Unfortunately, the democratic political process being what it is, FoFA is full of compromises that will result in unintended consequences, including allowing the industry substantial scope to avoid the legislation’s spirit and intent. How much better would it be for planners and consumers alike if the industry’s leaders (including elements of my own accounting profession) would publicly accept that the industry is structurally flawed and that FoFA is sending a message to financial planners to not only embrace the proposed minimum legislative standards, but to go beyond them? In this way, we could evolve an advice-based professional approach to planning, rather than one that will inevitably be heavily regulated by Government. In that regard, the accounting profession’s independent standard setting body, the Accounting Professional and Ethical Standards Board (APESB), has recently shown considerable leadership by issuing a proposed ethical standard for accountants engaged in financial planning (APES230).
That standard, if adopted, will facilitate the structural change that is needed to create genuine reform in the industry (not just the appearance of it). It will do this by comprehensively banning all asset fees, commissions and other forms of conflicted remuneration. This is exactly where the financial planning industry must be if it is to be accepted as a genuine profession. There is no other solution. It is not negotiable. There can be no compromises, carve-outs or options. We must adopt the “highest professional standards” (as outlined in APES230). Regrettably, there are many planners who don’t, won’t or can’t accept this point (and probably never will). In so doing they are holding back the substantial growth potential of our industry, particularly from amongst the ranks of idealistic young people whose interests lie in the evolution of financial planning into the proud profession that it deserves to be.
