Self-regulation of financial planning is a real possibility of 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.
The chief executive officer of the SMSF Professionals’ Association of Australia (SPAA), Andrea Slattery, says the creation and enforcement of professional standards by the profession itself is something she expects will “absolutely” emerge from the inquiry, which will be chaired by Senator David Fawcett.
Slattery says self-regulation is an effective and efficient way to ensure high standards of competence and ethics among financial planners; and it frees up the regulator, the Australian Securities and Investments Commission (ASIC), to fulfil its primary role of regulation, rather than acting as a “gatekeeper” to the industry.
“Self-regulation is appropriate for the advice space, because it’s an opportunity for people to achieve excellence within their own professional industry, or across professional sectors,” Slattery says.
“By achieving that excellence, you have a much higher degree of knowledge, a much higher degree of responsibility. You normally have PI insurances and other risks reduced, because of that professionalism. You have the regulator that can actually regulate rather than always trying to set minimum standards for entry – you can remove that concept of the regulator having to manage the ‘gate’.”
Not negotiable
Slattery says it is not negotiable for a profession to have a code of conduct that is enforced by a professional association, and for the association to have the teeth necessary to discipline members for breaches of the code.
“There is absolutely a necessity to have professions that have codes, have responsible standards, have responsible ways in which to manage the behaviour of their members – and to remove members where appropriate – and it’s all about protection of the consumer,” she says.
“If you’ve got the consumer who is gaining more knowledge…about their savings and financial future, then you should have an advice industry that is a professional industry, [which] has achieved a standard [that meets] that expectation of the consumer.
“Other professions have a standard of expectation, they have a standard of professionalism, and they have triggers in the market – regulators or statutory bodies – that manage the way in which behaviour occurs.”
Removed or modified
Slattery says many of the elements that are needed to create an environment where a profession can flourish, but there are some things that need to be removed or modified.
“We must separate product and sales [and] information from personal advice,” she says.
“You must be accountable individually to be a professional.
“Whether your background is in the financial services or accounting realms or legal realm, we need to protect the consumer, we need to provide advice to the consumer and we need to make sure the profession itself behaves as a profession. We need to have the regulator regulating, and professional bodies managing the professionalism.”
PJC TERMS OF REFERENCE:
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:
i professional standards or rules of professional conduct which would govern the professional and ethical behaviour of financial advisers; and
ii professional regulation of such standards or rules; and
3. the recognition of professional bodies by ASIC.
