While the Financial Advice Association Australia believes there should be a path to the self-regulation, it doesn’t believe it will be the body to monitor the profession.
In a session on professional standards at the Professional Planner Advice Policy Summit, panellists discussed the holy grail of professionalism – the ability to self-regulate – and what it would take to get there.
Deen Sanders, a Worimi man and indigenous cultural leader who is now current partner at Deloitte as well as the inaugural CEO of the now defunct Financial Advice Standards and Ethics Authority, said the industry needed a separate body of authority to establish itself as a profession.
“[Where] I think we still fail as a sector is there’s a requirement for a professional entity, for a body that exists to be the police, from the body of the industry, not from the statutory frameworks,” Sanders said.
Financial Advice Association Australia CEO Sarah Abood agreed with Sanders and said financial advice was the only profession run by government.
“[The] government’s making decisions about what the standards should be, about behaviour, about who will be allowed to continue the practice,” Abood said.
“It’s not the mark of a mature profession.”
The FPA, which was led by Abood before it merged with the Association of Financial Advisers to create the FAAA, had taken steps towards establishing a code monitoring body which it withdrew after the Hayne royal commission recommended relying on standard’s body run by the federal government. Hayne made the recommendation after criticising the ineffectiveness of associations to hold members to account.
The FAAA has outlined co-regulation as a strategic priority, which is meant to be a step towards self-regulation.
However, Abood insisted the FAAA would not be stepping into the shoes of the proposed self-regulatory entity.
“I don’t think the FAAA is the body that does it,” Abood said.
“We’re one of the proponents that it needs to happen. But among us, somehow, we need to create that body.”
Abood described the role of being a professional entity as “a bit of a thankless job”.
IFM Securities principal Lionel Rodrigues was in further agreement with Abood and Sanders about future self-regulation via an industry body.
Rodrigues mentioned the accounting bodies and their success with self-regulation and described the advice industry’s professionalism as “prescribed”.
“Where is there a profession whereby there’s a piece of legislation that says you must behave in this way?
“We’ve got to get our mind around this idea that, if we are serving the public with special skills and knowledge, that denotes part of being a profession. And if that is the case, we need to be about ourselves, not have prescription leadership forced upon us.”
He praised the Advice Policy Summit as an event bringing the industry together to help drive forward initiatives such as self-regulation to improve the professionalism of the sector.
“It’s from forums like [APS] that we can develop a concept of actually being self-regulated and remove the legislation that we have,” Rodrigues said.
Sanders added that the moment the profession relies on the government to change anything, it is “in serious trouble”.
Lifespan Financial Planning CEO Eugene Ardino held some reservations about self-regulation, expressing concern about the effectiveness of self-regulation for other professions.
“A lot of those so-called regulators are pretty weak,” Ardino said.
Instead, he said the industry should focus on greater collaboration and having “a bit more conviction”.
“If you want to be seen more as a profession, we have to think about it from an outsider looking in.”
‘A degree is a degree’
On Monday morning of the summit, Minister for Financial Services Stephen Jones unveiled proposed changes to the education pathways with the goal of making it easier to become a financial adviser while still maintaining high professional standards.
Abood said the view of the association was that it was a “huge positive” as the industry is currently “fishing from a very small pool”.
“What [the FAAA] advocated for was to recognise a broader range of degrees, degrees that have relevant content to financial planning,” Abood said.
Jones’ proposed reforms included expanding the degree requirements from the specialised financial planning degree to a degree in any relevant discipline, such as economics or commerce.
“A degree is a degree,” Ardino said. He added that it was “more about the discipline required to actually go through the steps of having a degree”.
Rodrigues described Jones’ announcement as “quite pertinent” and said he was “absolutely in support of any educational initiatives that are brought to the table”.
There was consensus the industry believed a degree was necessary in order to maintain professional standards, but the requirements were cumbersome for future advisers.
“For [the FAAA], it wasn’t about reducing standards, it was making a high standard more flexible,” Abood said.
