various groups. But unfortunately many of us would have seen the varying quality of accountants operating today. How does this reflect upon these standards?

Delving further – are the interests of all accountants represented equally by the different associations? Or, as is arguably true in financial planning, are some practitioners and groups ‘more equal than others’?

What does this mean for a profession that has, traditionally at least, been almost beyond reproach? How can we learn from this experience and apply it to what we want financial planning to represent?

A Little Bit of This, A Little Bit of That
Some of these questions are quite thorny and I do not pretend to have the answers. But what I am attempting to address is the idea that there is no one profession that we, as an industry, can look at and say, ‘yes, that’s how we want to do it.’

Each of the three discussed groups have their strengths and weaknesses that we need to be aware of when developing our professional model. I think it is imperative upon everybody involved in financial advice to ask ‘who says we have to do it on their terms?’.

Who says we are not able to set our own direction?

For me, I believe financial planning has a lot of ground to make up in several areas, including the codification of a professional fiduciary duty. I believe the overall standard of technical knowledge in our industry is not up to scratch. I believe the educational standard is not nearly high enough for us to begin entertaining our professional aspirations. I also believe that the hoary issue of remuneration is going to get a lot more play. There remains a great deal of work to be done on the normative side of planning, before we can expect the regulator to let us out from under their thumb.

But I also believe that we can improve on the models being employed by today’s professionals. None of them are perfect and we need to avoid making the same mistakes.

One area that should be of concern is an over-reliance upon pure cognitive superiority.

Make no mistake – the technical superiority of the traditional professions is being comprehensively undermined by the twin forces of education and the internet. If financial planning were to mimic the characteristics of these existing professions, we would simply be walking into the same trap modernity has built for them.

Instead, we need to take the great elements of what they do and combine them with the great of what we do. We need to discard the bits that are broken in their model and we need to stamp out the parts that are broken in our world.

It’s Up To Us
This is where it gets exciting.

Given our starting point, we, as an industry, are in the unique position of being able to dictate what form our professionalism will take. We need to be wary of repeating the same mistakes and taking on the same risks.

Some will find it impudent for a member of an industry to be suggesting they dictate their own future. But I think part of being a profession is having the confidence to set your own terms and it is not something that will be given – it needs to be taken.

When the very idea of professionalism is an amorphous concept, shifting under the combined pressure of time and progress, it is very possible that – done properly – financial planning could become the new yardstick for professionalism.

It can be done. The only question is how?

Jordan Vaka is a financial planner and managing director of Tangram Financial. Both are authorised representatives of Apogee Financial Planning, an Australian Financial Services Licensee.


5 comments on “A chance to define our own profession”
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    The word profession and product group do not sit comfortable together.

    With that in mind we should be very sceptical of opinions given my bank owned product groups such as Apogee.

    We should also be very sceptical of opinions from members of de facto product groups such as accountants whose bias and sole financial product are SMSFs.

    Product pushers may have opinions, but the definition of product pushers, is thankfully always going to be in direct contradiction to the definition of a profession.

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    I absolutely agree with you that there are systemic issues that need resolution.

    The three professions that you mentioned believe that independence is a fundamental part of their professionalism. Even doctors are now being challenged on their independence when they accept gifts from drug companies.

    I personally feel that independence is not that essential for being a professional however the professional bodies strongly disagree.

    The people that wrote the AFS regime did not understand the difference between selling products and giving advice. They wrote the legislation as if everyone sold product and no one solely gave advice.

    As surveys are now indicating most people are happy to pay for product but not for advice. I have just finnished speakling to a potential client who wants to know my price for a SMSF product but does not want to pay for advice when it is clear she needs advice and not just the product.

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    Peter Vickers, I understand the argument about independence and the involvement of product manufacturers.

    However, what’s the best path forward to deal with these possible issues? That, alas, is a bit beyond my brief, and I’ll leave that one for others to answer!

    But a few points:
    – is all advice that involves product ‘unprofessional’?

    – I’ve never claimed independence. Nor do I pursue the concept as it exists under the current legislative structure.

    In fact, I would argue that independence and professional are separate concepts, and that it is possible to maintain a professional approach to advice within an aligned structure.

    – While NAB/MLC might prefer that I sell purely MLC products, the reality is that my agreement with them is a fixed annual licence fee and no overt pressure regarding what tool (product) I use for clients, which was a big part of why I chose them as a licensee.

    As for my working ‘for’ MLC, I do need to correct that point. I work for myself, under an MLC-related licence. Outside of their compliance requirements, good luck to them treating me as an employee :)

    What does everybody else think – is it possible to be tied to a manufacturer and still be professional?

    Is independence a true hallmark of professionalism?

    How can we, as an aspiring profession, deal with some of the systemic issues being raised now?

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    I agree with everything that Jordan says about a profession. BUT
    First I should state that I am a Chartered Accountant and also that I am a share holder of the NAB which wholly owns MLC which owns Apogee Financial Planning.

    As a sharholder of NAB I do not want Jordan to be giving professional advice to clients. I want him to be selling MLC products. This is the only way that I can maximise my return as a shareholder.

    One of the hall marks of a profession is independence.There is a severe burden in maintianing my independence as a Chartered Accountantnt. Jordan can never be independent as he “works” for NAB/MLC. This is the major hurdle of making financial planning a profession.

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    As an accountant and SMSF Specialist and financial planner, I agree with Jordan, we need to get all people involved in this industry to work together and stop having their own petty squabbles. What we should be asking is why is the Industry Super funds constantly waging battles and advising untruths, why is it that heh FPA have lodged a confidentail submission to the APESB and what do they not want everyone to know, why is it that Financial Planners constantly give tax advice whithout beee licencesd and why do they wnat an exemption from been licenced, why is it that Accountant cannot continue to recommend on the setting up of a SMSF when the Financial Planners can have an exemption to provide in many cases incorrect tax advice.

    What we all need is a common licencing system that will serve all players in this industry, Accountants, financial planers and others. We need to lift the standrads immediately.

    Until everyone stops fighting then nothing wil go forward. We must learn to work togetehr for the sake of all of our professions.

    Thank you kindly

    Peter Davis
    B.Bus, Dip FS(FP)

    Registered Tax Agent
    SMSF Specialist Advisor
    SMSF Specialist Auditor
    Authorised Representative

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