The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry will hopefully strengthen long-term consumer trust in the financial planning profession, but in the meantime, fear of the unknown could rattle the industry as it tries to unite, the Financial Planning Association states.
The optimal outcome from the inquiry would be a restoration of public confidence in financial services and advisers, FPA chief executive Dante De Gori said.
“If done correctly, it will recalibrate the industry and provide a direction for the whole financial services industry that will lead to better outcomes for consumers,” De Gori says. But as planners make their way through the draft terms of reference, he says, they could become concerned the inquiry will re-cover ground that other reforms have addressed.
He stressed that if there were parts of past scandals such as Timbercorp that had not yet been addressed, they should be part of the inquiry, but areas that had been addressed should be off the table.
“In financial advice, we’ve had [Future of Financial Advice] FoFA, which has essentially been in place since 2011, financial advisers have been subject to the Tax Agent Services Act, we’ve had introduction of the Life Insurance Framework, we’ve had introduction of the Financial Advisers Register and the strengthening of [Australian Securities and Investments Commission] ASIC powers,” he said. “We feel there has been a lot of progress and would be very disappointed if that is overlooked.”
De Gori’s comments broadly echo those of Self Managed Super Fund Association head John Maroney, who says SMSFs were rightly excluded from the draft terms of reference after the Cooper Review and Murray Review. The association also similarly believes the royal commission will improve professionalism.
But De Gori says until the full terms of reference are released, it’s hard to know precisely what will be covered.
“It’s the unknown that concerns me,” he adds. “Once the commission kicks off, that will dictate the tone and direction.”
Given the short reporting timeframe, he says he expects the commission to narrow the focus to the areas that have not yet been reformed.
A Professional Planner poll shows planners are roughly split on whether they support a royal commission, with 56 per cent saying no.
When asked whether the royal commission would affect the perception of incoming planners, De Gori said, “It’s possible that it could have some impact.”
“We’re told anecdotally from students that their only interaction with financial planning outside of what they learn at uni is in the media,” he says. “The royal commission, itself, could be a negative [for graduate’s perceptions] in terms of the headlines.”
The FPA is preparing a communique to members about how to approach and perceive the royal commission.