Reflecting on his short stint as FASEA chief executive, which was responsible for administering the education standard under rigid guidelines which the minister’s announcement has wound back, Sanders said the regime was an “ugly but necessary transitionary element” for the profession.
“The FASEA regime was a necessary but brutal – again another reason I left it was because it was unfair and improper, bot at law and its effect in the industry – but it was necessary to at least have something,” Sanders said.
Sacrifice of professionalism
The experience pathway, proposed by Jones in December 2021, was taken to consultation by the Liberal party at the start of 2022 and followed up later that year after Labor won the federal election.
The experienced provider pathway required 10 years of relevant cumulative experience as a licensed financial adviser and a clean disciplinary record instead of a mandatory tertiary degree approved under the FASEA education standard. It still required the adviser to have passed the adviser exam.
The aim was to prevent experienced advisers departing the industry and subsequently create more avenues for Australians to be able to access advice.
Rodrigues expressed a lack of support for the experience pathway and said he had believed it would have meant sacrificing a level of professionalism.
“[It was] that conflict of my idea of do we want a professional advice network, or do we want more advisers for the sake of having more advisers?” Rodrigues said.
“It was an idea of Stephen Jones. The government of the day quickly adopted it.”
Abood said the advisers with tertiary degrees, FASEA approved or otherwise, did not initially take kindly to the experience pathway.
“The advisers who had gone to the time and trouble and expense of completing the qualifications felt that that had been devalued,” Abood said.
The FAAA made attempts to get Jones to include a 10-year sunset clause to prevent young advisers being grandfathered for the rest of their career without ever having to complete formal qualifications, but Jones ultimately declined to make any changes to the bill.
“Fears that [the bill] would negatively impact the professionalism view have subsided,” Abood said.
Ardino said he did not believe the experience pathway needed a sunset clause.
“To say you’re not good enough to be in our profession, or whatever you want to call us after 30 years, because you don’t have a degree or because you’re too old to go back and do one – I think that’s awful,” Ardino said.
If we could put feel good storytelling aside for a moment and jump back into the real world that includes the ability for an Industry to recruit and rebuild to recover from the most awful 10 years that no-one should have been forced to endure, which reinforces what is still happening in the real world today, then maybe we could redirect back onto the correct line.
A now commonly used question that can clear the fog of red tape is; “Are we all better off now after having gone through 10 years of Regulatory purgatory and I mean ALL AUSTRALIANS, except for the Legal, compliance, Public service sectors and Education lobbyists who took and charged Multi-billions of dollars from Tax payers and the Advice Industry to feather their own nests and all we ended up with was twelve thousand experienced Advisers exiting the Industry, Advice fees and Life Insurance premiums skyrocketing, with Insurance New Business being deserted by most of the remaining Advice community due to unworkable red tape and a regime that made Attila the Hun look like a kindly benefactor.
To my dismay and disbelief, even after the Life Insurance Adviser force has been decimated, we still have people who are advocating for new entrants that just want to provide Life Insurance Advice, are still being forced to do expensive, time consuming, irrelevant studies, that nearly all of it has ZERO to do with the provision of risk advice.
What planet are all you people orbiting, as clearly it is not Earth.
There has been as far as we know, NOT ONE PERSON over the last four years who has gone through the University Education pathway that specifically wanted to just do Life Insurance Advice to the exclusion of full financial planning.
New Business has plummeted, specialist risk advisers are at critically low levels and Lapses are skyrocketing which unless something changes NOW, will lead to a collapse of the Industry.
NO BUSINESS, OR INDUSTRY can survive reducing customer bases, rising costs and claims, negative cashflow due to sales drying up caused by blockages to the supply lines, which has been happening now for years to the Advice retail Life Insurance sector, which also produced most of the TRUE new Business revenue streams, that is now drying up.
All the talk fests have led us all down to the dry well and many of the theory-based experts, still think that “talking,” instead of actually “doing,” will miraculously fix the problem.
The real world always eventually comes back to bite and there are very few leaders who know how to treat it properly.