The word “profession” has been liberally thrown around in the various reports, articles and opinion pieces on the proposed Future of Financial Advice (FoFA) amendments.
Let me state at the outset that I am very interested in the concept, and I facilitate the professionalism course for the Actuaries Institute three times each year. That course explores, via guest speakers and case studies, the serious responsibilities of being a member of a profession.
It’s fantastic that many financial advisers say that they want to be recognised as a profession; but they may not understand the consequences. Here is the definition of a “profession” adopted by Professions Australia: “A profession is a disciplined group of individuals who adhere to ethical standards and who hold themselves out as, and are accepted by the public as, possessing special knowledge and skills in a widely recognised body of learning derived from research, education and training at a high level, and who are prepared to apply this knowledge and exercise these skills in the interest of others. It is inherent in the definition of a profession that a code of ethics governs the activities of each profession. Such codes require behaviour and practice beyond the personal moral obligations of an individual. They define and demand high standards of behaviour in respect to the services provided to the public and in dealing with professional colleagues. Further, these codes are enforced by the profession and are acknowledged and accepted by the community.”
In my experience of dealing with a wide range of occupations, the challenging obstacles to becoming recognised as a true profession are:
1 “Possessing special knowledge and skills” and “learning derived from research, education and training at a high level”.
I think that financial advisers have in the past failed to uniformly demonstrate these criteria, but I applaud the Financial Planning Association’s (FPA’s) attempts to lift the bar on qualifications, if not training.
2 Being “prepared to apply this knowledge and exercise these skills in the interest of others”.
I think that financial advisers generally support these words, but their actions can give the public a different perception. The pushback on FoFA’s “best interests” duty does not look great in this context. Nor does the relative commitment to the employer’s interest rather than the client’s interest for some employed advisers. And that’s without mentioning the issues of conflicted remuneration models.
3 Requiring “behaviour and practice beyond the personal moral obligations of an individual”.
I think that this is difficult to comment on, other than to observe that anyone who defends their actions with sole reference to legal minimum behaviour gets an automatic “fail”. The tricky element is to be willing to put aside one’s own standards and be willing to embrace the standards set by the professional community.
4 “These codes are enforced by the profession.”
I think that this is one area where the FPA is exemplary compared with many professions. The willingness to pursue complaints, apply sanctions and, most impressively, publish the outcome on the FPA website is remarkable.
It seems to me that the building blocks for a profession are in place. However, some of the arguments used against FoFA’s current position on the opt-in rule, along with the staunch opposition to the principles in the APES 230 standard, Financial Planning Services, do not help progress towards a true “profession”.
These are the best of times to think seriously about the responsibility that a professional has towards his or her clients.
Maybe this is an opportunity for a group of like-minded advisers to take the initiative and establish a new profession?
I struggle to understand the fee argument. Any fee that is a $ amount can also be expressed as a %. As long as the client is happy with a specified fee and knows where they are paying it and what they will get for it, everything is OK.
Client engagement is the key – if a client has reason to trust an advisor based on the advisor education and then assisting a client to implement a strategy based on what a client needs (objectives based planning) rather than “risk profiling” (ie. lawyer introduced risk mitigation rubbish) then we are on track.
ASIC prescriptive and professional body prescriptive “best practice” is so far removed from reality and what clients want and need that it’s a joke these days.
I want to help my clients. I don’t want to be dictated to by people who have never created an SoA and implemented strategy for clients, or people who have never created “real” wealth by investing strategically.
Anyone with me?
Agree with Martin in that the building blocks for a profession are in place but IMO it will be at least a whole new generation before financial planning may be considered a profession. My reasoning stems from the need of a profession to be trusted by the public that is now missing.
Whilst the FOFA (prior to it being watered down by self-interest groups) and APES 230 may have gone towards building ‘trust’, what we have today won’t unless we agree and adopt a ‘best practice’ in financial planning. Again, what is ‘best practice’ is likely to be very difficult to define; however, it is likely to necessitate a breakaway from being tied to product manufacturers, removal of asset/ percentage based fees (incl. commissions on anything) and independent compliance.
It may also mean a move away from names such as financial advisers or financial planners, which have a very poor perception with the public. Food for thought. Ian Choudhury