The chair of the Parliamentary Joint Committee (PJC) charged with examining the educational, ethical and professional standards of Australia’s financial planners says there are examples from professions that can be applied to create a robust and effective co-regulatory approach to lifting standards.

Senator David Fawcett, chair of the Parliamentary Joint Committee on Corporations and Financial Services inquiry into proposals to lift the professional, ethical and education standards in the financial services industry, says one of the aims of the inquiry will be to find common ground among stakeholders on how regulation of financial planning can be structured to accommodate the range of skills, experience and qualifications of existing practitioners.

“I imagine, just based on the public comments that I’ve seen from a number of the peak bodies and a number of the banks, that people broadly support the concept of increasing professionalisation,” he says.

“The question that we’ll be interested to see is whether we can come to a common landing point in terms of what should that look like, and where should the threshold be set.

“Certainly, FPA [The Financial Planning Association of Australia] has put forward one particular model and that seems to be supported by SPAA [the SMSF Professionals’ Association of Australia], for example. Whether all stakeholders will support exactly the same level…

“The other issue that would come out of it is the whole grandfathering side of it. You have a number of people who are working very competently and with great ethics, with the customer’s best interests at heart, who are no holders of a postgraduate qualification. The question would be: how do you grandfather those people into a new system?”

Varying standards

Fawcett says financial planning is not the only sector that has faced the issue of how to regulate practitioners or participants of varying standards.

“My background is in aviation; my experience of regulators is both across the military and across the aviation sector, and it’s not an uncommon problem,” he says.

“You have people of different levels of competence; you have a regulator who in the face of a rapidly changing and evolving world struggles to attract and retain staff who have the background and the competence and the capacity to effectively impose standards and practice. The best way forward is to say, how can we essentially co-regulate?

“Most people are uncomfortable with self-regulation, but there’s a big difference between self-regulation and co-regulation, where professional bodies both work with the regulator to articulate what the standards should be and then in a separate measure, if you like, that cuts across the vertical stovepipes of the regulator and what companies are doing, this separate approach says how do we try to empower each individual to work to a higher standard professionally and ethically across each of the measures that the individual companies and the regulator and individual companies put in place.

“You see that with large airlines that have their own check and training system. They do their own training and development and testing of their people, within a framework that’s approve by the regulator. And that works very well.”

Over and above

Fawcett this model comprises “an approach to professionalism and professional conduct that is over and above, on one hand, what the regulator stipulates; but on the other hand is actually part of what the regulator requires”.

“That’s what I’d envisage here, in that ASIC would say we’re going to have a register of providers and we’re going to recognise a given number of professional organisations, and professional advisers would have to be part of that,” he says.

“That’s one potential model. I’m not trying to second-guess what the inquiry will come up with, but I’ll be looking to see how the different stakeholders would want it to work [and] the level of regulator involvement that they’d be comfortable with.”