It’s good to end the year on something resembling a bright note. With just two days to go until most of Australia shuts up shop for a couple of weeks (or more) of well-earned R&R, the vexing issue of grandfathering has been largely sorted out.
And amendments to the Future of Financial Advice (FoFA) regulations, proposed by the Palmer United Party and other minority Senate parties, have bitten the dust.
These regulations were always slightly perplexing. Mostly they replicated financial planners’ existing obligations under the Corporations Act.
They were more likely only to annoy the people who design and lay out statements of advice (assuming such people exist) than they were to meaningfully increase a financial planner’s obligations to clients or to enhance consumer protection. Imposing regulation like this is like teaching a pig to whistle: it’s a waste of time and it annoys the pig.
The idea of approaching the grandfathering issue through what is effectively a set of stand-alone regulations was canvassed last month by the Financial Planning Association’s general manager of policy and conduct, Dante De Gori, and the FPA’s national congress in Adelaide.
De Gori also canvassed the issue of having the FPA’s code of conduct approved by the Australian Securities and Investments Commission (ASIC) so that FPA members are exempted from the opt-in provisions of FoFA. Opt in came back into the picture at the same time that the government’s FoFA regulations were disallowed, deliciously on the first day of the congress.
As of yesterday, it’s possible for a financial planning firm to switch licensees, establish a new licence or to buy another practice, and for the firm to retain all “benefits” from the acquisition – namely commission. In almost any other context, Professional Planner would be – and is – implacably opposed to the concept of financial planners receiving commission. It’s a corrosive and conflicted form of remuneration.
A number of people have been in Professional Planner’s ear about the grandfathering provisions, both for them and against them. Those opposed say it’s disgraceful that a book of clients can be sold and that the acquirer can continue to receive an annuity stream from those clients without having to provide them with ongoing service. Yes, OK; we get that. On the other hand, clients will be no worse off under the new ownership.
And in addition, a financial planning practice that exists on a stream of conflicted remuneration from a significant book of “dormant” clients is very much an old-fashioned model. On balance, if being unable to sell a book of clients is an impediment to such an advice practice exiting the profession, then it’s better that the impediment be removed and clients be transferred to a financial planner who might be more inclined and committed to servicing them appropriately.
With the latest FoFA changes, it almost looks as if common sense has returned to the debate – even if it turns out to be only temporary. Expect normal service to be resumed in the new year.
