The first is for the Government to publicly challenge the industry associations to move beyond the minimum legislative position proposed by FoFA and to comprehensively mandate conflict-free remuneration for all their members, after which Government would be prepared to consider the FPA’s proposition.
The second is for Government to announce that it would be prepared to legislatively reserve the term “financial planner” for individual advisers who chose to adopt a truly conflict-free remuneration model.
The latter option may well prove to be easier than negotiating with a diverse range of associations. It would also encourage industry associations to seriously consider further reforms in their ethical standards, thus lifting the financial planning industry to the status of a true profession, not just the appearance of it.
In the end, irrespective of qualifications, registrations or the personality traits of its practitioners, the fundamental objective for any true profession must be to gain the unqualified trust of the public. Heaven knows there were many highly qualified advisers on Wall Street prior to the GFC whose string of university degrees and registrations made no apparent difference to their ethics (or lack thereof). Indeed, I suspect most of them are still there, having been bailed out of their troubles by the taxpayers of the United States.
Surely, the challenge for the financial planning industry in Australia (and worldwide for that matter) is to define what it means by “profession” and to act accordingly. This process will involve reaching some uncomfortable conclusions. So be it.
Robert MC Brown is a chartered accountant with more than 30 years’ experience in taxation, superannuation and financial planning. He is independent chairman of the ADF Financial Services Consumer Council, and a member of the Government’s Financial Literacy board.
The other is proposing that the government “mandate conflict-free remuneration”.
Presumably he is in favour of the government applying same rules to accountants. That is, accountants must not charge hourly due the inherent conflict in recommending that clients engage them to perform work that requires more hours than an alternative strategy. Nor must they charge a flat fee, lest it be suggested that they are conflicted when they recommend a client establish a trust requiring a higher level of accounting fees.
A licence is required to be able to provide any personal financial advice. Accountants aren’t required to be licensed with the Australian Government. One would have thought that’d be enough.
The majority of FPA membership is affiliated with Banks and Insurance companies. One can be certain the Banks would approve of this move.