While it may have come across as a simple agreement, the memorandum of understanding between the FPA and the Tax Practitioners Board is a clever, nuanced play by both parties and is unlikely to be the last tie-in we see as the government moves towards asserting a single disciplinary body over the industry.
The MOU, ostensibly signed to facilitate “engagement, cooperation and proactive information-sharing”, is especially important to the Financial Planning Association, which is keen to demonstrate that it will be a willing partner of the as-yet unveiled new body.
“Irrespective of what it eventually looks like, the FPA intends to play a role in supporting and collaborating with a single disciplinary body,” FPA chief executive Dante De Gori tells Professional Planner. “This MOU is part of trying to affirm that.”
A centralised, single disciplinary body will have a “big remit”, De Gori notes, in supervising the behaviour of 20,000 or so individuals. “It’s not going to do that alone, it’s going to need the cooperation and support of the FPA.”
By aligning with the TPB, the FPA is announcing to government and industry that it’s onboard with the plan, which is a somewhat magnanimous turn after the government scuppered the original FPA-led Code Monitoring Australia bid to police the Code of Ethics.
It’s a savvy pivot from the FPA. Firstly, the TPB wasn’t involved in the CMA let-down, so it helps the FPA move on and start fresh with a partnership free of any lingering disappointment.
More pointedly, after being blindsided by the government’s backflip the FPA has shifted to being as useful as possible – which is where the MOU comes in. According to De Gori, the MOU shows the two entities have a shared interest in a “co-regulatory model” to best serve consumers and the advisers.
“One impetus of doing this is the royal commission,” De Gori says. “The Commissioner made clear there is no cohesiveness in the way advisers are disciplined, so this was definitely a deliberate attempt from the FPA to say we’re prepared to collaborate for the benefit of the profession.”
The MOU also counteracts the perception that discipline is the soft underbelly of the FPA, after they – along with the AFA – were castigated for being weak in this area at the royal commission. The TPB is a regulator, which has nominally bigger teeth than a professional body, so it’s like making friends with the slightly tougher kid in the schoolyard.
It should be noted, however, that consumers have a much more respectful view of the FPA’s monitoring and discipline than industry does. In a recent study, CoreData’s Simon Hoyle revealed that disciplinary action from a professional association is much more likely to cause a client to stop using the services of their adviser (51 per cent), compared to action from the regulator (46 per cent) or losing money over a five year period (37 per cent).
What’s in it for the TPB?
For the TPB, the obvious advantage to the MOU – apart from the stated sharing of information around conduct, education and operations – is that it gives them access to the FPA’s more intimate relationship with financial planners.
As part of the Tax Agent Services Act 2009, licensees and authorised representatives must be registered with the TPB as a tax (financial) adviser in order to provide “tax advice or advice on tax consequences”.
For most financial advisers, however, this registration is about as close as they get to interacting with the TPB. The board is generally a layer or two away from day-to-day advisers, but this puts them in touch an association that deals with them on a much more granular level.
“Whilst they play a big role in regulating financial planners it’s fair to say the TPB has had to get up to speed with understanding the financial planning market and have relied upon us and other associations in their development and learning,” De Gori notes.
The FPA chief lists the licensee landscape and FASEA as two specific advice areas that they could help the TPB navigate.
The TPB board member that advisers would be most likely to recognise is Julie Berry. As a board member of the FPA, a director at ASX listed Explore Wealth and with 30 years as a planner under her belt, she’s a familiar and respected face in the advice industry.
According to Berry, the union between the two entities is the next logical step to the TPB’s cooperative efforts “with all the associations”. Like De Gori, she notes that combined conduct oversight is an area they are keen to leverage.
“It gives us the opportunity to move quickly for consumers if things go wrong because of the sharing of information,” Berry says.