Last week the chief executive officer of Infocus Wealth Management, Rod Bristow, wrote about the danger the financial planning profession faces from losing its “social licence” – that is, the privilege granted to it by the public to occupy a particular position of trust and respect in the community.
One of the issues undermining the social licence is a seemingly endless string of scandals that have rocked the financial planning industry over a number of years, and which are by no means over yet.
Bristow’s astute and timely commentary refocuses the debate on just who is in the best position to effectively police the financial planning industry. It clearly needs policing.
To date, the Australian Securities and Investments Commission has been less effective than many believe it should be. Its actions tend necessarily to be retrospective, can take considerable time, and on current evidence do not appear to be much of a deterred to ongoing wrongdoing.
Complicit
The institutions that have so far caught the attention of the regulator – Commonwealth Bank, National Australia Bank, Macquarie Bank – quite obviously can’t police their own advisers. And perhaps worse, they have been complicit, in some cases, of creating an environment where dishonesty is allowed to flourish, and where the best interests of consumers have been subordinated to the interests of advisers and the institutions themselves.
Recent events suggest the media may be by far the most effective “regulator” of financial planning – and it probably goes without saying that this is a clearly sub-optimal scenario for an industry that has designs on becoming a respected and trusted profession.
So that leaves two parties in a position to do something about the process of setting appropriate standards and, just as importantly, enforcing those standards.
One is government. A number of recent inquiries have set out clearly what needs to be done to raise education, ethical, and professional standards in financial services – or more specifically, in financial planning. A Parliamentary Joint Committee (PJC) report on the issue is more or less the blueprint for how to do it. And while the Assistant Treasurer, Josh Frydenberg, has said he is a willing participant in raising standards, we still await the government’s decision on which of the inquiry’s recommendations it will adopt, how, and when.
The industry itself
The other is the financial planning industry itself.
It is a common refrain after an authorised representative has been banned, or a licensee has been fined or hauled up before a Senate committee, that “everyone knew” what they were up to.
Well, enough of that. A responsibility exists on every individual who would claim to be a professional to speak out or take action when they see wrongdoing taking place.
That action can range from addressing it directly with the financial planner concerned, to addressing it with the licensee, to addressing it with the regulator or even addressing it via the Financial Planning Association’s FPA Confidential service.
But it must be addressed. Turning a blind eye just won’t cut it in the context of a profession. If the industry can be seen to be taking standards seriously, and to be actively ousting those who flaunt them, then it might just stand a chance of reversing the decline that Bristow identified in financial planning’s social licence.
