Trust is sometimes a scarce commodity in the financial planning industry. Perhaps that’s why we talk about it a lot. We know that winning our clients’ trust is central to the success of our work and to the reputation of our aspiring profession. And yet the discipline of financial planning continues to suffer from a frustrating deficit of trust. This is reinforced by a strong perception in the community that the wider financial services industry, dominated as it is by powerful and well-connected financial institutions, is unwilling to genuinely reform itself for the benefit of society as a whole.
The trust deficit is not limited to financial planning. Arguably, it is symptomatic of a deeper malaise. Many ordinary people no longer trust in governments, and in our society’s public and private institutions to support them, and to deliver outcomes in their best interests, and in the best interests of their children. We even see this phenomenon in the lack of trust of traditional professions such as accounting and law (let alone in financial planning). And we observed it in the recent Australian federal election in which the electorate appeared to be saying “a pox on both your houses”.
I’m certainly not suggesting that any particular system of societal organisation is perfect, relying as they all do on the frailties of human beings. But I am suggesting that the neo-liberal, free-market model of capitalism that has dominated most of the democratic western world since the oil crisis of the 1970s, is not working well, at least in the view of the majority of ordinary citizens. Originally championed by Ronald Reagan in the US and Margaret Thatcher in the UK, it is now widely accepted that the excesses of neo-liberalism, particularly as expressed in the deregulated banking and finance sector, was a principal cause of the global financial crisis in 2008.
Paying for failure
We’re still paying for this abject systemic failure;or more to the point, the working and middle classes in the western democracies are still paying for it. Concurrently, the perception continues to grow that powerful elites, including those in the financial services industry, are accumulating wealth and influence to the detriment of the majority of their fellow citizens.
This attitude is not driven by the usual crowd of left wing commentators. On the contrary, most of its supporters are ordinary conservative citizens for whom populist politicians are filling a gap by telling them what they want to hear. In Australia, that includes calls for a Royal Commission into the banks and their shameful activities in the financial planning industry.
So how should we react to this failure? Doing nothing, or engaging in a bit of regulatory tweaking on the margins, is not enough. I would go so far as to argue that the neo-liberal free market ideology is gradually eroding the foundations and credibility of our western democracies. It is doing this by shifting power and wealth towards elites, including large financial institutions, which are increasingly influencing and even controlling the policies and decisions of governments, particularly governments of the centre right.
We see this process happening in the activities of lobbyists who appear to have unlimited financial resources to achieve compromises in reforming legislation (for example, the Future of Financial Advice) and to promote their clients’ commercial interests over the public interest that a true profession of financial planning is ethically bound to support.
Take the warning signs seriously
Consequently, many ordinary citizens feel that they don’t count; that they are being left behind financially; that they and their children are bereft of opportunity; that no one is listening to them; that the democratic process is irrelevant to the operation of government; and that the capitalist system is stacked against them. History tells us that we must take these warning signs seriously. We must talk about reforming our society’s neo-liberal policies and structures.
The conversation must include the role of government, the function and operation of the market mechanism and the desirability of using the tax system and other public policy options to achieve a more equitable distribution of income and wealth in society. It must also involve reform and greater transparency of political donations and lobbying activities.
As professional financial planners, why should we even care about these issues? It’s tempting to walk away on the basis that the discussion is a waste of time, too hard, too theoretical, too controversial and well beyond our limited spheres of influence. Why not limit ourselves to issues on which we can have some impact and get on with our lives as best we can? That would be an entirely logical position to take. However, to do so would be walking away from some fundamentally important questions that financial planners should think about and on which we should be prepared to express an opinion.
We are a privileged and well-educated group of people who have a duty to contribute to society to the best of our ability. As true professionals (which we claim to be), I submit that we have an ethical and social responsibility to be involved in this debate on behalf of our clients and the public interest. It is simply unacceptable for professional planners to be passive bystanders.
