A strong start: where the standards body should begin

Simon Hoyle


March 21, 2017

Vision without action is a daydream; action without vision is a nightmare – or so the saying goes. Whether the proposed standards body for financial planning avoids either fate will depend greatly on what it does in its first 100 days of existence.

The standards body has a significant volume of work to do, and a tight timetable. Many of the issues it will tackle are highly complex, and the expectations on the body to get it right are extremely high.

If the challenges facing the body could be summed up as volume, complexity and expectations, the demands on the industry for that initial period can likewise be summed up in three words: vision, governance and strategy.

Rather than rushing immediately to the to-do list of standards and deadlines, key participants in the process want the board of the body to take a more measured approach.

They want it to articulate a clear vision for the financial planning profession; establish robust and totally transparent governance structures, including how it makes appointments to board committees or working groups; and to set out a clear strategy for how it will hit the milestones and deadlines government sets. Only then should it start to tackle specifics.

“If relationships haven’t been built first, you never get through the detail well,” says Brad Fox, chief executive of the Association of Financial Advisers.

The standards body – first proposed in a December 2014 report by the Parliamentary Joint Committee on Corporations and Financial Services inquiry into proposals to lift the professional, ethical
and education standards in the financial services industry – is scheduled to come into being by mid-2017.

In her second reading speech in Parliament, on November 23 last year, the Minister for Revenue and Financial Services, Kelly O’Dwyer, provided the clearest indication yet of the government’s vision for the standards body.

It will be, O’Dwyer said, “the first important step on the road to professionalism” for financial planning.

“Under this proposed legislation, we will establish a standards body, as a Commonwealth company limited guarantee, to set education standards, professional year and continuing professional development requirements,” she said. “The body will also develop an exam and a comprehensive code of ethics for all financial advisers.”

O’Dwyer said the industry would have “a key role in the proposed model and will be consulted extensively as the body sets standards”.

“This is critical because industry must have a stake in the standards-making process if it is to be truly professional and to develop standards above the minimum,” she said.

In those few, short paragraphs, O’Dwyer set out the scale of the task facing the body, its board and any appointments the board makes. She made it clear that the standards the body sets must exceed the current minimum legal requirements; and even though the government will not have direct control over the body, she pledged to consult with industry.
Before it gets to that stage, however, the minister must appoint all nine directors to the board of the body, those appointments must be appropriate and acceptable to industry, and the body must have adequate resources – both financial and staff. These are big chores, but only if success is achieved can the body move on to fulfilling its objectives.

Matthew Rowe

Matthew Rowe, who in his time as chair of the Financial Planning Association was at the forefront of consultations with the PJC, says a starting point must be the board defining its strategic intent.

“What is the vision for this thing?” he says. “When I first became chair at the FPA we were having trouble with messaging and cut-through and people weren’t willing to follow us. A really important thing I have learned is you can’t be a leader unless you’ve got followers. If this body intends to be a leader and take a leadership position, it can’t tell people, it’s got to show them. They can’t lead unless they bring people with them.
“[They must] clearly articulate the vision for this organisation and map out what the purpose is – the values that they hold dear – and [be] completely transparent around these things, so that people can understand where they are wanting to go, and then come along with them.

“That’s the first piece of work that needs to be done, not the task list, not, ‘Here’s all the stuff I’ve got to get done. What filter are we going to put over every decision we make?’ For me, that would be what’s in the public interest, and then from there, where do we want this organisation and our professional community to be in 12 months, three years, five years. But let’s map out that journey.”

Rowe says there are myriad stakeholders who need to be brought along by the standards body, and it “needs to be Switzerland, politically”
to succeed.

“This is the conduit through which we can deliver peace in the industry over all the land grabs and turf wars that have been held,” he says.
“If any individual thinks they can get up and they think this can be their personal thing and they’re gong to be the saviour of our industry,
they are the wrong person. This needs to be more than people joining this thing just to put it on their resume. It needs to be about how you can bring as many people with you [as possible]. It’s also about making sure what this body does now stands the test of time.”

Rowe says, “At the end of 100 days, I’d like it to come forward with a clear strategy statement – vision, mission, values – and how it’s going to get there, the roadmap, and then be talking about how it’s gong to implement, operationalise and execute this.

