A lack of engagement with “community” – in particular with clients of financial advisers – will undermine FASEA’s approach to building the optimal framework for a new profession, Deloitte partner and the statutory body’s former CEO, Dr Deen Sanders, has told Professional Planner.

Sanders, who is currently engaged in a consulting capacity with a number of licensees adapting to the demands of the new Code of Ethics, said: “more and better engagement is needed if this current push for the advice industry to galvanise as a profession is to work.”

“We all want this to work, but I don’t think the current approach is giving us our best chance, because I struggle with the assumption that you can regulate a profession into existence,” Sanders said during an interview for Professional Planner’s new Ethics & Professionalism for Financial Advisers podcast series, which will be publish starting in mid-February, 2020.

“You can regulate for compliance or for clearer rules and perhaps that’s what we now have, but professions are a construction of the community, they are a relationship that individuals within the profession use to guide and connect with each other… If we have to transact around rules, or understand rules or be driven by rules, that’s not what ethics or professions are about,” he said.

Deen Sanders & Matthew Smith in Conexus’s Sydney offices

Sanders was the inaugural CEO of FASEA; he left less than a year into his tenure and before the issuance of the latest Code of Ethics, to pursue his preference for “shaping the tools over making the rules” as he described to this publication late last year.

Sanders is currently a partner, governance, regulation and conduct at Deloitte. Previously he was head of Australia’s Professional Standards Authority which is responsible for the oversight of Australia’s regulated professional communities. Sanders was also previously the chief professional officer at the FPA in charge of leading the global standards development process for financial planning.

One of the shortcomings of the Code of Ethics and the new professional standards is the way they have been handed down as rules rather than through a process of discussion, Sanders explained.

“An essential element in the development and oversight of professions is that connection to community. I don’t just mean the regulated participants, I mean the voice of the clients. Not necessarily the voice of complainants who have a particular lived experience, but the community largely, who also want to see positive things embedded. We must be asking – how do we engage in that conversation,” he said.

Since publishing guidance on its contentious Code of Ethics standards in November, FASEA’s Glenfield and members of the statutory body’s board have conducted multiple rounds of consultations with licensees, education institutions, industry associations, consumer representatives and industry regulators.

The successful emergence of a profession won’t be determined at these meetings, Sanders reckons.

“There is a great deal of work that licensees and advisers need to do in readiness for the introduction of an ethical, professional framework for financial advice. If you take the view that professions are born from a collective discussion, then the first step is to involve the collective, meaning they should involve the voice of participants, they should involve the voice of community, we should all be in a public conversation about what these things mean and how business, advisers and clients adjust to them. Dictate is not a recipe for a profession,” he said.

The level of anxiety and debate the advice industry is having in relation to the Code of Ethics indicates it’s not serving to encourage the positive conversation that professions are meant to be about, Sanders said.

“It’s distressing to see the level of anxiety. The idea of professional discussion is meant to be about negotiating this with each other. Notwithstanding the room for improvement in drafting of particular standards… the challenge for licensees and advisers is to work with each other to ask ‘how do we put the right ingredients in place to allow the profession to emerge?’ To suggest it’s going to come because the law says it will or to wait for FASEA to tell you it’s here, is actually flawed thinking,” he said.

Power in  advisers’ hands

Australian Financial Services License holders are just now beginning to focus on the role they’ll play in a new world where community and regulator expectations are putting the onus on the individual adviser to create and maintain higher ethical and professional standards, Sanders noted.

The law relating to advice is not about licensees or financial services providers or corporations in Australia generally, the law is focused on advisers, Sanders noted.

“It puts an enormous amount of power in the hands of advisers – we haven’t fully realised the amount of power advisers can exert back up the machine. I want to see that conversation emerge too,” he said during a wide ranging interview.

When you hold the power to say to a provider ‘your product is crap, I’m no longer prepared to put this in front of my client,’ that’s a different level of power than we’ve ever had,” he said.

Smith is the editor of Professional Planner’s print and digital platforms. He is an experienced financial journalist, editor and multimedia producer who has held senior editorial positions both in mainstream press and trade media.
4 comments on “Code ‘anxiety’ undermining professional status: Sanders”
  1. Avatar Emma Pardede

    Jeremy, I couldn’t agree more with your comments. Sadly we are now deep into territory governed my scare-mongering and fear. So many stories emerging of advisers being paralysed by fear and not knowing where to start to try and survive this chaos. And these are advisers who have done nothing wrong. Worst of all is the number of advisers who can’t see a way through and are taking their own lives – at a rate that is many times above the average population. How is this not making headlines? This alone should be making policy makers think twice about their approach to this reform – they literally have blood on their hands…

  2. Avatar Ryan David Grant

    I look forward to seeing our profession develop with this likeminded philosophy, through which, we will recognise that the rules and regulations will always be less than the professional standards we want to set for ourselves. Ultimately, we will stand up above these rules, and say “this is what it is to be an adviser in Australia”, and be proud of it.

    The risk, as Jeremy rightly points out, is that the nuances of the rules may become so complex that it is impossible to be profitable, and client centric, while trying to navigate the legislative maze created.

    I look forward to the “individually licensed” world of the future, where professionals link arms to drive forward.

  3. The author’s article overlooks one huge factor in the equation – the spoiling role of ASIC , who think that micro-managing the advice process is the best approach. That is in obvious contrast to the principles-based approach that we need. As advisers, we may be able to push back against our licensees, but they don’t enjoy that same liberty to push back against ASIC’s misguided, relentless regulation. In my view, we need to have ASIC either come on board on the path to professionalism, or get out of the way and stop being an impediment to the process. The latter has the greatest chance of success.

  4. Avatar Jeremy Wright

    The threat to advisers is very clear.
    Obey or suffer the consequences. The only problem with that, is advisers have very little time to fully understand every rule, recommendation and regulation and in what context, the plethora of rules and regulations they must abide by, will fit into every bit of advice they provide.
    So what advisers do, is rely on expert opinion and people who do that work all day long.
    Where it falls down, is very few of the experts and Government bodies, actually understand or have experience with how advise is provided, so there is a missing link.

    Confusion leads to anxiety and an insidious slow paralysis has already crept into the advice Industry, where Advisers are saying they are too scared to give advice, as they feel they are damned if they do and damned if they don’t.
    What is occurring, is an explosion of regulations, regulators and auditors who are crippling any growth and as can be seen from what has occurred with the Banks and the Large Institutionally owned Life Companies, they are exiting the Industry, which frees up the Regulators to then force out the smaller advice practices with their constant demands and threats.

    If Multi-Billion dollar Corporations, with vast reserves cannot make a return in the brave new world of red tape and sledge hammer negotiation, what chance does every one else have?

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