Sir Anthony Mason, a former Chief Justice of the High Court of Australia, says he has no doubt that financial planners ought to aspire to professional status.
Mason, who is also the patron of the SMSF Association, says some occupations have sought to organise themselves as professions and have often been motivated to do so to improve the standing of that occupation in the opinion of the public. Law is one example, Mason says, and “I don’t see any reason why you can’t draw parallels
between financial planners and lawyers”.
“My own feeling in relation to the law is that lawyers have never been popular,” Mason says.
“[Historically] it’s hard to find people who spoke well of lawyers as a group. [Seeking the status of a profession] is motivated partly by a desire to improve the relationship between the law and lawyers on the one hand, and the public.
“I don’t think doctors suffer from the same problem. People may have complained in early days about apothecaries. But by and large, I think they were fairly well thought of. And if you’re tending to the needy, the sick, the aged and those who need care, people are going to think well of you. But if you’re just rendering bills for appearing or giving advice to people, it doesn’t have the same kind of endearing sentiment about it.”
An obvious parallel between financial planning and the law is that “the public, the consumer, is dependent upon their expertise,” Mason says.
“Very few members of the public can access law. Some people want to do it but they don’t do it successfully. It’s likewise with financial planners. And financial planners, [like lawyers], don’t have a good name. What’s the best way to restore that situation? I’ve always said dedication to the professional ideal.”
Too easily attached
In some instances, it seems the term “professional” is too readily attached to individuals and to occupations that do not truly warrant its use.
“It seems to me these days everyone calls himself a professional, but that wouldn’t be my justification for saying a financial planner ought to aspire to professional status,” Mason says.
“It seems to me it’s a very important activity; it seems to me it involves very serious responsibilities; and it seems to me the clients of financial planners are in a situation of dependence upon expert, competent advice.
“I’ve always thought in the past bankers have considered themselves as professional people, although it’s hard to say they are pursuing the professional ideal in many respects, when it seems to me they are largely devoted to guzzling huge bonuses. If bankers are in that position, why shouldn’t financial planners have the same sort of status in terms of what they do?
“In times gone by, I think people looked to banks for financial advice. You’d go along to your bank manager and get financial advice. Under those circumstances I do not see any reasons why financial planners should not aspire to professional status.”
Dedication to the professional ideal, Mason says, “demands professional competence and integrity”.
“These days I suppose you could say that integrity is more important than anything else, having regard to the particular cases that have generated bad publicity for financial planners,” he says.
“My impression is that the bad publicity has been generated for financial institutions, rather than for individual financial planners. It’s Macquarie Bank; I suppose more than any other, Commonwealth; and that affair in Queensland, Storm Financial. And unfortunately those things tend to tar an entire profession with a reputation – that is, to the unthinking observer. The thinking observer would naturally draw a distinction between them and the ordinary financial planner that he deals with.
“I also think that financial planners achieved a bad reputation because of kickback commissions. They did recommend investment in particular things where they were receiving kickbacks. Now, true it is that they would comply with the requirement of disclosure, but it was only a requirement of disclosure. And what does the client do when he’s faced with about three or four foolscap pages listing a whole series of things?
“I always thought to myself that that requirement really was one that was designed to achieve non-disclosure, rather than disclosure. It’s rather like my view of freedom of information legislation. It ought to be entitled ‘freedom from information’.”
The role of professional standards
As a pre-eminent person within his own profession, Mason understands well the limits of protections afforded by law and the protections afforded by professional and ethical standards. He says strong and enforceable professional standards are vital in winning and maintaining public confidence.
“We just look at the example I gave in relation to the requirement of disclosure,” he says. “The individual financial planner who hands over the sheets of tightly typed names, he must know perfectly well that it’s only a one in a thousand of the clients who might read through the list.
“And as observance of requirement of the law will not necessarily ensure that people’s interests are going to be protected, failure to observe higher professional standards will result in the interests of clients being imperilled.”
Mason says it takes a commitment to “high personal standards and hard work” to achieve the status of a professional, and to maintain it.
“And [it requires] commitment to ensuring you do devote at least adequate time to servicing the needs of the client,” he says.
“It’s not just good enough to give the client superficial advice. I think that’s one of the problems with financial planners. Do they sufficiently investigate the financial situation and requirements of the individual client, rather than, as it were, just lay out for the client what might be regarded as a preordained plan that the adviser happens to be familiar with – a cookie-cutter approach?
“I would think there are countless cases where the adviser has made up his mind it would be best for the client to do so-and-so, to invest in X, Y and Z, without fully thrashing out with the client what the client’s wishes are, whether the client regards safety of investment as the prime consideration as against the prospect of the growth.
“That, I would have thought, is the principal flaw in financial planning these days. As I say, I think a majority are doing the right thing. Certainly a majority consider that they are doing the right thing, but whether they are actually engaged in sufficient investigation of the client’s needs, I don’t know.”
Strong associations
A strong professional association is a critical piece of the professionalism puzzle. As a membership of a profession increases, and as its members become increasingly specialised – an inevitability, Mason says – smaller, special-interest groups emerge.
However, the “central” professional body should remain responsible for setting profession-wide general standards – including codes of ethics and professional practice.
And Mason says the central body also should retain the power to “deal with infractions of rules, codes of ethics”. That must include, in extreme cases, the power to expel individuals from the profession, albeit with a right of appeal for the expelled member.
“In some cases there’s an appeal to the courts,” Mason says.
“For example, there’s an appeal to the courts from rulings of professional bodies in law, and I think that’s the case in medicine.
“There are infinite varieties of how you can deal with this, but generally speaking it’s the profession itself that deals with matters in the first instance.”
But whether expulsion from a professional association should prevent an individual from practising altogether is another question.
“You might be expelled from the society, so you couldn’t call yourself whatever you were otherwise entitled to,” Mason says.
“But whether you could practise I think would be another question for another tribunal to determine.”
Image of Sir Anthony Mason by Matt Fatches