An insider’s view of association reform and the regulation puzzle

Simon Hoyle

By

August 23, 2017

 

In the late 1980s, the Australian Securities Commission (ASC) was in the throes of transitioning to the body that financial planners know and love today as the Australian Securities and Investments Commission (ASIC). Not long after, as new financial services legislation began to bite, the focus of financial planning regulation shifted from the prevailing approach of licensing individuals to the new idea of the Australian financial services licensees (AFSLs), to be overseen by ASIC.

Against this backdrop, Corinna Dieters landed a job in financial planning, joining the group that had recently been formed by the merger of Stenhouse Investment Services and Financial Focus. Initially hired as a graphic designer to produce the group’s marketing materials, Dieters quickly realised that the changing fin ancial planning landscape would require some careful consideration of how to communicate the coming changes to clients.

 ‘Does anyone have a grip on this?’

“We needed to work through how best to manage the new responsibilities,” Dieters says. “I sidestepped into a compliance role, which sounds really strange but it was more that I found information that was being published and I thought, don’t quite know if anybody’s got a grip on this.”

And so began a career that has included stints on the board and as chair of the Financial Planning Association (FPA) and as a director and chair of the global Financial Planning Standards Board (FPSB), which licenses the use of the Certified Financial Planner designation in all territories outside the US. Dieters was also the founding chair of the FPA’s charitable foundation, Future2. And today she is a director of Seaview Consulting, a firm that specialises in business valuation and succession planning.

Dieters’ transition from industry participant to industry representative, first as a director and then as chair of the FPA, came about through involvement in the association’s Victorian chapter.

“I’d spent quite a few years doing various things with the Victorian chapter and it was Peter [Dunn] who said, well, why don’t you try nominating for the board?” she says. “He had also been involved at the board level. That’s not something I’d actually thought about. But I did come through in the 2002 elections and at that stage it was through the licensee space – we had a licensee representative – not as a practitioner.”

Dieters could not today line up a tilt at the board, after an April 2011 extraordinary general meeting of FPA members voted 94 per cent in favour of restructuring the association to allow only practitioner members to vote and to serve as directors. Restructuring the organisation to set it up as a professional association was on the agenda even during Dieters’ tenure, and while the FPA chair and CEO at the time – Matthew Rowe and Mark Rantall, respectively – ultimately carried the day, Dieters and her successor as chair, Julie Berry, and Rantall’s predecessor as CEO, Jo-Anne Bloch, had done plenty of groundwork

Licensees and the FPA board

“We used to get the criticism a lot from members that the FPA was being dictated to by the licensees,” Dieters says.

 “If you’re involved in any board, you know that’s not the case when people come to sit at the table, but it was a mindset that was there from our own members.”

She says the only way to address the perception effectively was to tackle it head-on and remove licensees from the board and from setting FPA policy.

“And the licensees, I remember from the time I was on the board, were quite happy to step off the board,” she says.

“It wasn’t them that were creating the blocks. It was all really about timing and doing things in the right order and not necessarily rushing into things without clarity around what does this mean for our members, how do we keep that relationship then with licensees if they’re not in the tent?”

She says that because licensees are so intricately involved in providing oversight and direction to financial planners, removing them from direct involvement with the professional community meant other ways had to be found to maintain the relationship with the professional community, so matters such as association-mandated professional standards and a code of ethics could be effectively implemented.

“It was a very complicated discussion, and when [the FPA] made the transition to member-only, they kept everybody onside,” she says.

The restructuring was formulated as part of a broader conversation about how to restore trust in financial planning generally, at a time when product collapses like Westpoint, and ASIC’s financial planning shadow-shopping exercises were painting financial planners in a poor light.

“A lot of it was conversations that some members didn’t want to have, some licensees didn’t want to have and some managers didn’t want to have, about things like remuneration structures, the role of commission in the advice process, talking about conflicts of interest, channel conflict,” she says.

“All of those sorts of things no one had talked about in open forums before. Trying then to say what our policy was going to be and what we expected of financial planners, those were conversations that started then and led to changes in some of our policies at the time.”

The global perspective

She says financial planners were taking a lot of heat at the time for failures that were really not their responsibility. As financial planning began the long process of soul-searching and self-improvement, she gained an insight into the state of the Australian industry from a global perspective through a stint serving on the FPSB.

She says that Australia had long thought of itself as a remote outpost of financial planning and that best practice existed elsewhere.

