There is growing optimism that the latest Parliamentary Joint Committee (PJC) inquiry – into professional, educational and ethical standards in financial planning – can provide the final pieces in the puzzle and create an environment for financial planning to flourish as a profession
The inquiry – The Parliamentary Joint Committee (PJC) on Corporations and Financial Services inquiry into proposals to lift the professional, ethical and education standards in the financial services industry, to give it its full title – was issued terms of reference on July 14 and will take submissions until September 5. (See below.)
Matthew Rowe, chair of the Financial Planning Association of Australia (FPA), says the inquiry is a significant development for financial planning in Australia.
“We strongly believe that this inquiry is a significant step forward for the financial planning profession, in terms of education standards and ethical standards,” Rowe says.
“That’s one key component: lifting from RG 146 and lifting standards in line with what is an accepted minimum requirement for any profession. And for us that is: approved university degree; undertaking your Certified Financial Planner [CFP] program, which is at a Masters level; three years’ supervised experience as minimum; ethics training, because there is an ethics component in all of this; and then continuing professional development.
Continuing education
“And to put CPD into perspective, the Financial Planning Standards Board [FPSB], which is the global body, is having this debate around CPD and Australia’s CPD requirements are seen to be easily world’s best practice.”
Rowe says the “big pay-off” for financial planning could be to have the term finally enshrined in legislation.
“If we get all these things right and we can get into a co-regulatory environment and we we’ve lifted standards, there’s linkage to a professional obligation [though] professional membership of an approved professional body – ASIC might be the organisation that ends up approving those, just like the TPB does for tax agent associations – then I think we’re in a position, to enshrine the term ‘financial planner’,” Rowe says.
Recommendation 45 of the Senate Economics References Committee’s inquiry into the performance of ASIC was to amend the Corporations Act 2001 to require:
• that a person must not use the terms ‘financial adviser’, ‘financial planner’ or terms of like import, in relation to a financial services business or a financial service, unless the person is able under the licence regime to provide personal financial advice on designated financial products; and
• financial advisers and financial planners to adhere to professional obligations by requiring financial advisers and financial planners to be members of a regulator‑prescribed professional association.
“There was a recommendation around restricting the term ‘financial planner’ and linking it to education, being of good standing, and being a member of an approved professional body,” Rowe says.
“For me, that is the big goal in all of this.”
Rowe says the FPA is ready to “support the terms of reference and support the committee in ay way that we are asked”.
“We did produce our White Paper, and that was around not only the 10-point plan but also education and standards; anything that we put forward will be consistent with that policy position,” he says.
The inquiry
Parliamentary Joint Committee on Corporations and Financial Services inquiry into proposals to lift the professional, ethical and education standards in the financial services industry.
Committee members: Senator David Fawcett (Lib) (chair); Senator Deborah O’Neill (ALP) (deputy chair); David Coleman MP (Lib); Senator Chris Ketter (ALP); Senator John Madigan (DLP); Julie Owens MP (ALP); Tony Smith MP (Lib); Michael Sukkar MP (Lib); Tim Watts MP (ALP); John Williams (Nat).
Pursuant to the committee’s duties set out in section 243 of the Australian Securities and Investments Commission Act 2001, the committee will examine proposals to lift the professional, ethical and education standards in the financial services industry, including:
1. the adequacy of current qualifications required by financial advisers;
2. the implications, including implications for competition and the cost of regulation for industry participants of the financial advice sector being required to adopt:
a) professional standards or rules of professional conduct which would govern the professional and ethical behaviour of financial advisers; and
b) professional regulation of such standards or rules; and
3. the recognition of professional bodies by ASIC.
Submissions close September 5, 2014.
Hi I was on the task force that set up the CFP level 4 and was an adviser for 10 years prior to doing my CFA and moving into institutional funds management.
My point being that advisers are not the ones that need to be better regulated in order to get better investment outcomes for clients as it is the dealer group and retail researchers providing the APLs and ultimately model portfolios. Much more emphasis needs to on the education and conflicts for these two groups as ultimately planners follow their instructions and don’t have the time, resources, expertise or emotional discipline (TREE) to properly access risk.
Ultimately the dealer groups and researchers should be taken to task rather than advisers being scape goats for being told what to do.
ASIC has a role to play as they are hung up on risk profiling which has caused advisers and clients to chase yields without current market risk assessment that have ended in disaster. A better approach is to for advice groups to have better understanding of current market risk and in conjunction with clients objectives.
Who signed off on the business model and investment menu for most of the major issues of the last 10 years? I guarantee that very few of the advisers did.