Advantages of being dull, timid and tedious

Robert MC Brown says a profession is ultimately the sum of its parts.

Australian consumers are often surprised to learn that any person, with or without qualifications, may use the descriptor “accountant”. The word “accountant” and its derivative “public accountant” have been unregulated for more than 20 years, since the repeal of relevant state legislation and the establishment of a national scheme for the regulation of auditors.

Faced with this revelation, some unkind commentators have pondered why a person would actually want to be publicly identified as a member of the accounting fraternity. Monty Python clearly wondered about that too.

Who could ever forget the sledging that accountants regularly received at the hands of John Cleese? He once described their sub-species “chartered accountants” as “appallingly dull fellows, unimaginative, timid, lacking in initiative, spineless, easily dominated, no sense of humour, tedious company, irrepressibly drab and awful; and whereas in most professions these would be considerable drawbacks, in chartered accountancy they are a positive boon!”.

Given this public image, albeit reflecting in somewhat exaggerated terms what the community really loves to think about accountants, why is it that people still consult them about matters financial? I suggest the answer lies in the fact that people trust them – a point that was accepted in the recent “No More Excuses” promotional brochure from the Financial Planning Association (FPA), in which the following pledge was published:

“We are determined to do everything in our power, and within our means, to keep raising the bar in every area of activity, until, one day, FPA members will be held in the same esteem as doctors or chartered accountants.”

‘There is no doubt that in making this suggestion, the FPA is acting in the public interest’

In the light of this, what should we make of the FPA’s latest attempt to achieve legislative recognition of the term “financial planner”? The idea has been promoted to governments since the industry’s inception some 30 years ago. It has received enthusiastic support from many advisers as a consumer protection measure that would enable consumers to identify well-educated, qualified and ethical financial planners.

It would also be a strong promotional tool for advisers who would be able to inform potential clients that their descriptor is recognised by statute in much the same way as traditional professionals such as doctors, lawyers, auditors and liquidators.

This time, the FPA appears to be proposing that anyone who wishes to use the term “financial planner” should be required to be a member of an approved industry association.

So far in the history of this issue, governments have not acted. Instead, they appear to have concluded that the industry’s culture is not something that they would wish to be seen to be supporting by effectively awarding a government-endorsed “gold licence” to tens of thousands of individual financial planners. In addition, regulators have quickly concluded that adoption of such an idea would inevitably lead to costly taxpayer-funded registration, education, compliance and disciplinary structures.

There is no doubt that in making this suggestion, the FPA is acting in the public interest by seeking to raise the bar for entry into the aspiring profession of financial planning. This is a worthy cause and it should be supported in principle. However, in practice, governments should be cautious.

In that regard, it’s worth recalling some history. In the 1990s, the industry regulator issued a document flagging its intention to limit the use of the term “financial planner”. The debate soon became farcical as advisers sought to avoid the proposed rules by seeking the regulator’s views on the use of similar terms such as “financial adviser”, “financial counsellor”, “wealth adviser”, “wealth consultant” and “financial consultant”. The list reached 50 variations before the proposal sank without trace.

Therefore, it’s important to be clear about what we’re doing here. Are we setting a new high bar over which every person who offers financial planning services must jump in order to practise that discipline (including the requirement that every financial planner must be a member of an approved industry association); or are we suggesting that only certain persons should be able to use that descriptor, while other advisers may continue to operate outside the system, provided that they don’t adopt the term “financial planner”? I assume it’s the former.

One of the accounting bodies (the Institute of Public Accountants, formerly the National Institute of Accountants) was reported to have objected to the latest proposal on the basis that the descriptor “financial planner” would be restricted to FPA members. While the FPA has made it clear that such a restriction is not their intention, I expect that it would not have been lost on their board that adoption of the proposal would give the association and its members a very large commercial advantage (given the association’s name).

Nevertheless, the idea has some merit on public interest grounds, provided that all of the “approved industry associations” (of which there are at least six) agreed to the same high level of educational, professional and ethical standards – well above the level proposed by the compromised Future of Financial Advice (FoFA) legislation (FoFA).

This would have to be especially so with respect to the removal of conflicted remuneration methodologies such as commissions, asset fees and other forms of product/volume-driven financial rewards and incentives.

In the absence of such an agreement, the Government would be effectively providing legislative endorsement to an industry in which most of its practitioners would be offering their services under the influence of remuneration-driven conflicts of interest. Assuming that option is unthinkable, two other options could be considered.