Mark Rantall is incredulous that it took a financial planning catastrophe of the scale of Commonwealth Financial Planning (CFPL) before any meaningful action will be taken to improve the system and to better safeguard Australians against unscrupulous and shoddy financial planning practitioners.
“Did it really take this? Did it take Mum and Dad Australians getting blown up to get people’s attention?” Rantall says.
“People have lost money. They have suffered stress. They have suffered humiliation, and they have lost trust and confidence. Some of them have struggled to make ends meet. It is unacceptable.”
The chief executive officer of the Financial Planning Association (FPA) has urged swift action to address key shortcomings in financial planning governance to make sure there is no systemic repeat, and out of respect to CFPL clients for the losses and the stress they have experienced.
On Thursday last week The Senate Economics References Committee inquiry into the performance of the Australian Securities and Investments Commission (ASIC) handed down a report containing 61 recommendations, many of which relate to improving the governance of financial planning in the wake of problems exposed at CFPL
Rantall says it is critical that members of the FPA make it known that they support changes that will improve the governance of financial planning and which will begin to restore trust and confidence in the sector.
“This should be a wake-up call for us to really get serious about professional standards and education and making sure clients’ interests are put first,” he says.
“We do not want to be sitting here in 10 years’ time facing the same problems.”
Be vocal
Rantall has called on FPA members to “be vocal, rather than just accepting this in a passive way”.
“Be vocal, and push forward – don’t be the silent majority,” he says.
“We have more than 10,500 members and they are here for a reason. This needs to be a grass-roots campaign. They all sit in licensees, and they should be letting their licensees know that this is what they want to have happen.”
Rantall says an individual’s professional duty to a client comes before their duty as an employee or an authorised representative,
“And we stand behind individual members to prosecute their right to act in the best interests of their clients,” Rantall says.
Rantall points out that the drive to raise professional standards, to lift entry-level and ongoing education requirements and to generally raise the level of confidence and trust in financial planners started long before the senate inquiry.
Reflected in recommendations
He is loath to say “I told you so”, but many of the key elements in the FPA’s vaunted 10-point plan are reflected in the recommendations of the Senate report released last Thursday. Of the 10 points, five were dealt with directly by one or more committee recommendations. Two points were addressed indirectly; three were either not addressed or weren’t relevant to the inquiry’s terms of reference.
The 10 points, and how they were reflected in the senate report, are summarised here.
In a poll of Professional Planner readers earlier this month, the question was asked: “Do you think the FPA’s 10-point plan is a workable blueprint?” In response, 20 per cent of readers said no; 40 per cent said yes, but it will need to be modified, and 40 per cent said yes, in its current form.
Rantall recognises that the recommendations from the committee are just that – recommendations – but he says the FPA stands ready to work with whoever it needs to to put them into effect.
“That’s the thing, isn’t it?” he says. “That’s the million-dollar question. These are just recommendations from a committee. What is important now is what the government reaction is to all this. We would seek to work with the government, and industry, to start to unpack some of these recommendations.
“The first thing that needs to happen is that clients need to be adequately compensated. There’s been a call for a royal commission in relation to that; if that’s what it takes then well and good, but if it can be achieved in another way, that’s probably better.
“Industry and government need to work together to have a good hard look at some of these recommendations.”
Accepted without reservation
For the FPA’s part, it will continue to push to have its 10-point plan accepted without reservation by its members, and then put into practice.
“We’ve had that paper out for discussion and debate, and there are a number of points in that paper that [ASIC deputy chair] Peter Kell agreed with,” Rantall says.
“We’ll now start to discuss that with out licensee partners and we will discuss it with government. What we’d like to see happen is the government also adopt some of these recommendations.”
some of the recommendations – such as membership of a regulator-prescribed professional body, and enshrinement of the term “financial planner” or “financial adviser” – require legislative changes. Some recommendations – such as minimum educational requirements – require new regulations.
To be clear: enshrinement of the term ‘financial planner’ and ‘financial adviser’ was passed by the House of Representatives under the previous government,” Rantall says.
“So some of these things should be expedited. Separation of product sales and personal advice needs to be clarified, and changes to the Corporations Act, particularly around ‘general advice’ and ‘general information’ needs to be fast-tracked as well.”