“It wasn’t until you were sitting in that global community that you realised Australia was leading the way, particularly around those issues like commissions and practice standards,” she says.

“Our requirements were higher than a lot of countries’. But it also showed that the development of financial planning in other countries would take on a completely different look and feel, depending on the structure of the regulation in that country.”

Dieters says that despite some local perceptions, Australian regulators were quite supportive of financial planning. She says it was reassuring to leave FPSB meetings with confirmation that the industry in Australia was heading in the right direction and that despite the disruption it had experienced it was in good shape.

“You only have to look to America to see they’re only just having some of these discussions now,” she says.

“We assumed, I think at that time, that they must have been leading the way, because it was America. We were having those conversations around commissions and transparency and fiduciary responsibilities and that’s all now quite well accepted as the way you should be doing it. But as I say, America is just having that conversation now.”

As Australia leads the way in developing financial planning as a genuine profession, Dieters says it is beginning to attract high-calibre recruits who are committed to the right way of doing things, particularly through financial planning content offered by a growing number of universities.

“They come into financial planning now with a view that the way things are, in terms of client-first principles, having to document advice, professional standards, that’s the norm,” she says.

“They don’t think twice about that. To them, it would not be any other way.

“Practices that have embraced bringing young people in, are working more towards that corporate model, who are growing their businesses, I think those ones are in a good place. They are building value for themselves and they are building a model that’s not dependent on them, either.”

But it continues to be tough both for sole-practitioner firms and an older cohort who are approaching retirement and who may be prompted to leave earlier than planned.

“Sadly, I think regulation is driving some of that change,” Dieters says.

“And [sole practitioners] are really challenged by change. It just gets to a point where it’s too much for them to cope with, whether it’s education or legislation, practice standards, all of these things just become a pile of additional things they need to do, when all they really wanted to do was deal with clients.”

Regulatory complexity is, in part, caused by trying to fit the round peg of advice into the square hole of product regulation. Given a clean sheet of paper and the view of advice as a service rather than an extension of product distribution, Dieters says regulation could look quite different.

“Advice has been kind of fitted into product legislation. That’s not how financial planners see themselves,” she says.

“Advice may not even involve product, but we still have to be subject to the legislation and fit within the financial product advice requirements. Looking back, if you could have started with a clean sheet of paper you’d have come up with a different way of dealing with advice.”

 A material and long-lasting difference

Even so, financial planning remains unbeatable as a service that can make a material and long-lasting difference to the lives of its clients. That was what initially attracted Dieters to the industry and she says it remains its greatest strength today.

“I was taken by how much opportunity there was to do things to help clients, to make a difference, and it really did strike me that financial planning was something that every individual could benefit from,” she says.

But financial planning isn’t only about helping the individual – a hallmark of any profession is its ability and willingness to give back to the communities that sustain and nourish it. The Future2 Foundation, created during Dieter’s last year as chair of the FPA, fits that bill for financial planners.

“It was an idea that was brought to me by David Haintz,” she says. “It really was about financial planners identifying, within their communities, projects that they wanted to support and helping those who through no fault of their own found themselves in a position where they were not able to achieve the same things as we were.”

She gives plenty of credit for the development of Future2 to all FPA members who have served as trustees of the foundation, and in particular former FPA and FPSB chair, ex-executive director of financial planning at AMP and current chair of Affinia Financial advisers, Steve Helmich.

“Steve, when he took over as chair of Future2, did phenomenal work on that, and I really credit him for a lot of the success that Future2 has had,” Dieters says.

“Bringing it back again within the FPA context, now it’s really seen to be the way financial planners support people within their community, in a really strong way. It’s a credit to financial planners to be able to do what they’ve done.”



Simon Hoyle

About The Author /

Simon Hoyle has been a finance journalist for 30 years – a finance journalist because the football and motorsports rounds at The Age were filled when he was awarded a cadetship in 1986. He worked on BRW and Personal Investment magazines, and was part of the team that launched Money Management. Hoyle spent 11 years at the Australian Financial Review before moving on to be an investment writer for The Sydney Morning Herald and The Australian. He was appointed editor of Professional Planner in November 2007. In March 2017, he stepped away from the reins of Professional Planner to assume an editor-at-large position with Conexus Financial, and now writes for Professional Planner, Investment Magazine, and Top1000funds.com