The government’s consultation paper on lifting the professional, ethical and education standards in the financial services industry, issued today, notes that adopting the recommendations of the Parliamentary Joint Committee (PJC) report would “represent a substantial change to the current regulatory environment for financial advisers”.
Further, the proposed PJC model would “apply equally to advisers working in different sized firms and under different licensee structures”, it says.
Both of these things are true, and are absolutely critical to effective future regulation of the financial planning industry.
To the extent that a new regime should also create the conditions for a financial planning profession to flourish, the professional, ethical and education standards contemplated by the PJC simply must apply to planners employed within major banks as much as they apply to the planner in the small, suburban, own-AFSL firm; and to the authorised representatives of every kind of licensee in between those two extremes.
Professionalism is above all else a serious individual commitment. Responsibility for setting professional standards has to reside within the profession itself. Enforcement has to be carried out by professionals themselves. Being sanctioned by one’s peers should be a source of significant shame; being ousted from the profession should mean the end of one’s career.
Licensee structures where individual planners, with their personal professional responsibilities, can influence the shape and form of the services they deliver to clients, will be central to the development of a trusted profession. Institutionally-owned licensees must instil professional values in the financial planners they authorise; and they must allow those planners to fully discharge their professional responsibilities within the structures in which they work.
On several fronts in recent months that kind of structure has been shown to be absent. The emphasis in creating higher standards has to shift from the institutional or licensee level to the individual level, and the PJC proposals have the potential to achieve that.
The government portrays the PJC recommendations as a jigsaw. That’s an apt representation – the piece of this regulatory puzzle interlock, overlap in some places, and only form a coherent whole when viewed in their entirety.
There are six pieces in the puzzle: education and training standards of financial advisers; the structure and role of a standard-setting body; ongoing professional development requirements; registration of advisers; the national adviser exam; and professional and ethical standards.
How the various vested interests in the industry respond to the proposals and to the questions raised in the consultation paper will speak volumes about their actual commitment to nurturing a financial planning profession. Or it will reveal their public pronouncements to have been just so much lip service. And if that’s what it turns out to be, their advisers should simply be excluded from any profession that may emerge.
