Robert MC Brown says there are many who claim the status of “professional” – from tennis players toBernie Madoff – but the true definition must take into account moral and ethical responsibilities.
There’s no doubt that Novak Djokovic is the world’s number one tennis player. His powerful performance in the 2011 Wimbledon Championships confirmed that status. One enthusiastic commentator referred to him as “the consummate professional”.
This form of words was also recently used by a journalist to describe a “well-known Sydney businessman and colourful racing identity” who is alleged to have been engaged in what might charitably be described as questionable practices.
Unfortunately, the word “professional” has been so diluted in recent decades that it is readily applied to almost anyone who is successfully engaged in such diverse areas as sport, property speculation, investment management, drugs, gambling, house burglaries and car re-birthing. Even Bernie Madoff of Ponzi scheme fame was described as running a “professional operation” until he was arrested, convicted and jailed for life.
Another regrettable trend is the way in which professional designations are increasingly referred to as “brands”. This development seems to have coincided with the employment in associations of marketing managers, many of whom have simply applied their expertise in the promotion of consumer products to the marketing of designations.
The problem with this approach is that it naturally leads to the conclusion that the reputation of a professional“brand” must be protected whether it’s “right or wrong” (rather than it being the public interest that must be protected, which professions claim as their role). Brand protection campaigns are often observed during financial services industry scandals where spin is employed to defend tarnished corporate and personal reputations, whatever the merits of the circumstances.
Even amongst members of traditional professions, it is not uncommon these days to hear accountants and lawyers stating that the principal emphasis in their practices is on “making an acceptable return on equity” and “running a business”, rather than on the quaint old-fashioned notion of engaging in a professional vocation for the primary benefit of clients and society as a whole, irrespective of commercial outcomes.
I’m certainly not concluding from this analysis that the bulk of individual financial planning practitioners who purport to act as professionals are dishonest and incompetent. In fact, in most cases, the opposite is true. However, I am suggesting that many financial planners (and some members of the traditional professions) do not fully comprehend the meaning of the word “profession” and the ethical obligations that must inevitably follow.
As for the financial planning industry’s professional associations, their boards must decide whether they exist principally to protect their members’ commercial interests (as would a lobby group), or whether they exist principally as the trusted protectors of the public interest. The answer to that question must always be the latter, even where detrimental consequences to members’ commercial interests are at stake.
Failure to unambiguously respond in favour of the public interest will cause the community to conclude that a professional association and its members are insincere and hypocritical. A major example of this ambiguity in financial planning is the industry’s intellectual rationalisation, which continues to allow the use of plainly unprofessional and conflicted forms of remuneration such as commissions and asset fees, while concurrently claiming professional status for individual practitioners who use those methods of remuneration.
This is a conflict that cannot be reconciled. Ultimately, its existence will devalue our designations in the collective minds of our members and of the public. This is not just some theoretical academic exercise. It is a matter of principle. It goes to the heart of why professionals and their associations exist and why our designations are trusted by the public and valued by our members.
Therefore, until we are prepared to undertake a rigorous self-examination leading to some unpalatable conclusions (not rationalisations) about our ethics, structures and behaviour, the financial planning industry will never achieve the professional status to which it aspires.
In my capacity as both a chartered accountant and a financial planner, I have grappled with these conflicts for much of my long professional career. In the early years, I convinced myself (in the absence of any guidance to the contrary from my professional associations) that I could live with a commission-based remuneration structure. After all (I rationalised), I’m professionally qualified and I’m an honest person. I wouldn’t do the wrong thing.
Of course, I was missing the point. It’s not just a matter of whether an individual like me would or would not do the wrong thing (although that is important to my clients). The point is, how should an aspiring profession behave and be perceived by the public that it claims to serve? This is not simply about removing a few “bad apples” from the box. It’s about structuring and regulating a profession (as a whole) in such a way that the community trusts its participants to act in the public interest, without the influence of conflicts (particularly remuneration conflicts) which are so deeply embedded in commissions.
In due course, I grudgingly acknowledged that commissions were irreconcilably conflicted and I came to the view that no self-respecting financial planner should accept them. So I decided that the relatively new concept of “fee for service” was the appropriate remuneration methodology for a professional person. I was quietly comforted to note that the concept of “fee for service” promoted to me was percentage-based (an asset fee really). It had the look and the feel of commission, without technically being commission.
