The man who oversees the top professions in Australia says the financial advice industry needs to sign up to regulation governing professions if it is to truly become a profession. Otherwise talk of professionalism is just fluff and marketing.
Speaking ahead of his speech to the Independent Financial Advisers Association of Australia’s (IFAAA) National Symposium on October 28 in Brisbane, the Professional Standards Authority’s chief executive Dr Deen Sanders has told Professional Planner that the rules around being a professional in Australia are clear: adherence to the Professional Standards Act.
“If financial advice wants to be a profession, it has to come under the formal Australian regime for professions and respond to the long established regulatory obligations. Otherwise it’s just theory and fluff,” Sanders says.
The IFAAA symposium’s theme is ‘The Road to Professionalism.’ In addition to Sanders’ speech, titled “What it takes to be a professional,” the symposium will also hear from Dr Claire Jackson, the past president of the Royal Australian College of General Practitioners, and Christine Smyth, the deputy president of the Queensland Law Society.
The Professional Standards Authority is the national regulatory support agency for the Professional Standards Councils, which administers the national framework of professional standards legislation, currently covering professions such as engineers, valuers, accountants, lawyers and barristers. (The Australian Health Practitioner Regulation Authority regulates the medical profession.)
‘Independence of mind’
Sanders says that everyone brings a different interpretation of professionalism, including plenty of solid academic theory but a whole host of uninformed opinion as well.
“But in Australia we helpfully have legislation that says precisely what it is,” he says.
Under Australian laws, a profession is formally legislated with a professional standards scheme when it meets the definitions and criteria outlined in professional standards legislation and has been recognised by the Professional Standards Councils.
The Professional Standards Councils use a 40-element version to analyse a group’s capacity to be approved for a professional standards scheme, which includes broad areas such as organisational and internal governance as well as external governance and public accountability.
Sanders says professional standards legislation is different legislation to the Corporations Act, which many professionals in financial services industry are perhaps too narrowly focused on.
The Corporations Act guides the function of people operating in financial services “but it doesn’t stipulate or describe what it means to be a profession,” Sanders says.
He says that independence – the key focus of the IFAAA – is central to being a professional.
“We talk about it in the context of ‘independence of mind’,” he says.
“It’s the idea that you’re acting in accordance with your own professional obligations and expertise, without influence from anybody else around you, whether it’s a product provider, clients or employer.”
Professional standards
Independence is “a primary trait of professionals,” according to Sanders: you’re not swayed by other forms of influence or distracted from giving your expert opinion.
In the financial services space, just like any other, “anything that interferes with independence of mind is something to be cautious about,” he notes.
Sanders says if financial advice wants to be accepted as a genuine profession, in the pantheon of law or accounting or medicine, then it needs to move to operate under the same recognised regulatory systems, such as the Professional Standards Act.
“There are rules around what it means to be a professional and established expectations of the things you have to follow,” he says.
“Many people use profession and professional as terms of marketing but if financial services does want to embrace being a genuine profession, that means genuinely getting on board with the rules.”
The president of the IFAAA, Daniel Brammall, says that independence is the first and biggest step that financial planners need to take, and without that, professionalisation of the industry isn’t possible. “Without that foundation – a Gold Standard of Independence as your platform – I don’t think the industry has a chance to professionalise,” he says.
Focus on the ‘doable’
Brammall, who is also principal if the ACT-based financial planning business Brocktons Independent Advisory, says that when planners become truly independent and divorce themselves from transactions, it raises the question: what is it we do – what does a professional financial adviser actually do? In Brammall’s view, they become strategic advisers.
“You’re a source of consulting knowledge; the interaction is one of trusted adviser,” he says.
That role includes raising issues that “might not be top of mind for clients,” and less emphasis on exciting issues like Brexit and commodity price crashes.
“These world events are absorbing headlines but beyond the control of our clients,” Brammall says.
“There are issues that clients can do something about, like preparing for the accommodation needs of their 70-year-old parents and dealing with the complex area of sibling interaction over succession issues.
“These are enormous opportunities for the independent financial professional add value.”
Reflecting
Aside from an exploration of what it means to be recognised as a professional, the symposium will be a chance for members to reflect on where the IFAAA has come in its six years of existence.
Reflecting on the reasons for the birth of the IFAAA back in 2010, Brammall says at the time the existing industry associations were promoting to the public that financial planning was a good idea. But those organisations existed principally to advance the interests of their members.“The overwhelming majority of those members were perfectly content to operate with big conflicts of interest,” Brammall says.
“By contrast the IFAAA was formed in the public interest – to educate the public and advisers on the value of independent financial advice.
“The other associations’ ability to effect change is constrained by their membership who are still largely associated with insurers and banks.”
