If something looks too good to be true, or so the saying goes, then it’s probably not true. It’s a principal that shapes the response to much of what lobs into the Professional Planner inbox.
Then again, we’re told never to look a gift horse in the mouth. But we all remember the story of the Trojan horse.
What, then, to make of the ABA’s submission to Treasury on the Parliamentary Joint Committee (PJC) inquiry into proposals to lift the professional, ethical and education standards in the financial services (that is to say, financial planning) industry?
Last week the ABA submission slid into the Professional Planner inbox, accompanied by a media release carrying the headline “Banks support lifting education, ethical and professional standards for financial advisers”. The release says, in part, that the ABA supports:
- New minimum entry qualifications for financial advisers, namely a degree or degree equivalent;
- A new mandatory exam, which an adviser must pass before they can be included on the Australian Securities and Investments Commission’s financial advisers register;
- A new professional year requirement for new financial advisers, similar to other professions;
- An enhanced continuing professional development (CPD) requirements, including mandatory elements of ethics and responsible decision-making learning; and
- A new mandatory requirement to be a member of a recognised professional association and adhere to that association’s code of conduct.
The ABA’s position looks too good to be true. In 19 pages, its submission sets out in detail its rationale for backing higher standards, and what those standards should look like. It reflects quite closely the recommendations of the PJC report itself, and even gives the impression it recognises that creating a financial planning profession will have long-term implications for the banks.
The ABA is effectively saying its members – who, remember, are largely responsible for getting us into this mess to begin with – are committed to creating a free-thinking, free-acting profession, whose members will be required to put the public interest before all else. This will inevitably put some financial planners in direct conflict with the desires and demands of their licensees – this is not a situation unique to the banks, of course – and the ABA’s members are doing this knowingly and willingly.
Great, if that’s actually true.
Gift horse, or Trojan horse?
Should we avoid looking this gift horse in the mouth for fear of discovering it’s not actually all it’s cracked up to be? Or is the ABA creating a Trojan horse to enable banks to control professional standards for financial planners? It wants a central role for its members in establishing and funding a standards-setting body, which it says must be independent. This is where things start to get a bit complicated.
The PJC proposed a body to set and enforce standards, which it called the Financial Professionals Education Council (FPEC); the ABA proposes something it calls the Independent Council.
The PJC said that an association could only have representation on FPEC if it were an association approved by the Professional Standards Councils. PSC approval is contingent on the members of an approved association being part of a limited liability scheme.
But the ABA opposes the establishment of such a scheme for financial planning – presumably, banks can’t be seen to support anything that limits the amount of compensation payable to clients ripped off by shonky advisers.
What can’t currently happen is PSC approval without a limited liability scheme also coming into play. The ABA knows this. So it suggests that some other association-approval process will have to be developed.
It has floated the idea that the same criteria that the PSC uses to approve an association could still be applied, but separately from a limited liability scheme. That could only happen if the PSC were some how separated from its own regulatory agency, the Professional Services Authority.
Never heard of the PSA? You might start to hear more about it in coming weeks.
