Unless financial planners are truly serious about reform, they will continue to suffer the consequences, as Robert MC Brown explains.
The reputation of the financial planning industry is surely in deep trouble when our ethics are mocked and satirised on Shaun Micallef’s TV show, Mad as Hell.
In a recent segment, a financial planner, looking every bit the sleazy used-car salesman – complete with big blond hair, pink shirt, white cuffs, shiny suit and cowboy boots – arrogantly tells Micallef that there’s been a misunderstanding about the proposed changes to the Future of Financial Advice (FoFA) legislation. Clients, says the planner, must accept that the statutory best interests duty is not about their best interests. It’s about his best interests. In his words, “it’s all about me”.
At one level this is funny, as it’s intended to be.
At another level it’s tragic. The sentiments contained in the segment, which have been replicated many times in recent weeks throughout the mainstream media, act to brutally reinforce what the community has suspected for years about an industry that spends an inordinate amount of time vainly trying to convince the public (and itself) that its participants are the good guys.
So how should we react to this kind of criticism? Should we ride it out, hoping that it will run out of steam? Should we write it off as yet another evil conspiracy between the political Left and ill-informed journalists? If you’re inclined to the idea of a conspiracy, remember that the criticism hasn’t just come from the Left. Alan Jones, the king of conservative shock jocks on Sydney radio, has been highly critical of the industry, and even of the Coalition government, over these proposed changes.
The first thing we must accept is that there is no conspiracy inspired by the forces of darkness and that most of the media commentators are not ill-informed. What’s happening is an unprecedented public backlash against a poorly regarded industry that has a reputation for saying one thing and doing another. In writing this, I’m not reflecting on the honesty of individual planners who seek to do the right thing by their clients. And I’m not reflecting on a handful of industry leaders who are doing their best to achieve reform in the face of powerful vested interests and deeply ingrained attitudes. However, I am reflecting on an industry which (as a whole) is structurally corrupted by a product selling culture that it seems unable and unwilling to reform, irrespective of the consequences.
The reason why the industry has become embroiled in so many controversies over the past 40 years is that we’re never willing to do what must be done to create an industry that the public trusts when seeking advice. That is, we have never been willing to remove all forms of conflicted remuneration. Every time we get close to doing so, powerful vested interests step in and force political compromises, mainly in the form of highly complex, costly and ineffective disclosure-based workaround laws, through which the proverbial fleet of trucks can be driven. Both Labor’s and the Coalition’s versions of FoFA suffer from this.
What we should be doing (if we are the true and trusted profession that we claim to be) is working with government to adopt a comprehensive and uncompromised self-regulation code that would be applied to all Australian financial services licence (AFSL) holders and their representatives. This should appeal to a Coalition government that is seriously committed to the removal of red tape. It should also appeal to consumers who could then be assured of receiving trusted advice, which would also become affordable due to the removal of mountains of ineffective bureaucracy. And it would appeal to the regulator, because it would then only have to deal with the rogues, rather than with a flawed industry structure that constantly gives rise to a multitude of problems caused by systemic conflicts.
But would it appeal to the industry? It should, because most industries prefer to self-regulate. Sadly, however, for many of our industry’s participants, comprehensive self-regulation would not be appealing. They would prefer to have complex, costly and ineffective legislation, the intent of which can be avoided, rather than a self-regulation code that would work.
Either we genuinely reform ourselves, thereby winning the trust of the public we are supposed to serve, or we will continue to suffer the consequences, including an increasingly dreadful reputation, regular media controversy and layer upon layer of government intervention. The choice is ours. If we don’t “get it” by now, I’m afraid we never will.
