At the time of writing, there’s a massive cruise ship berthed at the Overseas Passenger Terminal at Sydney’s Circular Quay, just down the street from the Professional Planner office. It’s the Royal Caribbean International vessel Ovation of the Seas, and it’s something to behold.
Its gross tonnage is 168,666, more than enough for all the pages of all the legislation affecting financial planning that’s been churned out in the past decade. It’s almost 350 metres long. It’s got 18 decks and can carry 4900 passengers – it could accommodate almost all of the certified financial planners in Australia.
You can go skydiving on it (truly), or surfing, or drive dodgem cars. There’s a casino and a music hall on board. It’s the state of the art in cruising. Today, this thing will back out of port, turn 90 degrees and make for the heads, before reaching the open seas and steaming north at its cruising speed of 22 knots.
And as 2016 draws to a close and it gets harder and harder to say anything new or original, that’s as close an analogy as I can muster for what the financial planning profession should be aiming to do in 2017.
Turning around the industry isn’t exactly like turning around a 350-metre cruise ship but there are some similarities. When an industry has been doing things in a particular way for quite a long time, there’s a certain momentum. Habits are hard to break. Shifting direction and getting people to think and behave in a new way takes time and effort, and no small amount of skill and careful navigation.
Those are going to be requirements for the proposed standards body, due to come into being during 2017, following the presumed passage of professional standards legislation through the upper house of Federal Parliament.
The standards body, and those who lead it, face a number of challenges that could be summarised under the headings of volume, complexity and expectations.
The body has a vast amount of work to do, across five key areas. It must set the entry-level education standards, and determine appropriate requirements for existing planners. It must set the exam. It must devise a code of ethics that will apply to all financial planners. It must set the parameters for the professional year for all new entrants to the profession. And it must spell out continuing professional development (CPD) requirements to apply to all planners.
That gives an idea of the volume of work it has to do, and each of those issues has its own set of complexities.
For example, in setting education standards for new entrants, it has to take into account that students who commenced three-year financial planning degrees this year will be entering the industry after January 1, 2019. It will be a major problem if entry-level requirements are set so that those students find their studies won’t qualify them to enter the industry. The pipeline of new entrants would shut off for a time, and that would have serious consequences for an industry seeking to replace those planners who leave. Meanwhile, education standards for existing players must take into account formal qualifications and industry experience to define the term “equivalent” in the “bachelor’s degree or equivalent” requirement.
There are established legal definitions for what a attaining a bachelor’s degree entails, so the standards body has to think about whether its requirements are going to be the same. For example, is a four-week RG146 course and five years of experience truly equivalent to three years of full-time study?
When it comes to the exam, the standards body has to consider not only the purpose of the test – whether it’s a mere compliance tool or is meant to assess competence – and also how it is to be administered.
And when it comes to setting a code of ethics for the profession, the standards body has to determine which organisations are properly resourced and set up to monitor planners’ compliance with the code.
Those are just the surface complexities associated with some of the tasks. There is plenty more to consider, once you start to think each of them through in detail.
It’s fair to say that the expectations of the industry for the standards body are sky high. It’s no exaggeration to state that this may be a once-in-a-generation opportunity to get all of this stuff right. Get it wrong and the quest to win back public trust and confidence in financial planners and financial planning – and the drive to create a profession – could be set back years.
The work of the standards body in 2017 will determine whether the financial planning profession negotiates the tricky passage to the open ocean or runs aground and founders.
