The chairman of the Financial Planning Association, Matthew Rowe, says the profession has reached a tipping point. It is time to stop talking about change, and to do what is required to make the change happen.
Four years and four ministers later, Australia’s financial planning profession remains burdened by the deadweight politics of FoFA. The debate has devolved largely into one of ideological self-interest, which is useless and distracts from the ultimate goal of building robust frameworks that underpin renewed confidence amongst consumers and clear legislation that upholds the ultimate and measurable value of professional financial planning and advice.
Practitioners and others in the financial services ecosystem have laboured under four years of uncertainty for themselves, their business operations and their clients.
In parallel, we have seen played out in the media clear evidence of the worst that our broader ecosystem serves up to consumers under the guise of “advice”.
It is time to move on from FoFA. It is time for financial planners to come together behind SoPA – the Separation of Product from Advice.
Step forward
Today, the FPA asks you to step forward. We ask each of you who believes in acting in the client’s best interests, who seeks higher standards that equal those of other respected professions and who desires a profession in financial planning, to step forward.
We ask you to act on your beliefs, mandate this step and cement the definition of professional success as making a positive difference in our client’s lives.
The FPA has spoken in clear and comprehensive language that is unprecedented by any member-based organisation. The FPA has done this in the face of staunch opposition. We have done so because it is simply the right thing to do and simply the right time to do it.
The FPA seeks to move beyond the self-interest of product manufacturers, both retail and industry, that manufacture public campaigns in order to distract from commercial agendas. If you own or represent a superannuation or investment product, it is not surprising that the answer to every problem is more superannuation or investment.
It is time to move beyond those that cause reputational damage to all financial planners through their actions when they should know better and have the resources to do better.
The final straw
The final straw for the FPA was the announcement last week that a major Australian institution did not follow regulatory guidelines allowing clients to seek independent advice regarding compensation.
It is time to change the language of financial planning, in particular those running financial planning organisations, from “product”, “sales”, “compliance” and “distribution”, and to have instead as the new default language “client”, “value”, “quality” and “advice”.
It is time to rally comprehensively behind this movement called professional financial planning to ensure the Australian community understands and trusts the ethical, education and standards-based contribution that adds to, not detracts from, their financial well-being.
It is time to separate advice from product in the corporations law, in our profession, in our value proposition, in the way we operate day-to-day, and in the way we are remunerated for our services.
If we cannot see clearly that we have reached a tipping point for change, what more must happen? When will we stop talking about change and do what is required to become the change we want to see?
A flag on the hill
In the Senate tomorrow the Financial Planning Association will put its SoPA flag on the hill. We will call for:
1. Raising the minimum criteria so that the term financial planner/adviser is restricted under the Corporations Act and the individual must:
a. Have membership of an ASIC approved professional body; and
b. Hold minimum education standards of a relevant university degree, and three years’ experience over a five-year period; and
c. Maintain minimum continuing professional development of 90 CPD points over a triennium.
2. Amending the law to develop criteria so that ASIC can approve professional bodies such as those prescribed in the Tax Agent Services Act or the approach proposed by the FSA in the UK.
3. The immediate establishment of a financial planner education working group (FPEWG) to develop a considered, strategic and holistic financial planner education framework. With the aim of lifting minimum education and experience standards to a relevant university degree and three years experience over a 5-year period.
4. The term “commission” to be defined and then banned under the General Advice exemption.
5. General advice to be re-termed “general or product information” and be limited to the provision of “factual information and/or explanations” relating to financial products.
6. The development and implementation of a co-regulatory design, which recognises and facilitates the role of “approved” professional bodies in assisting ASIC to achieve its consumer protection and confidence mandates.
7. The establishment of a public register which is managed by ASIC, with a requirement for all financial planners/advisers (including employed representatives) who provide personal advice to be individually registered.
8. ASIC to have suspension powers for financial planners/advisers suspected of material and systemic breaches of the best interest duty. ASIC must have a justifiable position and the financial planner/adviser has the right of appeal to the Administrative Appeals Tribunal (AAT).
9. The government, once the Federal Budget position has been improved, to commence consultation with industry to determine the benefit of having the preparation of an initial financial plan be expressly stated to be tax deductible.
10. A review into lifting the criteria of a “sophisticated” investor.
To stand with us you do not have to believe in everything the FPA is doing. We do not profess to have got everything right. We ask you to stand with us because by doing nothing you give tacit approval to the status quo.
The status quo is no longer an option.
I am a professional engineer in the mining industry earning > $200k per year.
My finances are a mess for a number of reasons, some of them from poor personal decisions etc.
However a major reason is because I have been burnt by poor advice in the past and having realised that the pre-FOFA status quo was fighting against me, I simply did not trust the financial advice industry.
I for one will be knocking on the door of a reputable adviser ASAP if I can have confidence that the framework is in place so that the industry is working in my best interest.
I’ve been watching the FOFA campaign for a while, particularly through Alan Kohler’s efforts. Given the ridiculous turn-around from the Abbot government, it is great to see this initiative.
For the sake of Australia, I hope you succeed.
In the truest sense, separating product from advice would be a paradigm shift in financial planning.
Millions upon millions of dollars have been paid by product manufacturer licensees to essentially ‘own’ the eyes and ears of financial planners everywhere. There will be many planners that resent the implication that they are owned by their licensee, yet they have been bought and sold in the marketplace by licensees that control the direction of investment dollars through the use of “preferred platforms”. I am not suggesting that these planners don’t seek the serve the best interests of their clients, far from it. I genuinely believe these planners are desperate to prove their value by serving the best interests of their clients.
So yes, I support the FPA’s call for the separation of product and advice and I urge all planners across Australia to do the same.
Our professional reputation is at stake.
I would like to commend the FPA for showing leadership in professionalising financial planning.
There is a need to distinguish between financial sales and financial plans and to ensure financial sales are not given the guise of a financial plan.
Interestingly, Australian law (ie the Corporations Act) does not talk about ‘financial advice’ nor a ‘financial plan’; there is only ‘financial product advice’. The key word in all this is ‘product’.
Hi Matthew,
Good on you and I for one strongly support your stance.
As food for thought one possible way to help remove the behavioral conflicts evident in our system is to ask the govt to legislate to remove commission from any product design. i.e. institutions manufacture at cost + margin only.
But, as many products already allow for, give the consumer the choice to pay for services via the product provider by adding a payment at their discretion and able to be turned off if no service is provided. Consumer would then have to be aware of the costs and disclosure would no longer be an issue. This could apply to any product in Australia as most manufacturers already allow for it and is a simple solution to remove many of the points you are looking to overcome with your rally cry.
Good luck.