Two of the key players in the debate about industry reform come together to discuss a shared vision on the future of financial planning, and their differences on how it should get there. Simon Hoyle reports.
The debate about legislative reform of the financial planning industry has been protracted, regularly heated, and often bitter.
Two of the key protagonists in this debate are the Financial Planning Association (FPA), as the putative professional association for the financial planning industry, and the Industry Superannuation Network (ISN), representing a cohort of 60-odd super funds that have about $260 billion in assets and, as at June 2010, (the most recent annual data) about 11.5 million member accounts.
There are very few people involved in financial planning – at any level, and in any capacity – who genuinely believe that the industry’s interests, and those of the public, would not be better served by it becoming a genuine profession.
Mark Rantall, chief executive officer of the FPA, and David Whiteley, chief executive officer of the ISN, agree on this point. And they agree that financial planning must transform, or evolve, to become a profession. But it is the issues that the FPA and the ISN disagree on that have generated most of the heat and light in the debate.
Professional Planner invited Whitely and Rantall to meet, to share their views on the development of financial planning as a profession, and to discuss some of the issues that continue to divide them. Rantall says the FPA’s “vision of financial planning” is “that financial planning become a universally-respected profession”.
“And the reason it should be regarded as a respected profession is [that] financial planning, I believe, is one of the most important professions, behind the medical profession,” he says.
“If you’ve got your health and your family, you’ve pretty much got everything; but your financial security runs a very close second.
“So therefore it’s appropriate that we implement our goal, which is members of the Financial Planning Association adhere to the highest standards of professionalism, and inspire trust and confidence in the community.”
Rantall says the issues of trust and confidence – not to mention respect – are “critically important”.
“In both the superannuation industry and in getting financial planning advice from a qualified professional, [it] is absolutely critical that [trust and confidence] be maintained,” he says.
“With that comes a responsibility, and the responsibility is to continually increase standards, which we seek to do as the [professional association] for financial planning.”
Whiteley’s vision for financial planning is not substantively different.
“To become a profession there are certain foundations and hallmarks that the profession should meet,” Whiteley says.
“And these include not [being] in receipt of any form of commissions or inducements or kickbacks or any form of incentive paid by a third party to make a particular recommendation. And that means you’ve got to rid the system of all of this. That includes ongoing advice fees – and I’m happy to talk about that in the context of opt in. You cannot claim to be a professional and then receive an inducement of any description.
“I agree with Mark. I think it’s laudable for the financial planning industry to become professional, and regarded in society as second only to the medical profession. But I think that is inconsistent with the receipt of commissions or other payments by product providers.”
With both sides of the debate aiming for essentially the same result, it’s sometimes confusing to an observer just why there is so much friction between the two. But as Whiteley and Rantall explain and defend their respective positions, one point gradually becomes clear.
Rantall says there are between 16,000 and 17,000 financial planners working in Australia; however, he says that about 8000 of those are members of the FPA and subject to its standards and codes. About 5800 are Certified Financial Planners (CFPs), the highest designation currently possible in the industry.
But Whiteley, too, has a constituency: the members of industry superannuation funds, who are exposed to both FPA and non-FPA financial planners.
When Rantall takes umbrage on behalf of his members at what the FPA believes is, in the case of opt in, for example, an unwarranted meddling in the relationship between a client and their professional planner, he may very well have a strong point.
But it overlooks the fact that half of the planners in Australia will not be deemed “professional”, by virtue of the fact that they will not belong to a professional association.
(The issue of whether a professional association yet exists is another issue, covered in last month’s Professional Planner.)
When Whiteley speaks about an issue like opt in, he is acutely aware that half of the financial planners in Australia are not subject to the FPA’s standards. Standards for non-FPA members must be enshrined in legislation – otherwise, who will enforce them?
In other words, Whiteley is focused on what might be described as a “lowest common denominator” set of rules: legislation that will apply to every financial planner. The FPA’s standards build on that.
Rantall says: “There’s a difference between the financial planning industry – because you keep linking them together – and the Financial Planning Association.
“The FPA is representing the interests of consumers through its 8000 professional financial planners. That’s our stance. I can’t speak for the rest of the industry.”
