Rock Solid

The protection of consumers in most Australian industries is ensured by legislation, both at national and state levels. But legislative protection is by no means the only way that consumer security, and consumer confidence, can be achieved.

A professional association, defined by a robust structural framework and philosophy – covering, among other things, entry requirements, ongoing educational or professional development, and meaningful disciplinary procedures – is an essential element in protecting consumers and in winning consumers’ trust and confidence.

And a true professional association should work alongside Government, rather than being controlled by it. The ultimate scenario would be to function with autonomy and exercise powers of self-regulation.

While there are currently associations and organisations that represent financial planners in Australia, there is no official body enshrined in law, nor even universally recognised by the industry, for that matter. And there is still no organisation that yet fits the commonly accepted definition of “professional association”. Some are closer to achieving that than others.

In contrast, industries such as accounting, medicine and engineering have established professional associations. These associations are recognised and respected within the professions themselves – but just as importantly, they are also held in high esteem by governments, regulators and the public at large. There is widespread acceptance that while these associations represent professionals operating in a particular field of expertise, they have at their core a duty and a role to protect the public interest.

‘Our view is that the Government has got the wrong end of the stick’

The lack of a professional body in financial planning helps explain why so many divided views exist both within and about the industry; why the industry often speaks with more than one voice and presents conflicting views to lawmakers and regulators; and why the public remains, largely, wary of the industry and its practitioners.

To be a profession, financial planning needs a professional association, set up the right way, and representing the right constituency.

MANDATORY MEMBERSHIP AND PROFESSIONAL DESIGNATIONS

Many would argue that membership of a professional association is of commercial benefit and that it gives the public confidence to engage the services of a given individual, so the privilege should be protected.

Currently, anyone who is compliant with ASIC Regulatory Guide RG146 can claim to be a financial adviser or planner; any financial planner can claim to be “professional”. But clearly, any claim along those lines fails if a prerequisite of being a professional is to belong to a professional association. There isn’t yet a professional association to belong to.

Richard Klipin, chief executive officer of the Association of Financial Advisers (AFA), says they have been “loud and clear on this issue”.

“If you are licensed by ASIC or you come under their licensing regime, the you have the right to call yourself an adviser or a planner, and part of that right is an obligation to belong to a professional body,” he says.

“That means everyone’s in the tent, which means the entire financial advisory community belongs to a professional association.

“It means you can set standards; you can enforce standards.

"But the current regime is that membership to a professional body is a personal, discretionary decision and so there’s no binding requirement. “[So] associations have to compete on their value proposition, which is a good thing. “On the flip side, it means if you’re outside of the tent and on the fringe, doing fringe activities, other than the regulator having oversight [of you], there’s no code to stand before and to operate within.” He agrees with the comments made by Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, in late June. “Minister Shorten said: ‘You can’t legislate for ethics. You’re either honest or you’re not’. “And no amount of law, no amount of paperwork is going to change that.” Deen Sanders, deputy chief executive officer and head of professionalism for the Financial Planning Association of Australia (FPA), disagrees with a mandatory membership requirement for financial planners. “We think that as a professional, you should choose to be a member of a professional association,” he says. “If you make it mandatory, then what you get is the lowest common denominator approach. It should be a positive motivation.” Another key aspect to ensuring consumer protection is necessitating a professional designation, according to Andrea Slattery, chief executive officer of the Self-Managed Super Fund Professionals’ Association of Australia (SPAA). “The function of it is to have a process whereby the public can find a professional,” she says. “The community looks for and expects a professional level of advice and performance...and having a professional designation meets those two targets.” SPAA general members are eligible for specialisation through an exam process. However, those interested in joining the association must first meet certain criteria before being offered membership. (Cont'd) To read the full story, get the August edition of Professional Planner magazine.