More than 40 leaders of financial planning licensees came together at the 2016 Professional Planner Dealer Group Summit to examine five key issues facing financial planning as it evolves into a profession.
Topics ranged from the quality of advice to the industry’s efforts to reach more than one in five adult Australians; and from proposed education and professional standards to the pros and cons of vertical integration.
Participants assessed how the topics related to consumer confidence, sustainability of financial planning practices, risk of further government intervention, and the outlook for licensees themselves.
Conducted under the Chatham House Rule, the discussion was open and direct.
“It’s definitely a very different conversation to be able to sit in the room with direct competitors and talk about improving the nature of what we do,” said one participant. “It’s really unique.”
ISSUE 1: EDUCATION STANDARDS – RAISING THE BAR
Education standards and professionalism are fundamentally linked, and the 2016 Dealer Group Summit heard that higher standards are “one of the fundamental tenets of us moving from this into a profession”.
However, Discussion Group One said a problem for the emerging profession is that direction on standards has largely been set by government, rather than from within.
“There was a sense that the messages that have come out from the government undermine our ability to convince consumers in the value of advice, so it just reinforces the nature of the way those messages land and [what] it looks like,” the group said.
It said the message to the public on standards has been compromised by the industry’s inability to speak with a single voice. Government-enforced standards are aimed at the lowest common denominator and “it doesn’t really matter at the end of the day, what we individually do, it’s going to matter what we collectively do”.
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ISSUE 2: THE ‘ONE IN FIVE’ – IMPROVING THE INDUSTRY’S REPUTATION
The financial planning industry has “a lot of work to do” to increase the use of planning services from the generally accepted level of one-in-five adult Australians, and to raise the image and the standing of the emerging profession, the 2016 Dealer Group Summit has heard.
Discussion Group Two said: “You don’t hear in the press the negativity about the members of other professions,” to the same extent financial planning. Part of that is linked to incidences of poor advice, and it is also partly due to the industry regulatory structure.
But the group said that product manufacturers must step up and take responsibility and accountability for product failures, which often unfairly reflect poorly on advisers.
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ISSUE 3: VERTICALLY CHALLENGED – VERTICAL INTEGRATION NOT ALWAYS STRAIGHT UP AND DOWN
Vertical integration isn’t necessarily the evil it is often made out to be, and integrated institutions are well placed to help support advisers to become professionals and to support the delivery of great advice, the 2016 Dealer Group Summit was told.
Discussion Group Three defined vertical integration as “the value chain between product curation and proliferation, sales distribution and financial planning – which means it’s not just the big five and IOOF; it’s anyone who has an operation who does that”.
“In fact it’s quite powerful because it allows you and enables you to do things that you couldn’t otherwise do if you were a small operation with less capital,” the group said.
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ISSUE 4: CHURN, AD THE QUALITY OF ADVICE – PLANNERS BEHAVING BADLY
The financial planning community should be brave enough to call out instances of poor behaviour and take the initiative in policing its own ranks, the Dealer Group Summit heard.
Discussion Group Four said there has been “bad industry practices previously, and we’d like to think that they have been exposed and discussed, but there are things that are inevitably going to come out”.
“We should call it, go to the regulator and be brave enough to speak up and mediate where that needs to happen,” the group said.
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ISSUE 5: PROFESSIONAL STANDARDS AND SELF-REGULATION – PLANNERS COULD BE DISBARRED LIKE LAWYERS
profession’s code of ethics not only informs the actions and behaviour of its practitioners, but also acts as a clear signal to the public that the profession’s members are committed to high standards, the dealer Group Summit has heard.
But for a profession to be taken seriously it must be prepared to act against its own members who breach the code, Discussion Group Five said. That can be a simple sanction or, in extreme cases, expulsion from the profession.
“[We have] touched on the concept of the recalcitrant adviser, and we all know where they turn up and nobody does anything about it,” the group said.
