Appearing before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry today, FPA chief executive Dante De Gori and AFA chief executive Philip Kewin were separately interrogated, with a focus on member disciplinary procedures.
During cross-examination, counsel assisting Rowena Orr QC asked both CEOs whether their very make-up and mission statement may be conflicted.
“How can an organisation that is seeking to make itself attractive to potential members in comparison with other industry bodies, also at the same time as seeking to make itself attractive to regulate the conduct of those members?” Ms Orr asked Mr Kewin.
“Isn’t there an inherent conflict in those two propositions?”
Mr Kewin responded that he “didn’t think” there was an inherent conflict, but went on to acknowledge there was a “tension” between the functions of promoting and regulating financial advisers.
Ms Orr put a similar proposition to Mr De Gori.
“The two things are difficult to reconcile, is what I’m putting to you, “she said. “On the one hand you’re wanting to promote financial advisers, nd I’m putting to you that it’s difficult to do that at the same time as imposing disciplinary sanctions on financial advisers for misconduct.”
The FPA chief executive rejected the proposition, saying the FPA has a “dual purpose” and that the two missions are “equally important”.
He conceded however that the dual purpose is a “challenge” for the association in practice.
The two CEOs also differed in their response to questioning about the current status of the financial advice industry.
“Do you see financial advisers as being part of a profession or part of an emerging profession?,” Ms Orr asked both chief executives separately.
When pressed, Mr De Gori confirmed that he thought the latter, that the industry is an “emerging profession” and that it is not yet equal to professions such as law and medicine that have “been around for centuries”.
By contrast Mr Kewin indicated that the industry is currently a profession, on par with doctors and lawyers. He said that the “majority” of advisers are professionals and the “majority” of clients would see them that way.
Compliance consultant Brett Walker tweeted that the testimony may cause problems for the associations in their bids to become code monitoring bodies under the FASEA regime.
ifa has previously criticised the “dual purpose” of the two associations in two editorials:
https://www.ifa.com.au/editorial/17641-a-cautionary-tale
https://www.ifa.com.au/editorial/17334-hunted-becomes-the-hunter
The royal commission financial advice hearings continue live: https://www.ifa.com.au/strategy/25404-royal-commission-financial-advice-hearings-live-blog
afa and fpa cohorts who were the trowbridge horse that introduced LIF all the managemnet members now have Board positions on Fasea and Tribecca doesn’t that tell you something all these advisers of the year is a joke and jobs for the boys and girls and then sell us out and get the good jobs thanks for nothing and that’s why I refuse and have for 3 years to pay these idiots a cent I will not be a member of there associations.
While disheartened with FPA for years now, and no surprises the banks who are commercial businesses have conflicts of interests, [b]the truly shocking aspect of this RC was the utter lack of questioning or investigation of the ISA funds![/b] How can the RC even be considered moderately unbiased, when it absolutely crucified all aspects of planning and advice provision in our world, and yet for such a huge area of wealth advice be ignored? Especially when acknowledged conflicts with First State were initially mentioned. Orr & Co, you’re as much as a problematic conflicted and biased joke as the ASIC clown Kell, who you never truly pressured on major issues that went against the planner vilification agenda. [b]Shame on you and to your family name.[/b]
The FPA is a pathetic excuse of an industry body. They would do and say anything if you sponsored their gigs with enough money. Starting out with part time staff and just grew and grew to what they are today by cashing as much money as they could grab whether it be by sponsors, membership fees or of course their overpriced diploma courses.
Hopefully this is the first nail in the FOA’s coffin. I don’t know a single smart planner who wants to be associated with the FPA. God knows why anyone would.
They forgot who they are representing over a decade ago. It’s a joke…..an absolute joke.
FPA was fully behind the Life insurance reforms. Banks / Insurers margins have been increased with the implementation of these reforms. When was the deal done to have bank planners paid up as FPA members by the insto’s?
it was like watching a re run of Dumb & Dumber, the FPA/AFA found time in the past to collaborate on FOFA/LIF/FASEA to screw their Adviser members, surely they could have agreed that we do have a Profession and like all others, their are some bad apples? Unfortunately it has taken a damaging Royal Commission to send a clear message to Advisers that these two organisations are in bed with the Instos and lending them your political capital is unwise…….
I am writing as a concerned member of the FPA! I have been in the industry for five years (which is by no means an extended period of time) however after my years studying Financial Planning at University, I take insult by the CEO of my industry body to consider the industry I love as being an ’emerging profession’. It is deeply troublesome that an association I am aligned to does no reflect the same beliefs of it’s members (but is rather there for self-interest).
I have, as others, joined the FPA in hopes that this body would represent us as we come up against issues in our profession. Which, since I have joined has not really happened. I find this deeply concerning that the CEO (either from the FPA or AFA) does not appear to have it’s advisers in their best interest.
