Financial planners should be granted professional privilege in some circumstances – like that extended to lawyers – as the industry evolves into a profession, the Financial Planning Association has stated.
In a pre-budget submission to Treasury, the FPA argued such statutory provisions should be put in place for defined cases around the legal areas planners provide advice on, including taxation, superannuation and social security.
In the legal community, professional privilege protects communications between a practitioner and a client from being disclosed in court under common law. The privilege is owned by the clients and can be overturned at their discretion. The FPA stated in its submission that the concept “has its roots in the notion [of] fairness and public interest”.
The accounting community already has professional privilege, meaning some private client information does not have to be shared with the Australian Taxation Office or the courts, FPA head of policy Ben Marshan said. And because accountants are registered tax agents, they are able to represent their clients to the commissioner of taxation, which puts them at an advantage over planners.
One planner expressed concern to the FPA that this discrepancy might make some high net worth clients, or clients with complex financial circumstances, prefer to see an accountant.
The FPA brought the situation to Treasury’s attention years ago, initially arguing the ATO should apply the same rules to both accountants and financial planners. Since the accountants’ exemption expired in July 2016, planners and accountants have operated under the same licensing regime. Marshan said this strengthens the case that both should have professional privilege.
He said this is a particularly important professional benchmark for planners now.
“It’s our view that for financial planners to be properly respected in a way similar to accountants and other professionals, professional privilege needs to be put in place, especially as we have to comply with the Tax Practitioners Board in the same way as accountants,” he said.
Marshan said accountants’ “clients can be confident in having frank and open conversations with them and not [having them disclosed] to the ATO or in a court”.
“Financial planners don’t have that same privilege,” he said. “They may be asked to provide private information to the ATO and the courts and there is nothing they can do to object.”