“I’d like to have a clear understanding, and it should have a transparent process around appointments to working committees,” he says. “I am very, very concerned about this body being captured by any particular group or institution. There needs to be some really clear governance frameworks around committee appointments. In any organisation, if a board is going to be effective it has to have a great executive and a great team, but it also needs to have really good working committees. They are the workhorses to get things done.”

Brad Fox, outgoing AFA chief executive

Outgoing Association of Financial Advisers chief executive Brad Fox says the AFA views the standards body “essentially as a start-up”, with the
same challenges that any start-up faces.

“We’ll all want to see early momentum and traction with stakeholders, but we need to see that it’s nimble and agile, if it’s going to achieve the sorts of progress we need to hit the milestones that we’ve all accepted from the government to date,” he says. “It needs to be less of a bureaucracy and have more entrepreneurial energy in how
it goes about it. And these first 100 days will be critical. If we take the assumption that the board is in place and the executive team – the doers – have been recruited, then there’s still this critical path of team forming, storming, norming and performing.”

Fox says the board’s first task should be to set “a vision, a mission and parameters for success, whilst always keeping an eye on the prize, which is the establishment of a recognised and widely valued profession”.

“This is a really big part because until there is cohesiveness on what they are trying to do and the respectful environment in which to do it, they can’t convey anything to the employee team, the executive team, to put into motion,” he says. “They need that part. And as they are going through that very early stage, at the same time as they are recruiting and putting people into place, they need to be ensuring they have deep and collaborative stakeholder engagement and consultation processes.”

Fox says that will hinge on how well the board can articulate its vision and mission to all relevant stakeholders to win buy-in. He says the industry and its various bodies and associations have never been in a better position to collaborate effectively, and the standards body should capitalise on that.

“One of the very good things the last 12 months has given us around professional standards is that the AFA and a bunch of other bodies have got very good at working together in this group called the Consensus Group,” he says.

“We need that energy and good intent to transfer across so everyone is on board and contributing and rowing in the same direction, to support this start-up board quickly.”

Fox says stakeholder engagement is critical at the outset so the board of the standards body quickly wins the support and confidence of the industry is it meant to lead. He says confidence must be established in the people leading the board, and the process for setting new standards.
He says plunging immediately into the doing would not be an effective way to get the body up and running.

“If I look at what I’d like to see by day 100, I would want them to have got through this early stage to the point of being able to deliver a clear and transparent business plan that has clear milestone targets that are in line with the key dates that have already been supported by the AFA and other associations,” he says. “We need that clear business plan at the end of 100 days. We need that strong stakeholder two-way engagement, we need confidence in the people and the processes they are implementing and – this is the real wish-list one – we want to see the beginning of momentum of gaining public support for the direction that all of this is taking.”

We want to see the beginning of the public support for the direction this is all taking.

Mark Brimble, chair of the FPEC

Professor Mark Brimble, head of finance and financial planning at Griffith University and a chair of the Financial Planning Education Council (FPEC), says it could be a disaster for the standards body to succumb to tight deadlines without doing the groundwork first.

Even so, Brimble says the sheer volume of detail that the body must sift through and make decisions on – even on the proposed education standards alone – means starting the job cannot be put off for too long.

“When you look at each of those components of work – the exam, the educational framework, the professional year, the code of ethics, continuing professional development – each of them are very significant projects, bodies of work, in and of themselves and the legislation sets up a very high-level framework and not a lot of detail,” he says. “One of the first pieces of work would be to put a plan in place for how are they going to tackle each of these, logically, given the resource envelope they’ve got.

“Overall, it’s coming to terms with how are they going to operationalise this legislation, when the legislation doesn’t have a lot of detail? Let’s set up a working group around each of these areas and flesh it out, as a SWOT analysis, moving forward: what are the risks? What do we have to do to progress it? What are the key questions we’ve got to ask? What are the unknowns? What are the potential ways we can operationalise it?”

The standards body’s order of priorities has already been determined by the deadlines set for each component of the standards – and starting on January 1, 2019, new entrants to the industry will have to have completed an “approved” degree, sit the exam, start a professional year and sign up to a code of ethics. Different deadlines apply to existing financial planners, but by January 1, 2024, all standards will apply to all planners.

