“Today we have naming of parts,” begins a poem by Henry Reed. “Yesterday, 
we had daily cleaning. And tomorrow morning, we shall have what to do after firing. But today, 
today we have naming of parts.”

For financial advice in Australia, Schedule 2, which potentially amends Part 7.6 of the Corporations Act, is this naming of parts and last week’s release of a Parliamentary Joint Committee (PJC) report of recommendations an insight into the inner workings.

While government’s proposed restriction of how the terms financial planner and financial adviser are used has generally been welcomed by the industry, the debate has revealed some underlying divisions between the major players.

Certainly some precedents for enshrining the terms exist under the Corporations Act with stockbroker, futures broker and insurance broker all restricted in relation to terminology.

Accountant is a high-profile exception, a point seized on by the opposition when indicating its lack of enthusiasm for enshrinement.

The Financial Planning Association (FPA) also notes that Malaysia and Quebec in Canada have enshrined the term financial planner in law and that New Zealand has enacted legislation around financial advisers.

The spirit of FoFA

But, in the spirit of the Future of Financial Advice (FoFA) reforms, should the legislation go further and clearly differentiate between those involved in holistic financial advice and product advisers?

Indeed, the equivalence of the terms financial planner and financial adviser was fiercely debated before the PJC.

Chief executive of the AFA, Brad Fox, stated that the terms financial planner and financial adviser were “equivalent and interchangeable”, while the Australian Institute of Superannuation Trustees pointed out that, in terms of the provision of personal financial advice, the terms were treated the same under current law.

Mark Rantall, chief executive of the FPA, accepted that the terms were used interchangeably throughout the industry, but pointed out that the FPA had a different perspective.

“We believe financial planners are more involved in a holistic approach to financial advice. We think financial advisers are more product advisers,” he told the committee.

A few submitters had concerns about confusion the legislation may cause, and specifically about the inclusion of the term financial adviser in the legislation.

Accountants view

CPA Australia and the Institute of Chartered Accountants Australia (ICAA) conceded that restrictions on the use of the term financial planner might be beneficial but do not support the restrictions proposed for the term financial adviser.

“We do not support restricting the use of the term financial adviser and any other word or expression that is of like import. We believe this is unnecessary and overly restrictive. In addition, it would add complexity to consumers’ understanding,” it said in a joint submission.

“The term financial adviser is recognised and used in broader terms by professionals other than those licensed to provide financial product advice to retail clients. This includes professional accountants and financial institutions such as investment banks that provide financial advice both in Australia and internationally. It is also widely used by other professional advisers who provide financial product advice to wholesale clients.”

Furthermore, CPA Australia and the ICAA warned that the legislation could cause confusion if persons authorised to give personal advice on a limited range of financial products were still allowed to use the restricted terms.

“Allowing individuals with a limited scope of advice to call themselves a financial planner or financial adviser would not be in the public interest. These terms should apply to individuals who provide comprehensive financial advice. This must be addressed if the regulation is going to achieve its intended policy objectives of improving consumer trust and confidence.”

Experts can coexist

However, Fox disagreed with the concerns that restricting the term financial adviser would be detrimental.

“If there are specialists in a particular area, they still cannot provide personal financial advice unless they are authorised. If they are authorised, then they would be welcome to use one of the approved terms and they would be welcome to use other descriptors of their role,” he said.

“A financial adviser and an international investment expert can coexist, but the point that we would be looking for is for a consumer to understand, if they are seeing someone that has the term financial adviser or financial planner, that that is someone licensed to provide them with personal financial advice.”

This disagreement within the industry on whether the terms can be used interchangeably will now need to be considered by a government which, having given the industry a good cleaning, will not want to trip up on the naming of parts.

5 comments on “Naming of parts: planner versus adviser”

    Never have so few peddled so much dross that doesnt have any meaningful impact on the industry or the consumer at large. I guess if they had nothing to say these people would be made redundant . Space wasters and oxygen thieves on one side and financial planners /advisers on the other . Not hard to figure out who provides value

    Ross Cardillo

    Agree with James S, clients care about the level of service and advise provided not a name – FPA = hopeless.

    A more accurate and useful means of identification would be to have two categories – “financial strategist” a person who works with clients to achieve their financial goals providing strategies and advise and when needed products. The second term being “product flogger” which would capture most of the “advisers” in the industry. Who is a product flogger – predominately those that are employed by banks and fund managers to sell their products.

    Seriously Mark? The next thing your going to tell us that if someone is called a “politician” they are just self serving but if someone is called a “legislator” they are in it for the good of the country.

    Comments like this from the FPA does nothing, I repeat, nothing to give consumers confidence.

    My clients are not interested what I call myself they are interested in what I can do for them as human being.

    It’s about what clients think of these two terms.
    I hate the fact that, for some individuals, to be able to call themselves a “financial adviser”, might mean that they could be misleading the client as to what they are really qualified to do.
    I think both terms should be restricted in their use. Unfortunately the public are unlikely to understand the distinction…and if that’s the case, restrict the use of both terms unless research shows that they do.
    It’s all about perception.
    The FPA shouldn’t have to run an advertising campaign to “compare the pair”…one a financial planner and one a financial adviser, who’s more qualified or professional in your eyes?

    Another Mad Planner

    What about these people running around with general Advice Authorisations peddling SMSF’s, property etc all whilst being authorised for General Advice Only

Join the discussion