If your only membership is of an association that also welcomes corporate members, then the Parliamentary Joint Committee (PJC) inquiry’s report into professional, ethical and education standards has an idea that you might not like very much.
Tucked away in chapter three, which deals with qualifications and competence, is a little paragraph that effectively cuts out any association that has corporate membership from having a say in setting and enforcing professional standards.
The report says that an association with corporate members shouldn’t be allowed to appoint representatives to the Finance Professionals’ Education Council (FPEC). The PJC recommends that FPEC be up and running by July 1 this year.
As a quick aside, a nuance of the “new FPEC” is a change in its title – from Financial Planning Education Council, as it was called when it was set up by the Financial Planning Association (FPA) to oversee the development of a national curriculum for university financial planning courses. It’s a subtle change, but a telling one, and clearly sets out the PJC’s objective of establishing standards for professionals.
Professionals are, of course, actual individual human beings. They are not businesses, and they are not corporations.
The relevant statement by the PJC appears on at paragraph 3.90 of its report: “The committee does not support membership of the council being available to corporate AFS licence holders.”
Only PSC-approved
As previously reported, the PJC recommends that only professional associations operating Professional Standards Schemes, approved by the Professional Standards Councils, should be permitted to appoint members to FPEC.
(It also recommends that FPEC have appropriately qualified representatives from academia, at least one and preferably two consumer advocates, and an ethicist.)
The PJC it makes its view on corporate involvement even more clear at paragraph 3.91: “The committee notes that transitional arrangements would be required until the professional associations have established Professional Standards Schemes under the PSC. The committee view is that during the transition period, representation on FPEC should be open to professional associations that have individual members (as opposed to corporate members) working in the financial services sector who intend to establish a Professionals Standards Scheme under the PSC.”
There’s been a fair bit of chatter about the prospect of some sort of self-regulatory organisation (SRO) to be established up and funded by major licensees – corporations – to set and enforce standards for financial planners. This kind of SRO is a flawed idea for a couple of reasons, not least of which is a clear potential conflict in having the entities that manufacture and have a clear interest in distributing financial products also involved in setting standards for financial planners.
Financial planners as ‘distributors’
It reinforces the institutional tendency to view financial planners as “distributors”, and it’s been pointed out to Professional Planner that it is something like drug companies being in control of professional standards and ethics for doctors. As a community we accept that this should never happen, and neither should we accept that it’s OK for product manufacturers and major licensees to be in control of professional standards for financial planners.
The PJC recommendations have implications for associations, too. Any association that has a “corporate” membership category will be specifically precluded from appointing representatives to FPEC, and its members will be disenfranchised.
As things stand, of the two major entities representing financial planners, only one is structured without corporate membership. But even this one is not approved by the PSC.
The PJC says an association without corporate membership can have provisional representation on FPEC, as long as it “intends” to operate a Professional Standards Scheme approved by the PSC.
Associations that don’t operate a Professional Standards Scheme and don’t have representation on FPEC will have to find some reason to exist other than setting standards of professionalism, education and ethics – but whatever that reason ultimately is, the distinction between an industry association and a professional association will be clearer than ever.
