The next month or so will be critical for the future of financial planning, for the development of financial planning as a profession in Australia and, by extension, for the interests of all Australians.
As various interest groups prowl the corridors of Canberra, presenting their respective cases and lobbying lawmakers and bureaucrats, no less than the future of financial advice is at stake – and not only the legislation that carries that title.
Will the government take the opportunity to use the Future of Financial Advice (FoFA) reforms to create an environment where an ordinary person can seek the services of a financial planner and be confident that the planner is a genuine professional, operates to true professional standards, and operates solely in the individual’s best interests?
Or will there forever be the belief, depressingly regularly reinforced, that financial planners are really only glorified salespeople, ultimately beholden to the institutions that manufacture investment products?
Fundamental level
The answer to this question matters, at a fundamental level. People need the confidence to work with financial planners to negotiate a complicated retirement savings system. They also need confidence to work with financial planners to protect and increase their wealth outside the superannuation sphere. That confidence can never be fostered in an environment where financial planning is equated with product sales.
If people do not seek advice it reduces their chances of making a complex retirement savings system work in their favour; it’s worse still if they seek “advice” but get sold an inappropriate product and blow up all or even part of their capital.
Picking up on a theme flagged last week – which was well supported by Professional Planner readers, if your phone calls and emails are any guide – the government has a responsibility to ensure that its own citizens, who are forced into a complex system, are not then left to fall into the clutches of incompetent or unscrupulous financial planners.
Informed and competent
The current government might be all about smaller bureaucracy and a philosophy that says “the market” is more efficient than government at developing solutions. A fair and efficient market depends on parties on both sides being equally informed and competent, but that’s clearly not how it is when an individual goes up against a major financial institution backing a highly motivated sales force.
The professional financial planner stands between the individual and the vested, sales-orientated interest of the institution, and provides guidance and advice that serve the interests of the individual.
Other measures meaningless
Governments can do what they want to raise the pension age, raise the age at which people can access superannuation and make other tweaks to tax rates and contributions.
But if the amendments to FoFA don’t address the fundamental causes of individuals losing their retirement savings to a flawed and conflicted financial planning industry, then all other measures instantly become meaningless.
And they will have failed all Australians who want to build a better financial future for themselves and their families.
