In 1995 the financial planning industry in Australia confronted a media firestorm, the likes of which it had not seen since the 1987 share market crash.
Almost 20 years on, financial planners and the managed-investment industry are still feeling the effects of this reputation fallout. BlueChip Communication director Bruce Madden was there at the time and reflects on the factors involved.
In the aftermath of the 1987 crash, investigations took place into planning firms and fund managers – many of which had surfed the peak of the market only to be left dramatically wanting once the crash came.
Stories of investment firms closing their doors to angry investors (and advisers) piqued the interest of the press, ever-ready to point the finger of blame.
There was no equity market crash in 1995, but an even deadlier reputation issue unfolded at the instigation of corporate regulator the Australian Securities and Investments Commission (ASIC) in league with consumer lobbyists, CHOICE.
This was the first of the covert “shadow shopping” exercises conducted to assess the quality of financial plans handed out to ordinary Australians.
As editor of a financial services newspaper, I was a keen observer of this process, standing alongside the various senior ASIC and CHOICE personnel at the inaugural shadow-shop press conference.
I clearly recall the public charge of “structural corruption” determined by CHOICE, bizarrely, to the surprise and consternation of ASIC representatives in the room.
Bad-reputation genie uncorked
A genie of bad reputation was uncorked. Worse still, Australia’s financial planning industry was publicly charged, sentenced and hanged in the noose of an expedient term that stuck: structural corruption.
Fast forward to 2012 and the preliminary findings of the latest covert shadow-shopping results were released recently in the shadow of Bill Shorten’s FoFA reforms, a series of never-ending structural industry shifts that owe their existence in no small way to those harsh words uttered back in 1995.
And while the interim results of the most recent shadow shop are less than flattering, the mainstream consumer media reaction is nothing like the humiliating flogging that hit planners hard in 1995 and continued to do so with each consecutive shadowy outing.
Why is 2012 different? There are many explanations, beginning with media antipathy. The journos might simply have become immune to launching yet another hatchet job on financial planning or planners have done a good job in persisting with their reputational rebuild. I believe it’s more of the latter.
I also believe ASIC must be careful with how it positions the results of a survey based on just 64 financial plans, and how it communicates those findings against a broader context of sustained regulatory reform the likes of which no other industry I know has yet had to endure.
The world has dramatically shifted, and one could reasonably expect the expression “structural professionalism” to more accurately reflect the financial planning sector in 2012.
By this, I mean the silent majority of professional financial planners, doing the right thing by their clients, can finally begin to see a light at the end of the reform tunnel and, perhaps, the end of the need for shadows in how they are shopped.
