Real and meaningful improvements in the quality of financial planning can only be driven from the ground up, and cannot imposed from the top down. About the most helpful thing that any institution or a licensee can do is just create a structure and a culture that allows financial planners to get on with the task of being professionals.
The responsibility that individual financial planners take for what they do, and how they do it, will have by far the greater impact on the quality of advice than almost anything a corporation can do; a financial planner’s professional responsibilities always outrank the interests of their employer.
The Parliamentary Joint Committee (PJC) inquiry into professional, ethical and education standards will help to underline this fact, if its recent recommendations are adopted. The PJC recommends that from January 1, 2019, only financial planners who are members of an “approved” professional association may appear on the ASIC register of financial planners; and only financial planners who are on the register can call themselves “financial planner” or “financial adviser”.
PSC to decide
The PJC recommends that the Professional Standards Councils (PSC) should determine what is and what is not an “approved” professional association. To gain approval, an association must have, among other things, a comprehensive and robust code of professional product – a list of bullet points on two sides of a sheet of paper won’t do.
And an “approved” association has to have a mechanism to monitor compliance with its code, and to act decisively and appropriately where the code has been breached. This includes expelling members, for particularly serious breaches.
This sets up an intriguing potential scenario.
The managers of licensees and institutions will need to tread carefully when it comes to terms of employment and remuneration incentives for financial planners. Anything that encourages or requires an individual financial planner to breach his or her professional obligations (whether implicitly, by turning a blind eye to dodgy practices; or explicitly through processes or practices) will jeopardise that individual’s livelihood, and will put the institution or licensee at risk, too.
Expelled from the association
That’s because if an individual breaches a professional code, they could be expelled from the professional association. That can happen now, of course, but while it might be a hassle, it’s not necessarily terminal – a planner can be booted out of an association and continue to practice as a planner. In future it might be far more damaging: they could be struck off the register of financial planners.
And if they’re not on the register, they can’t call themselves a financial planner.
Best of luck to any institution or licensee that finds itself trying to run a financial planning business with a bunch of employees or representatives who aren’t on the public register and who can’t call themselves financial planners.
The PJC recommendations create a second interesting scenario. Currently, an estimated 7000 or 8000 planners and advisers are not members of any association at all. If the PJC recommendations get up, they will need to join an approved association so they can be included on the adviser register.
Beyond some people
One potential problem is that if the only association to be approved by the PSC by January 1, 2019, is the Financial Planning Association (FPA), then getting onto the register may be beyond some of these people. Since June 2013, entry to the FPA has been contingent on holding a relevant university degree.
The FPA has affiliate and associate member categories, where entry requirements aren’t as stringent, but it may have to think about lowering standards to let new members in.
But to paraphrase what Lyndon B Johnson said of J Edgar Hoover: is it better to have them inside the tent than outside?
