Rantall says his point is ISN “positions [itself ] as the consumer advocate”. “I just can’t see how you can do that when you’re clearly representing the interests of your membership,” he says.
“You’re no different to any other or- ganisation or institution out there that’s seeking to do the same.”
Whitley says the FPA’s position seems to be that “you do not want Indus- try Super Network to be advocating for change”.
“That’s what you’re saying, really – is that right?” he says. “You do not want us to express an opinion?”
Rantall disagrees.
“That is absolutely not the case,” he says.
And he says the FPA has “no issue with members going to their super fund to get advice”.
“The issue here is similar to CHOICE,” he says.
“You cannot be critical of a profession, or an industry for that matter, around conflicts and conflicted payments, and operate in the same way.
“Let’s be clear. David said we’re not advocating for change. We’re absolutely advocating for change. We’ve led the debate around best interest and fiduciary duty; our Principle No 1 states that you have to put the client’s interest ahead of your own. So we absolutely support best interest and how it’s evolving. We’re yet to see the detail around it, but in principle we absolutely support it.”
Whiteley says that “for the financial planning industry to claim for a millisecond that you’ve led the debate on best interest or banning commissions, you’re living on a different planet to me”.
“I was part of the debate when we turned around and said financial planers must act in the best interests [of clients] and the entire industry turned around and said, ‘You can’t do that, you’ll cause a legal nightmare’,” he says.
Rantall says that in 2009 the FPA increased standards in relation to clients’ best interests.
“We have always pushed for putting a client’s interest ahead of anybody else’s, which is at the heart of a fiduciary duty and a best interests test,” he says.
“You cannot claim that the FPA has not been pushing forward on the professional agenda.”
Whiteley asks: “When you say‘always’, what do you mean? Life [starts] before 2009.”
If FoFA is implemented in close to its currently proposed form, and bans commissions, eliminates the worst of the conflicts of interest and imposes a “best interest” test on all financial planners, not just FPA members, then it seems much of the heat in the debate could evaporate.
“I think the heat is out of the debate, I think the ISN is hanging on to yesterday’s news, and I’d encourage the ISN and
David to move on and embrace the change and support the profession and the industry,” Rantall says.
“Good,” says Whiteley. “Does that mean you’re supporting the Government’s FoFA reforms, Mark?”
The FPA has “always said we support the vast majority of the FoFA reforms”, Rantall says.
“We do oppose opt in because we do not think opt in should be a law,” he says. “It’s a reasonable standard to have in place, but it’s poor public policy.”
Whitley questions how opt in can be “poor public policy if it’s a reasonable standard to have in place?”.
Rantall says “there’s a big difference between a law and what you might do with your clients”.
“Our standards always say that you should engage your client on an annual basis, and you should be talking to your client and re-engaging them annually; and you should not be accepting a fee if you’re not providing ongoing advice,” he says.
“But there’s a vast difference between that standard and putting in law a bi-annual opt in – making clients, making consumers, have to renegotiate their contracts with a financial planning professional every year or every two years is unprecedented. It doesn’t happen anywhere else in the world, and it is Government taking one step too far.”
But Whiteley points out that the FPA’s own standard is therefore less onerous than the FoFA proposal. FoFA will be a bare minimum standard for non-FPA members.
“You’re saying – if I’m misrepresent- ing this then please forgive me, but it’s not done deliberately – that every member of the FPA should be in contact with a client on an annual basis, and should not take fees unless they are going to be providing advice,” he says.
“And that should be, in effect, an annual renewal. The 8000 members of the FPA should all be contacting their clients every single year, and will ask the client, do you want to receive ongoing advice? And if the client says no, they will turn off the fee?”
Rantall says: “That is a standard that is in place. Our system is in place to ensure that a client has the ability to opt out at any time when they’re not getting advice.”
Whiteley says the opt-in proposal is appropriate because the current opt-out alternative has not worked.
“It’s based on the premise that there are many, many people that are paying ongoing commissions or trail commissions and/or ongoing fees – and will continue to pay ongoing fees – without necessarily receiving advice, and that they could opt out now,” he says.
“You say to yourself, are there people paying for advice through commissions or ongoing fees now, but not receiving it? If you believe, as we do, there is considerable evidence to that effect…then you think we’ve got to fix that, and opt out doesn’t work. It doesn’t work now, and the definition of lunacy is continuing to do something you know doesn’t work – therefore you have an opt in.
