The debate around proposed changes to the Future of Financial Advice (FoFA) reforms has shifted to the role that codes of professional conduct and co-regulation will play in determining standards of behaviour and practice that exceed the minimum requirements set down by the law.
A Professional Planner article earlier this week generated both criticism and support after it questioned whether lobbying against some of the consumer protection provisions of FoFA was a good look for the industry.
The article suggested the industry had lost an opportunity to generate a greater level of trust and respect from the general public, and that the changes weakened the obligation of planners to place clients’ interests first.
Criticism of the article centred on four main issues:
– A professional financial planner does not need the law to tell him or her how to behave or to put clients’ interests first;
– The cost of FoFA compliance was a burden on “good” planners who already place clients’ interests first;
– The changes proposed to FoFA won’t reduce consumer protection, but will reduce costs for industry;
– What would you know, you’re a journalist; and quit the negativity.
Comments against
A typical comment (all comments have been edited to save space) was:
I find your article both of a sensationalist nature and insulting. As a Financial Planner of 28 years, I have not needed legislation to tell me to put my clients’ interests first. It has been one of the foundations upon which I have built my reputation with my clients and to read your article suggesting that because some of the BID legislation is to be changed it will result in a message of “It’ll be planners’ interests first thanks” is like I said, nothing short of insulting. The manner in which you have written your article suggests it is your view that the majority of, if not all, planners put their own interests ahead of their clients. That coming from a journalist is quite pathetic if we are to also base a journalist’s reputation on that of the most rude and invasive journalists. Fortunately for people like yourself, the majority of us do not take that approach.
And:
We…do not wish to start another year having to see you quote opinions of those with biased views and vested interests.
For more than 27 years our clients have always known what they pay us and what they receive for that payment and through our peer group participation we find that we are the norm rather than the exception in this regard.
Simon is showing that he is first and foremost a journalist with an interest in selling news via negative headlines rather than offering a worthwhile service to his subscribers.
I will be passing on my views to Matthew Rowe (FPA chair) regarding your publication’s constant negative bias towards the professional advisor community and industry and also to the…independent practices in my peer group and encouraging them to vote on their feet to try to improve the poor standards of articles in publications such as yours.
Comments for
The article also generated comments in support. For example:
I was very impressed [by the] article on the repeal of FOFA. I fully agree with you but unfortunately I doubt that a majority of my colleagues share that view. A few additional reasons why it is disturbing are:
1. The [Treasury] instructed ASIC to stop enforcing FOFA even though the legislation is still in place and may not be repealed.
2. The govt gave the industry more than it had promised or asked for before the election.
It seems that the main motivation for repealing FOFA is based on the promise made before the election to reduce $1b of red tape. Apparently FOFA was set to cost the industry $190m pa which goes a long way towards meeting that target.
However the vast majority of that cost was likely to be fees from clients who failed to opt in to our services so it is not actually a saving, just a transfer from consumers to the industry.
And:
“I really enjoyed your article today – it was spot on! Interestingly enough one of my main motivations for setting up my own practice was FOFA and despite the proposed watering down I still a great opportunity. I think there is enough momentum in the media and within the community generally that issues such as commissions, platform rebates, independence, etc are now more well understood by clients. I really love it when I hear an adviser complaining about FOFA because that tells me that they are completely missing the point of the changes and it also presents a great opportunity for someone like me and my business to present an alternative service model against people like that.
And finally, on the subject of codes of professional conduct:
[There is] a role here for the FPA Code of Professional Practice. It is pitched higher than the legislation contained within FoFA – but there is question mark over enforcement in my humble opinion. That question mark around the FPA’s enforcement capability with respect to the Code is perhaps no larger than the question mark around ASIC enforcement capability with respect to FoFA.
Self regulation
In the November 2013 edition of Professional Planner, accountant and industry commentator Robert MC Brown suggested the repeal of FoFA in its entirety “in return for a truly comprehensive and genuine regime of self-regulation”.
This move would eliminate all FoFA-related complexity and inefficiency, help the government achieve its goal of reducing compliance costs on industry, and hold planners accountable to standards above those set out by FoFA.
Of course, a code of practice applies only to those who belong to an organisation that has such a code. Adherence to a code must be enforceable, and there must be genuine and meaningful sanctions for any serious breaches that occur.
Mark Rantall, chief executive officer of the FPA, in response to this week’s PP article, said the association supported the changes to FoFA and that the FPA does not “share the view that key consumer protections are compromised”.
“On the contrary, we see an opportunity for greater consumer protection and reduced consumer cost through scaled advice, combined with the benefit of unburdening planners from the dead weight of unnecessary red tape and cumbersome policy,” Rantall said.
(Rantall’s full reply will appear in the February edition of Professional Planner magazine.)
Rantall added that the FPA will “continue its mission to educate consumers about the benefits of professional financial advice, and the professional difference consumers can benefit from when choosing a certified financial planning professional, operating under a world’s-best code – the FPA’s Code of Professional Practice”.
“The number one principal in that Code has always been that FPA members have an obligation to place the client’s interests first,” he said.
