Speaking at the IFAAA symposium in Sydney on Friday, Louise Macaulay, the corporate regulator’s senior executive leader, financial advisers, said the advice sector required business model reform.
“I think the industry is a long way from being professional,” she said.
“I don’t think the structure is in place to encourage the industry to become a profession and hopefully that’s something we will see coming out of the current treasury working group.”
Yet even if changes are implemented, a shift towards professionalism may still be years in the making, she suggested.
“I think that will take a while to occur and then the flow-on effect to change the culture within organisations in the industry would almost be a generational thing,” Ms Macaulay said.
Changing cultural norms would be the key to re-building confidence in the sector, she said.
“I cannot use the word ‘culture’ too much when I talk about the way the industry can try and grow and engender the trust which has gone missing,” she said.
Addressing the same function, consumer advocate Jenni Mack – a former director of Choice and FOS board member – concurred that efforts to drive professionalism without structural change are doomed.
“I think business models really matter,” Ms Mack said.
“If you’re running an in-house platform, your incentives and your drivers are to put people on that platform.
“Professionals have a fiduciary duty to the client and where’s there’s conflict, that interferes with your capacity. It’s not a question of managing them; it’s a question of getting rid of those conflicts.”
What needs to change is the culture at ASIC.
Storm Financial – they knew exactly what was going on well before it all blew up. Had no problem with what was going on at all.
CBA – had whistle-blowers telling them exactly what was going on and did nothing – for 18 months – then the media got hold of the story.
choice lost all credibility long ago when they started taking commissions. aka clipping the ticket.
I’m not interested in what these individuals have to say.
Hi Patrick, thanks for the reply.
You have explained it well and I cannot disagree, that a financial adviser can meet legal and ethical requirements without the business model being relevant. You have explained that better than anyone else I have heard in this debate.
But that doesn’t help us get to the objective, if the objective is to be viewed as more trustworthy by the public.
On the trustworthy scale of 1-10, financial planning is rating around a 2, maybe 3 at best.
To get to 7-9 range we need to show the public that we are doing everything we can to eliminate reasons why things could go pear shaped.
In theory you’re 100% correct. In practice, people outside our little bubble here can’t see how good our people are; they have turned their backs and aren’t going to give us another chance until something changes, until we change.
The big elephant in the room is CONFLICTED ASSOCIATION/CONFLICTED AFFILIATION.
Qualified and registered doctors prescribe pharmaceutical products they favour, but they are not licensed to practice medicine through these pharmaceutical companies. Indeed, lawyers, doctors and accountants work for corporate institutions with various business models, yet when they leave these institutions or business models they retain their status, their license to practice and are able to earn a living helping Australians without being employed by other corporate institutions. This is not the case with qualified and certified financial advisers.
Hi Matthew
I didn’t respond because anti VI doesn’t know what ‘to trump’ means.
Different (legal) business models introduce different potential conflicts for sure. But insofar as they are different to your preferred model does not necessarily mean that they should be abandoned, no matter how passionately you wail to the wind.
I believe Neil was actually saying that at an individual level, a financial adviser can/should/will be able to meet their legal and ethical requirements to putting a client’s interest first and that the business model is irrelevant (not inferior) in doing this.
That you, and other commentators with either outdated or no practical experience in financial advising cannot perceive how this is achieved…well it’s not my mission to solve this for you.
God give me strength, ASIC is without shame. These are the same people who told the Senate in June 2013 that they had done a great job at CBA. This was such an absurd claim in the face of the known facts, it provoked the Senate Inquiry that showed how just little ASIC actually knows. Now that their incompetence has been exposed, instead of dying of shame as they ought decently to do, they’ve gone into blame shifting overdrive. They seem oblivious to the fact that as the regulator they are responsible for the state of the industry, it is as if it is nothing to do with them. Just back from testifying to the Senate in Melbourne about yet another disaster on ASIC’s watch: Timbercorp. Now it would be hard to absolve the Planners who took the commission and put their unsuspecting clients into this but there was a dodgy product provider involved as well. Their fraudulent but technically compliant documents were signed off by ASIC. The first thing we need is a new regulator.
I was at this symposium last Friday.
Heard people like Jenni Mack and Robert MC Brown from the ADF say that business models really do matter.
Instantly made me angry. It’s that obvious. Yet the Chairman of the FPA says the opposite – that business models don’t matter.
Anti V-I provided one reference for you Patrick. Can you provide a response? Just one.