As part of my message, would hope that other members approach their respective representatives and ask for further information regarding breakdown of revenue from (1) members; (2) professional partners; and (3) partnership with product providers. I would like to highlight this is without bundling fees as I know has been done previously. I only ask this as a means of total transparency; which does not appear to have happened as part of the commission.
you are dreaming. the FPA is not a professional body it is an industry body, financial planning is not a profession. so the CEO, of the FPA is [b]correctly[/b] characterizing financial planning as an “emerging profession”
[b]Professions[/b] have some fundamental characteristics such as:
a. based on specialized theoretical knowledge, i.e. not RG146, generally a minimum of a post graduate degree
b. articleship – i.e. white collar apprenticeship for a defined period, i.e. 3 years or longer
c. autonomy – control over and ultimate responsibility for their work, financial advisers work under an AFSL responsible managers authority
d. ethical constraints
I feel the same way. I’ve sent 20 plus emails over the last 2 years leading up to the RC to the FPA expressing the very same thing. They’ve told me to get stuffed on all occasions. They’ve even said if you don’t like it than just leave. They are no where near to being a professional association. There is no leadership. I suggest you continually remind them they are not professional.
Not a good day for the FPA. Media headlines are sceaming: “FPA accused of remaining silent to protect one of it’s own.” Dante indicated he’d appeared several times on Sam Henderson show..is this a case of unless.you scratch my back I’ll..not put you & the FPA on TV. Takes the FPA 12 months to decide whether advising someone to cash out a SASS fund prior to 58 and invest in the in-house product, you don’t need 12 months for that.. that’s smelly. Dante you’re fired…I wish.
Taken from the Sydney Morning Herald today as per the RC regarding Sam Henderson and the FPA’s investigation outcome with regard to his complaint “Under these proposed terms, Mr Henderson would be admonished for breaching the FPA code of practice, he would be required to pay outstanding fees he owed the FPA, and he would have to make various commitments on staff training, compliant practices, and the commissioning of independent reviews”. Does it surprise you one of the conditions was he pay his outstanding FPA fees? Speaks volumes for this organisation!
Paul is completely correct – the Associations have naught to do with regulation and are/could be only a lobbying body – and therefore, quite rightly recognised as self-interested. I refused to join FPA after I helped set it up in late 1980’s because from day one it wanted “sponsorship” from funds management companies for its conferences! We should not compare ourselves to doctors unless it’s to those who do cosmetic surgery and/or liposuction and breast augmentation. If only we financial advisers practiced the “first, do no harm” philosophy and did what we DO know about (suggesting what insurances are needed, how much and when to stop them – rather than selling the products; explaining estate planning; explaining super and saving for retirement rather than selling the products; almost anything BUT investing – about which most advisers know next to nothing) – we’d all be better off and so would our clients. all advisers should be licenced and accountable for their own actions. Scrap all vertical integration. mandate complete transparency at every step. We used to have Advisers Licences and Dealers Licences so consumers could tell who was selling and who was advising but the Howard govt was convinced (by Life Offices and Banks, I would suggest) to drop that in favour of AFSLs which give consumers no idea what’s going on. ASIC is NOT to blame; they are the police on the beat and with too few resources and the politically poisonous job of doing the impossible and taking all the blame for others’ wrong doing. Like the police they can’t stop criminals – they might catch some and succesfully prosecute a few, but most crime goes undetected until well after the fact and too late to fix or even compensate for…
I disagree but we’re on the same page somewhat. Why does someone join an association? 1) to be around like minded people 2) make new friends 3) a fancy title like CFP 4) because there employer pays for it or 5) they want to be represented 6) they genuinely want to prevent red tape and Government intervention. For me it was 5 and 6. I want to belong to a profession. You see 20 years ago financial planners were being compared to cowboys…20 years on and with the help of Sam Henderson we’re still being compared to coyboys. 20 years ago I didn’t want end my carer in the environment we’re now in so I joined the FPA. So I’ve been let down, I’m angry and upset with the FPA.
I am also a member of an industry association and I am happy with that because they tell me that’s all they are. However the FPA advertises they are “professional”….when clearly they are not.
My point is we need a professional association in the industry in an attempt to prevent Government regulation.
The difference is the Govt are scared of doing anything in regard to the AMA at anytime, simply because the AMA have such a ferocious, efficient and influential lobbying machine that the minute anything is raised, they go for the jugular, kill it off and then nothing more is heard.
In addition, because Medico’s are seen (rightly or wrongly) as entirely trustworthy professionals, the Govt don’t want to be seen attacking ” my very helpful and kind GP” , but they love taking a massive stick to every financial adviser in the country and beating them senseless for year after year because it’s an easy target and they are much further down the pecking order of loved occupations.
