The financial planning industry has overcome its initial shock to the recommendations of the Trowbridge report, and is starting to converge on “sensible” solutions, according to leading financial planning licensee and dealer group heads.
In a session debriefing a series of small-group discussions held at the 2015 Professional Planner Dealer Group Summit on Monday and Tuesday this week, the summit was told that “we’re seeing it now: the FPA, the FSC and the AFA are converging on sensible solutions”.
“Everyone understands we need to come together as an industry and we can’t be so diverse in our thinking for too much longer before regulation hits us,” the Summit was told.
But to date the responses being voiced were coming predominantly from the adviser side of the fence, with product manufacturers notably silent.
“It certainly has put the product manufacturers in their bunkers,” the Summit head.
“They’ve been pretty quiet of late. They’re working out how can they best react to this, how can they deal with legacy products, how can they incentivise consumers to be loyal.
“There’s opportunities for the product manufacturers and we’re sure to hear more about that in the next few weeks.
“But we’re all moving in the right direction and we’re on the same page now; there was a shock to get some of those recommendations out there, but it’s forced us into action.”
Broader debate
It was also suggested that the initial debate arising from the report, which focused on adviser remuneration, was beginning to broaden.
“It’s more than the Trowbridge report now; it’s about the quality of advice; it’s structural change in the industry; it goes back to professionalism and education,” the Summit heard.
The Summit heard that there are opportunities for advisers and manufacturers to work together to address some of the issues – particularly that of churning – identified in a report by the Australian Securities and Investments Commission (ASIC). This report prompted the Association of Financial Advisers (AFA) and the Financial Services Council (FSC) to commission the review of advice on retail life insurance.
“Let’s call out the bad guys and the groups who are [churning],” the Summit heard.
“Product manufacturers probably have more [visibility] of that than licensees, in some respects, so we encourage product manufacturers to talk to dealer groups and point out the guys who are doing the wrong thing.
“Likewise, if we’re letting people go in our groups, for whatever reasons we think are not in consumers’ best interests, we should let the product manufacturers know.
“Regulation is a last resort. We don’t think the regulation will play out this year. It’s pretty hard to go to the senate and put some regulation in place around something that’s going be a big dramatic change for an industry that’s been around for 120 years or so.”
The Summit heard that Assistant Treasurer Josh Frydenberg has put the industry on notice to clean up its act or face regulation, and “he’s probably calling our bluff a little bit, but we still need to show some significant progress towards coming to a solution”.
Voice opposition
The Summit heard that licensees should take every opportunity available to voice opposition to parts of the Trowbridge report they believe are flawed.
“What we have to do as leaders in this is to say…how can we help our clients as part of the reaction to the Trowbridge report in coming up with some sensible solutions?” it heard.
“Any mechanism we can get out there to voice opinions is worthwhile.”
Licensees committed to send out emails and to contact local parliamentarians, to say this is a real concern for us. Even as individuals we have a powerful voice.”
“Going individually, via licensees and via industry bodies, there isn’t any one form of attacks that’s any better than another; a combined effort is probably the way to go.”
The Summit heard that ASIC report that prompted the Trowbridge review was itself flawed, being based on a sample of 200 client files, targeted because they were thought to expose problems in the provision of advice.
“The outcome was going to be predictable; and that was the basis of the recommendations of Trowbridge,” the Summit heard.
“Two hundred files is statistically insignificant; you need at least 600 files and they have to [selected at] random to make it a valid report to draw conclusions from.”
More than 70 dealer group and licensee heads, consultants, academics, politicians, product manufacturers and service providers attended the 2015 Professional Planner Dealer Group summit.
The Summit is conducted under the Chatham House Rule, which states that “when a meeting, or part thereof, is held under the Chatham House Rule, participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.”
The 2015 Summit was sponsored by AB, AIA, AMG, Legg Mason, Macquarie, PIMCO, Rubik, State Street Global Advisors, TAL, Vanguard and Zurich.
