It was two years ago last week that the government warmly embraced Commissioner Hayne’s 76 recommendations to boost standards and, once and for all, fix misconduct in the financial services industry.
Some five years earlier, though, two independent government inquiries into standards – a Parliamentary Joint Committee on Financial Services and the David Murray-led Financial System Inquiry – had come to that very same conclusion. Unsurprisingly, ASIC had been making the same noises for even longer.
Perhaps this is why the industry regulator had been accused of being a toothless tiger by Hayne, for being unable to bring the industry to account for its conduct. Hayne’s approach was different, though: the very public hearings of the Royal Commission were like watching a train wreck in slow motion – impossible to look away.
The obvious could no longer be ignored: standards had to be lifted and, what’s more, government had to be the one doing the lifting because industry couldn’t (or wouldn’t). And so, in 2019, before Covid was even a thing, implementation of Hayne’s standard-lifting recommendations began.
Industry, however, despite being the expert in the room, didn’t get to come up with its own standards. The task was handed to FASEA. Sure, industry knew what a standard is – the two largest associations each had their own set of them, both reading like a who’s-who of vague virtue. But when closely scrutinised under Hayne’s steely eye, industry enforcement looked more like a rubber-stamp circus.
Hayne’s cynicism about the industry could hardly be faulted, by the way. It was surely no coincidence that the industry-authored standards had been revised and republished right at a time when the subject became subject to much closer scrutiny, hence the Financial System Inquiry. One standard, called ‘Code of Professional Practice’, originally published in 2009, was given a makeover and re-released just before Joe Hockey launched the FSI. Another, called ‘Six Principles of Professionalism’, had previously been languishing as a draft version for two years before being dusted off and re-released while the FSI was in the middle of its proceedings.
Nonetheless FASEA had already begun its work to professionalise an industry. Seldom, though, does the stick of statute magically install a new culture.
Traditionally, recognised professions emerge when a community of like-minded practitioners come together to set aspirational standards in the interests of the public. That’s not what this looked like though; an unwilling industry was instead being handed down a set of new commandments – the bare minimums now required by law – that it must meet, or else. The situation more closely resembled herding cats than celebrating the birth of a profession.
Then what happened? Thousands of financial planners exited the industry, and many more are expected yet to leave.
And now, with the government not yet even half-way through implementing Hayne’s recommendations, the industry narrative has shifted from ‘standards’ to ‘affordability’.
Is this real or is it spin?
No doubt in response to industry bleating the perils of this adviser exodus, ASIC released a consultation paper, ‘Promoting Access to Affordable Advice for Consumers’. Allegedly financial planner numbers are causing “widespread concern” that consumers may find it difficult to access “good-quality affordable personal advice”.
Does this pass the pub test, though? Let’s back up a moment.
- New industry standards that underpin good quality advice are released;
- Those who don’t want to meet them leave the industry;
- Consumers now can’t access good quality advice. From whom? The ones who left the industry rather than meet the good quality advice standards?
Has the availability of good quality advice really changed that much? Or has the tide gone out and now we can see who was swimming naked?
Here we are, only half way through raising the bar, and we’re jumping at the first shadow and talking about lowering it. This is a phantom fear. The truth is that access to good quality advice is the same as it was prior to the exodus. Getting good quality advice has always been the aspiration, and it was the reason for the Royal Commission.
As a matter of fact, the issue of affordability didn’t come up in the Royal Commission. Over 2100 pages in those reports and the word appears only once – out of the mouth of none other than AMP’s CEO. That’s because affordability is not about lifting standards, it’s about asking which standards can be let go.
However the word ‘conflict’ appears over 500 times.
A conversation now about affordability, before the new standards have been bedded down, is putting the cart before the horse. Get this wrong and we’ve got another scandal just around the corner, you can bet on it.