FASEA board member and executive director of The Ethics Centre, Dr Simon Longstaff, has taken aim at representative associations serving to protect the status quo, warning that the financial advice industry risks being overlooked in the future for statutory funding models along the lines of Medicare and legal-aid.
“There is a test playing out almost every day for those who are in this emerging profession and for those who represent them and it goes to the heart of what the Code of Ethics is trying to address,” Longstaff told Professional Planner during an interview as part of its Ethics for Advisers podcast series which can be listened to here. Longstaff added during the interview that his views were his own and should not be taken to represent the views of the FASEA board.
This test, Longstaff elaborated, relates to the idea of whether people in the industry working for clients are able to subordinate self-interest for the greater public good or the good of others.
Despite the challenges that come with adapting to policy and regulatory changes following the Hayne royal commission recommendations and the ensuing industry upheaval, Longstaff said he is aware of “plenty of people” who are embracing fundamental ethical change and are standing aside from their associations, which tend to represent the interests of a broader group.
Associations that represent people not prepared to forgo commissions or raise education standards “just don’t get it,” Longstaff remarked, while raising that a statutory fund designed to subsidise face-to-face advice which he described as a real possibility some time in the future.
“[O]nce this occupational group becomes a real profession, they could go to a government and say ‘now we have made that move, why not recognise the good we have made to society as a whole is equivalent to lawyers and doctors… and why don’t we introduce something like legal-aid or Medicare’: a statutory fund available to every financial adviser to make application to if they provide face-to-face financial advice to people of only modest means,” he described.
While a fund of this nature might not be an immediate prospect, according to Longstaff, the opportunity for the industry now is to transform the contribution it makes to society, “not just take this as something done to a group of people by a government that made this decision some time ago and then try to wind it back quietly here or there.”
Rather than be taxpayer funded, financial advice-aid could be funded with a very small percentage of the fees charged by funds managers progressively contributed to a government designated fund to which application could be made by advisers providing financial advice to average Australians.
“I imagine a world if this group could make the transition in good spirit, where you have a mixed practice with high net worth individuals providing fees to the business, and on top of that you are getting a decent and consistent salary to provide face-to-face financial advice to those who really need it across the Australian society.
“That has to be a marvellous prospect, but do you see people talking up that prospect?” Longstaff asked. “No, mostly what you hear are the voices of the discontented, and I think that’s such a shame because there is so much more to be won for the good of this society and for those who perform in this profession if only they embraced it,” he said
“Look at the financial requirements for Australians, particularly in the uncertain future emerging now because of the changing patterns of work – every Australian needs to be able to have good face-to-face-advice.”