Replacing FoFA with a genuine self-regulation scheme would be easier than ever under a Coalition government – but Robert MC Brown wonders if financial planners have the courage to back such a bold move.
View poll results: Is self-regulation for financial planning a realistic goal?
If going it alone isn’t an option right now, maybe a partner is the answer.
Senator Arthur Sinodinos has achieved an unusual, if not unprecedented feat for any politician in a democracy. That is, his constituency (the financial services industry) has unanimously and enthusiastically supported his proposed amendments to the Future of Financial Advice (FoFA) regime without any discernable qualifications or criticisms. So what’s going on here?
At one level, the government can quite properly point to the “no surprises” fulfilment of its pre-election promise to simplify FoFA, thereby delivering the laudable outcome of removing costly red tape.
At another level, the government should at least understand that the real reasons behind the industry’s effusive praise of its actions may be not quite as honourable and altruistic as they appear to be.
Typical comment
Here’s a typical comment from the industry about the government’s proposed changes: “They make the policy more workable and practical without reducing or diminishing consumer protection or the policy intent of FoFA, which in my opinion is this: removing conflicted remuneration and providing advice in the client’s best interest, but (my emphasis) doing it in a way that enables advice to still be affordable and accessible.”
While I accept that this comment was made sincerely, it’s regrettable that for much of the industry the already highly compromised FoFA legislation has proved to be not much more than a costly and ineffective impediment to the continuation of a longstanding and deeply embedded product sales culture.
The proposed changes (including the repeal of the statutory opt-in rule) simply act to water down the remaining commercially inconvenient aspects of the law.
This is very sad for an aspiring profession. That’s why in the November 2013 edition of Professional Planner, I recommended that if we are serious about being accepted as a true profession (and not just claiming that we are one), then we should take the golden opportunity presented by current political circumstances to call for the complete repeal of FoFA in return for its replacement with a genuine, uncompromised and comprehensive self-regulation scheme.
Besides some positive reactions, negative responses to my suggestion have ranged from “it can’t be done” to (astonishingly) “we’d prefer FoFA now that it’s going to be watered down”.
Vision and will
I’m certainly not saying that it would be easy, but my recommendation could be implemented if we had the vision and the will to do it. As for those who would prefer a diluted FoFA over genuine self-regulation, I would question both their commitment to and understanding of what it means to be a true profession.
In closing this story, let me revert briefly to the above quote. The most significant word in it is “but”. Of course, there’s always a “but”. It is the standard ethical compromise word. It’s been used for decades to kill off serious debate about ethics in the financial planning industry.
Trust is at the core of genuine professionalism; and the removal or avoidance of conflicts of interest is at the core of trust. If we are a profession, we must never compromise when it comes to professional ethics. Until we accept this (and remove words like “but”), we will never receive the professional recognition that we so earnestly seek. The use of “but” is inconsistent with trusted ethical advice, as is the nonsensical proposition that FoFA removes conflicted remuneration.
Trusted advice
My many years of involvement in financial education of consumers have demonstrated to me that the problem is not about access to “affordable” advice, as industry apologists and successive governments have repeated after considerable and incessant lobbying from industry vested interests. What it’s really all about is access to trusted advice. That’s what consumers want.
True professionals in other disciplines know this and have the confidence to promote it to their clients, large and small. If ever we had the opportunity to achieve what I’m suggesting, we have it now under a Coalition government; but have we the courage to do what it takes? There’s that troublesome “but” word again.