Oh, and this isn’t about bad apples. It’s about bad apple trees. Lots of great apples stuck in bad apples trees. That’s my belief.
Steve A is correct. Sadly the product providers, in the eyes of ASIC, are not at fault.
See if you can find ANY mention of product providers contributing in the smallest way to the issues raised in the ASIC report on life risk advice
Not a scintilla. Zilch !! Yet insurers, and their controlled licencees contribute incentives to churning ! CBA owned Comminsure !
ASIC and insurers are just too close, too cosy !!They have a common enemy and its us. How close is yet to be seen, but insurers would love not to have to pay commissions, but in the past the hard heads knew they needed advisers.
Steve A you hit the nail on the head mate, well done.
Simple – stop the product providers from also providing advice and problem solved.
The constant sniping and undermining from our regulator is deplorable. Our profession is not perfect, but there are a great deal of positives. For instance, we provide our clients with a professional document outlining our advice, the pros and cons, the steps involved etc. etc. (I have never had a doctor, solicitor or accountant provide me with such a document) As a result, we are far more accountable when things go wrong. There is a clear paper trail. There is also a free process for making complaints without needing legal advice or going to court. For all of the problems we have seen with the CBA, Storm et al, there has been a great deal of compensation paid out to clients as a direct result of our professional processes. If you receive dodgy advice from a doctor, lawyer or accountant then good luck. It’s your word against theirs & squillions in legal fees!
Oh Wait, but surely an expensive and lengthy multiple choice exam and course from the FPA fixes everything? Dont you understand that once you have paid the FPA for a pointless course everything is just dandy.
[quote name=”Philip Carman”]Until advisers cease the “you can’t tell us…” type responses and understand that they (we) need to “weed out” the bad guys amongst our ranks, then we’ll remain regarded by all and sundry as having an unprofessional culture. criticism and ultimately failure.[/quote]
No doubt parts of the sale culture have to go but that is ASIC and the regulator to sort out
ASIC taring us all as unprofessional is ridiculous, Many parts of the industry just do the best for their clients.
Its simple human nature for most of us.
I dont need a Government organisation or Quasi educator / peak body telling me how to do my job or that i’m not qualified, unprofessional etc etc.
It’s insulting and therefore i have little respect for either. You treat me with respect and i will give you the same professional courtesy.
More BS from some ASIC executive that I have never heard of, I suppose she is on some ridiculous salary to throw stones at Advisers.
ASIC needs to get their own house in order before they start making suggestions about anything.
Royal Commission into ASIC and make these clowns responsible for their incompetence
To take the Bart Simpson reference further, getting comments on integrity from Choice is like getting comments on this topic from the fake principal Skinner. Choice receives payments from manufactors regularly and ASIC concentrates on financial planning and allows other industries to get away with just about anything. At least you know what they will say as your speaker at an event
Until advisers cease the “you can’t tell us…” type responses and understand that they (we) need to “weed out” the bad guys amongst our ranks, then we’ll remain regarded by all and sundry as having an unprofessional culture. That’s not to say there aren’t good advisers – there are many more now than 10 years ago – but the culture certainly needs changing. And any business model that contains and then ignores conflicts of interest is doomed to criticism and ultimately failure.
It is about individual behaviour, not about distractions about licensing. Business models dont matter; licensees dont matter.
– Neil kendall, fpa chair, on this website justa few weeks ago
Anti VI – one reference please to support your contention that the FPA says education trumps business models. Just one. Thanks.
You know it would be interesting if ASIC actually talked to clients about the service clients received, particularly at claim. When ASIC talks “professionalism “its code for no commission
ASIC have an ideological bent on commissions. They have found themselves in step with the ISN lot, who want to ban retail commissions while accepting commissions from insurers at the wholesale level for every member who takes insurance. The ISN want to attack/slow up advisers because it may stop the outflow of funds to SMSFs and other fund managers, driven by “advisers “, but more particularly by accountants..
Its a strategy by ISN to maintain market share under the guise of consumerism
I think the lawyers at asic make a good point for once. Too much heads in the sand stuff from the likes of the fpa, saying education trumps business models. good to see asic sees a difference – speaking to an audience of indpendnets too!
A case of ASIC justifying their existence for the next decade or two. Rather than call us all non-professionals, how about they do their jobs and weed out the unprofessional planners – this will then allow consumers’ perceptions of a professional “culture” to flourish much more easily.
Asic talking about professionalism is like Bart Simpson lecturing kids on how to behave. haha
Could not agree more!