Every financial planner has his or her own experience of the reaction from people when they say what they do for a living. This illustrates one of financial planning’s great dichotomies: people with first-hand experience of a financial planner generally rate that experience highly (unless they rate it extremely poorly after being defrauded or ripped off); while those with no experience consider the industry to be populated exclusively by charlatans and rogues.
Public perception can be quick to form and often comes from small sample sizes, but it can be excruciatingly slow to change. That’s why, when companies face a crisis (think Samsung, recently), the textbook response is to act decisively and swiftly and defuse the situation, before a perception forms and well before it solidifies.
Where companies frig around, either denying an unfolding scenario or denying it’s happening, there is more often an adverse and long-lasting effect. And if an entire industry has spent generations denying the need for change and at times vigorously and vocally opposing the need, public perception sets like concrete and can take decades to chip away.
But if you’re going to chip away at it at all then you need a high quality set of tools, and a big dose of perseverance. That’s perhaps how recent and impending legislative reform should be viewed: as important tools to begin to chisel away at the public’s perception of financial planning and its practitioners.
It would be easy (if I can see how far this metaphor will extend) to reach for a stick of dynamite and blow public perception to pieces, but there’s a risk of significant collateral damage, and after the dust settles, who knows what might be left? (OK, that’s far enough.)
Reforms no guarantee against ‘crooks’
A consistent criticism of the push to raise education, ethical and professional standards for financial planners is that no amount of legislation and raising standards can ensure there will never be crooks or unprincipled participants involved in financial planning. That is true, and it’s true of any profession – Robert MC Brown wrote for Professional Planner recently about the ills visited upon individuals and corporations by accountants behaving badly.
I suppose it’s still possible to obtain a bachelor’s degree or equivalent, pass an exam, be actively monitored for compliance with a code of ethics, complete a minimum amount of CPD each year and do all of that with the express intention of committing fraud. But a clear benefit of the changes will be that if anyone is looking for something that is easy to get into, make large sales, earn massive bonuses and generally get rich at the expense of customers, there will be other, easier places to do that.
I recall watching TV years ago when a current affairs program looked into questionable life insurance practices (this was in the early 1990s; some things only ever change very slowly).
One of the big insurer’s best (i.e. most productive) agents was interviewed, and if memory serves it was about the mind-boggling size and the cushy terms of an agency development loan he’d been given by the insurer – he may not even have asked for it; the money was just being sprayed around. All he had to do was sell, sell, sell. It was these loans, and subsequent events in investment markets that trashed capital-guaranteed products, that brought a number of insurance companies to their knees.
The agent’s face appeared on screen, and I nearly fell off the couch. It was the same guy who’d just sold my fiancée a car. He’d literally gone from insurance agent to car salesman – a transition that he apparently made seamlessly. And I have little doubt that around that time, transitions in the opposite direction were just as seamless. Sales roles were interchangeable across industries and whether it was a car or an insurance product or a managed fund, the product was irrelevant.
If you can’t play by the rules, don’t play
For some financial planners and advisers, the reforms to life insurance announced in the past couple of weeks, and the professional standards legislation to be introduced later this year, will be the final straw. They will choose to leave the industry, and the industry will lose some fine people.
For some, the transition to a new regime will be difficult, but necessary, and they’ll get there. For others the transition will be welcomed, and embraced. And for others still, the changes are a non-event because it’s how they already operate.
For newcomers, the situation is simpler still: these are the rules of the game and if you don’t like the rules, play another game. Go and sell cars or something.
As these ideas begin to sink in, we will start to see a shift in public attitudes towards financial planning. The public has, at this stage, little to no idea of what’s actually happened, and what is about to happen, and they do not need to know all of the details.
But they do need to know that things are changing, and they need to know that the industry is on-board and supportive of the changes.
And you’ll start to see a difference when you tell someone you’re a financial planner and their first reaction is not to assume you’re little more than a salesperson – and in time they’ll even start to assume that you’re a professional.
