In the 2011 Reader’s Digest survey of Australia’s most trusted professions, consumers ranked paramedics as the most trusted profession, and there were no surprises that politicians languished at the bottom of the list.
It’s a given that trust is a key stumbling block for consumers when they’re looking for financial advice. The eternal question that we have all been grappling with is: how can we foster consumer confidence in financial planning while putting appropriate measures in place to protect them from poor advice?
The FPA believes that three elements are needed in order to satisfactorily answer this question:
- Legislation and regulation to provide a suitable platform for the delivery of financial advice to consumers;
- Professional standards and accountability providing a robust framework to drive the right professional behaviours in financial planners, leading to appropriate advice outcomes for clients;
- Qualification and education benchmarks to ensure that the minimum competency level for financial planners is sufficiently high.
The FPA welcomes the end of operating models that make it possible for consumers to pay for services they don’t receive and for advice fees linked to product. A foundation where clients know what type of advice they’re getting, how much they’re paying for it and when/how they’re paying has been part of FPA policy since 2009. To this end, FoFA should serve to improve advice models going forward (albeit we will continue to argue that opt in is redundant and poor policy).
Moreover, in Minister Shorten’s announcement of the first tranche of draft FoFA legislation in August, he pledged to kick off the process of restricting the use of the term “financial planner” in law – something which wouldn’t have featured in FoFA had it not been for the advocacy efforts of the FPA. This is critical for consumers who, at present, can be offered “financial advice” by both a property developer and a Certified Financial Planner (CFP) professional, and have limited means to distinguish between them.
In other professions, membership of a recognised professional body forms a mark of trust for consumers. This is one of the roles performed by the AMA for the medical profession and the Institute of Chartered Ac- countants and CPAs for the accountancy profession.
For us, consumers working with a financial planner who is a member of a professional association, such as the FPA, benefits from double protection: at the first level, from the law and ASIC’s powers; and at an additional level, in this case, from the FPA Code of Professional Practice and the FPA’s disciplinary authority and process.
In order to address the trust gap that consumers have with financial planners, we believe that all professional financial planners must make a commitment and sign up to an enforceable code of professional conduct and ethics. This is important in order to drive up the professional standing of the industry as a whole, and as a consequence, it would form a significant step in fostering consumer trust and confidence in financial planning.
This is the reason why the FPA is taking a stand in its consumer advertising campaign to exclusively promote its members who have made this commitment, and is no longer seeking to be the voice or advocate of those financial planners who choose not to subscribe to a professional framework of standards, ethics and conduct.
Today, if you wanted to qualify to become a financial planner, it is fairly straightforward. Too straightforward. In fact, the education requirements to become a financial planner are nowhere near what you need to become a doctor or an accountant. The FPA believes that this bar needs to be raised, and is heavily involved in the ASIC consultation process on CP153. Reflecting the strength of our view on this, financial planners already need a degree to enter the CFP certification program, and from July 1, 2013, financial planners can’t qualify for FPA practitioner membership at all without an approved degree.
And finally, in case you were wondering, in the Reader’s Digest survey of Australia’s most trusted professions, financial planners ranked 32nd – or put another way, on the cusp of the fourth quartile. We have a way to go.
Mark Rantall is chief executive officer of the Financial Planning Association (FPA).
