The financial planning industry can no longer rely as heavily as it has on the Australian Securities and Investments Commission (ASIC) to find and chuck out the industry’s bad apples.
Over the coming four years the budget of the corporate watchdog will be cut by about $120 million. ASIC chairman Greg Medcraft told Senate Estimates last week that despite the cuts, the regulator can “still perform its statutory functions” and will continue to meet its strategic priorities, including confident and informed investors and financial consumers, fair and efficient markets, and efficient registration and licensing.
“But, some change is inevitable,” Medcraft said.
“In particular, our proactive surveillance will substantially reduce across the sectors we regulate, and in some cases stop.
“For obvious reasons, we do not want to identify to the market the areas where we will not be conducting proactive surveillance.
“We will rely more on the intelligence we get from misconduct reports and the complaints we receive.”
That statement is being interpreted as a call to the financial planning industry to step up, and to take a more hands-on and proactive role in policing its own. But how committed and ready to step up is it?
The chief executive officer of the Financial Planning Association of Australia (FPA), Mark Rantall, says self-imposed higher educational standards, coupled with the self-enforcement of higher professional and ethical standards can produce “better outcomes for consumers and help restore trust in Australia’s financial advice system”.
But that requires a commitment by every professional financial planner to adhere to those standards personally, and to call out those peers and colleagues they see who do not also adhere to those standards.
Rantall says new data from FPA Confidential – the service established to allow FPA members and others to report incidences of misconduct – shows how co-regulation can establish and promote high ethical standards be used to take action against those who choose not to play ball.
Since February 2010 FPA confidential received 61 incident reports, relating to 62 individuals. These reports were received anonymously.
Rantall says about 90 per cent of the incidents were resolved by the FPA’s Professional Standards team, and the remaining 10 per cent are “either ongoing matters, are subject to active inquiry or being monitored”.
“The story behind these numbers is of a professional system operating to self-govern against perceived or actual misdemeanour,” Rantall says.
“It points us to the timely conclusion that we must now embed a relevant, consumer-centric professional framework in Australia that separates industry from profession and product sales from advice.”