Brimble says the time it will take to for the body to do its work should not be underestimated. He says it took the FPEC eight months to create a national curriculum for financial planning bachelor’s degrees, and then a few more months of consultation and feedback, before reaching the final product.
“That was a narrower universe because it was dealing with the FPA’s patch, if you like,” Brimble says. “This is much broader. How long will it take to build that? How long will it take to get to a consensus position on what a financial planner should know?”

The curriculum developed by the FPEC is already in use at 17 accredited institutions – chiefly universities – with as many as nine more currently going through the accreditation process.

Dante de Gori, FPA chief executive

The chief executive of the FPA, Dante de Gori, says the board must “provide clarity to both new and existing financial planners about their studies”.

The reality is, if [the board] is not set up until July 1, 2017, and spends the next six months developing a curriculum and approving providers, people won’t be able to enrol in those degrees until 2017 or 2018, and they will then need to complete them by 2019 if they are going to come into the profession,” he says.

“The first order of business for them is to review the FPEC curriculum, and approved providers, and say, ‘If you’re in one of these degrees approved by FPEC, we will accept them.’ Even though they may go through a process of redoing the curriculum and approving providers going forward, they have to be able to say to everybody in financial planning degrees now that they are not wasting their time, and they will be accepted.”

De Gori says the industry is already “going to have a shortage of planners who are going to sign up from 2019 because they don’t have an approved degree”.

“So then to say to someone who’s doing a financial planning degree today that it’s not approved and you have to do another one, that’s going to be diabolical,” he says. “I don’t expect them to be like that, but I think their first order of business is to recognise the FPEC has an approved curriculum, and has an approved degree list, [and] for the purposes of continuity, we will accept that anybody enrolled in those degrees is approved by the standards body automatically, and we will review that as an ongoing process. That’s the first thing they’ve got to do.”

De Gori says that as a follow-on from that, the standards body must quickly make it clear to existing financial planners which degrees in related fields will be acceptable, which planners will need to upgrade their qualifications to an appropriate degree or “degree-equivalent”,
and the approved pathways for doing that.

“They need to hit the ground running on providing certainty for industry that for those people who are doing study right now, you’re not wasting your time – keep going, we’re going to accept it,” he says. “And for those people who have degrees in related fields, we’re going to accept them. Everybody else, OK, you’ve got to do something, but you’ve got until 2024 and we’ll let you know what it is.”

Sally Loane, FSC chief executive

The chief executive of the Financial Services Council, Sally Loane, says the standards body has “an ambitious timeline to set the new professional standards framework and ensure advisers are compliant with it”.

“A key function of the new body will be to set the standards,” Loane says. “This includes identifying which courses and degrees will qualify, as well as setting exam and code of ethics requirements.

“This will require extensive consultation and engagement with industry and relevant stakeholders to enable the standard board to set the new requirements.”

Loane says the most pressing issues relate to the education requirements
for new financial advisers entering the industry after January 1, 2019.
“This requires the standards board to identify and set the degree, exam and professional year requirements,” she says. “While 2019 feels like it is quite some time away, these requirements must be finalised as soon as possible to ensure that new practitioners can undertake the relevant courses and exam to join the advice profession from January 1, 2019.

“Within the first 100 days of the new body, it will be critical for it to engage with stakeholders and establish consultation processes for the degree, exam and professional year requirements.”

Loane says it is an exciting time for financial advice as it moves towards becoming a profession.

“However, there is a great deal of work to be done between now and the commencement of the new professional standards framework,” she says. “We are keen to ensure the standards board is a lean, efficient and streamlined body, fit for purpose to deliver the next generation of professional financial planners.”
She says raising professional standards of financial advisers will “transform advice into a profession, along the same lines as accounting and the law”.

“Its new status will attract some of the best and brightest Australian students into the new profession,” she says. “Ultimately, this will
be very positive for Australian consumers.”

TOPICS:   Association of Financial Advisers,  Brad Fox,  Dante De Gori,  Financial Planning Association,  Financial Planning Education Council (FPEC),  Financial Services Council,  Griffith University,  independent standards body,  Mark Brimble,  Matthew Rowe,  Sally Loane

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