The issue of financial adviser professionalism is back in the spotlight – and not a moment too soon.
For too long the focus and energy of the advice community has been absorbed by a never-ending slew of legislative changes, reviews, consultation and ministerial announcements. It’s been flat-out just working out how to respond, and the pace of change has provided little scope to think and act in a collective, co-ordinated way.
The merger of the Financial Planning Association and the Association of Financial Advisers has helped; at last, there is an organisation which, with around 10,000 members, represents a majority of advisers. But not all advisers are FAAA members, and not all FAAA members agree on all issues.
Too often responses to Canberra are piecemeal and unfocused, and sometimes contradictory. This leaves the door open for policymakers to assume that since there’s no consensus among advisers, they can plough on with changes that may or may not make advice better, more affordable, and more accessible.
That’s not to suggest that contrary views and opinions are not valuable, because they are. Any proposal for change should be rigorously tested against alternative ideas.
Over at least the past two decades and probably longer, the advice industry has usually had things done to it – change has been pushed onto it from outside. Almost every change that has lifted standards, weeded out poor practitioners and fed into improved consumer confidence has come about through government action – reviews and royal commissions – and usually in response to some perceived systemic fault of failure.
Even the foundations for a financial advice profession had to be laid by government, because the industry couldn’t do it. Vested interests, conflicts of interest, resistance to derailing the gravy train of trailing commissions and other issues built a wall to prevent meaningful change from coming from within. It happened in pockets, within specific businesses, but not across the board.
Time for change
Something has to change. A real profession isn’t dictated to by government on matters of ethics and professional standards, and it shouldn’t be entirely up to government or regulators to weed out bad actors and to take disciplinary action against practitioners. A profession does those things itself.
For sure, government has a role. It sets minimum standards for entry, for example. It creates the foundation of laws that protect consumers and govern advice delivery. But as FAAA chief executive Sarah Abood told Professional Planner this week, government shouldn’t necessarily be involved in things like the minutiae of degree course content. The profession itself, and the institutions that offer education courses, should be working together to determine what content best services the needs of the profession.