The AMA dosen’t get payments from drug companies. Hence they represent their members. Nor is your membership fee based on which drug company you work for. It’s a very simple thing voting members can do and that’s stop the FPA getting payments from the likes of CBA.ANZ etc. If the FPA was solely made up of members and not AMP, CBA then Treasury etc would take them seriously. Simply write to the FPA and tell them to get rid of the professional partner program.
Yes but GP’s do get incentives from drug companies and are pushed by said companies to push their drugs. But do we ever hear about that ??
It seems CPA Australia and CAANZ have not major issues with conflict of interest. Members being disciplined are being published. neither have them received payments from organisations without disclosing them. Remember that there are more than 260000 members when CPAA and CAANZ combined. For FPA and AFA to survive, they cant live on memberships fees given a small numbers they would have to rely on other sources such as the big banks. I would suggest existing members of FPA and AFA should consider membership of CPAA and CAANZ they are the real professionals when it comes to compliance and discipline of their members.
If I join CPAA or CAANZ does that mean I can get away with recommending my clients rollover their existing super to an SMSF which I will charge them to set up and administer on an ongoing basis? And I won’t have to document any of this? I bet Sam Henderson wishes he’d joined CPAA or CAANZ.
You can also recommend, and take commissions on failed agribusiness schemes and building schemes with no documentation.
hi guys, everyone knows that being a CPA or CA is more than financial planning. With that you could work any where in the world. Why? Simply put it people trust a CPA or CA.
hi guys, maybe it is time to join CPA Australia Advice.
The FPA , if you didn’t know ( You won’t get a vote either ) are now looking to set up a shop (tender to the government ) to do annual compliance file checks on all members from 2020 . Asked at the FPA road show last week who was going to pay ? they said the members at about $5,000 per member !!!! Also as far as no conflicts , I am a CBUS referal partner member of the FPA , but I have to have CBUS as an approved product on my APL before I can join the program. Why would I have to have them on the APL compulsorily , if i am paid to provide the best product for their members ??
Just a reminder the closing date for submissions to FASEA to determine how a code of conduct is enforced ceases on the 1st of June. If you want it to be the FPA and pay them $5,000 then do nothing.
They seem to have missed the point on conflicts of interest. Both of these organisations are inherently conflicted by being paid for by the instos and banks. Take the FSC and AFA/FPA collaboration on the crooked con job that was the LIF. In the “deal” the FSC and its members made more profit and the AFA and FPA got compulsory membership. The losers were the non aligned advisers and all customers.
De Gori’s description of the financial planning industry as an ’emerging profession’ is an embarrassment and very likely galling to the millions of people watching the proceedings in disbelief.
Financial planning has never been further from achieving the status of a “profession” than it is today.
How exactly is it an embarrassment?
Especially certain advisers who think they are professional fund managers or wish to be.
The real conflict is where the money comes from not the roles of attraction and enforcement. Using that stupid argument how exactly does the government deal with the conflict of raising revenue from traffic infringements while committing to reducing the road toll? Isn’t it in their best interests to encourage stupid behaviour for financial gain?
I was forced to join the AFA by my licensee. I hope the AFA gets exactly what it deserves for doing nothing for us advisers.
Apparently the head of AFA told the royal commission you joined because you wanted to belong to a professional association. Is that ethical.
worst money spent FPA most planners have to join to maintain CFP status all the rest is just noise and jobs for the boys
I’m wondering if Dante De Gori just mis-lead the Royal Commission? He was asked if $8 million came from members. However the FPA bundles up payments from firms like Commonwealth Financial Planning as members fees. This goes to the heart of the professional partners program and the question he was asked about if was possible for the FPA to be a disciplinary body. The AFA head was also asked to explain the growth in members fees. He said it was due to more advisers wanting to belong. He made no mention of the requirement of Commonwealth Financial Planning to be compulsory members of the AFA and the FPA.
The line of questioning was all about the effectiveness of these organization being a disciplinary body. You cannot be a disciplinary body if for example the CBA pays it’s members fees for them or you get payments from these firms directly.
It is ridiculous to have a Licensing regime and strictly prescribed compliance in Law and supposed oversight by ASIC etc and then have a voluntary association in on the act. The associations should not promote advice or allow themselves to be used as a badge of approval.In fact they should specifically disclaim such a role. They should confine themselves to the development and sharing of matters of interest between members and the representation of the members to legislators. Just exit completely from being open to being sheeps clothing for wolves.
How are the dual roles of the FPA and AFA any different to the same two roles of other professional associations such as Chartered Accountants A&NZ or AMA which promote the services of their members as well as disciplining any recalcitrant members.
what one is describing Paul is an industry association. The FPA dosen’t know whether it’s a professional association acting for the public or an industry association representing advisers and banks.