As part of the association’s campaign to separate product information from financial advice, the FPA last week unveiled a white paper outlining 10 initiatives designed to achieve this policy outcome and raise competency standards in the advice industry.
Reflecting on the rival lobby group’s white paper, the AIOFP – which represents chief executives of non-aligned dealer groups – has raised a number of concerns with the plan, which AIOFP chief executive Peter Johnston intends to take up with the federal government.
In an email communication to members, seen by ifa, Mr Johnston raised concerns in particular with the FPA’s suggestion that ASIC be given “suspension powers for financial planners/advisers suspected of material and systemic breaches of the best interest duty”.
“This is a blatant denial of natural justice where the initial damage caused by an ASIC investigation in the media causes irreparable damage to the practice and its reputation with consumers and the industry generally,” Mr Johnston wrote, adding that the proposal would give the regulator the power to “shoot and ask questions later”.
“If the adviser has the resources or energy to challenge the decision in the [Administrative Appeals Tribunal] their practice and reputation has been destroyed, even if they win they lose,” he added.
More broadly, Mr Johnston said the 10-point plan – which he described as the “imposition of measures to try and create a perfect market for advice” – was flawed since it did not take into consideration conflicts of interest and in-house product bias in “vertically integrated institutional models”.
“There is no mention of any measures being imposed for institutionally-aligned advisers to be transparent with consumers on the ownership or alignment of their practice and the likelihood of what will be influencing the advice,” Mr Johnston wrote.
“These groups masquerading as independents need to be exposed to inject some integrity back into the market’s image with consumers.”
The AIOFP is joining the Boutique Financial Planners association – members of which are all also members of the FPA – in calling for additional licensee parent company disclosure rules.
Click here to view the FPA’s ’10-point plan’.
Seriously Domenic? These cliche Linkedin profile promoting motherhood statements really annoy me! If advisers want to be Marters and load their life up with unnecessary courses, Memberships and ongoing education, then go for it. But don’t involve me or my business by making it mandatory without any input from me and recognition of my EXCEPTIONAL experience and track record. Next you will be saying speed cameras are not revenue raising when snapping families & drivers doing 4kmh over the limit. I dont care about a linkedin profile, i just want to do business efficiently and well without some nazi regime dictating their self promoting terms.
Angelique’s comments make a lot of sense, however we already have the tools available at out fingertips to eliminate all conflicts of interest. Advisors can chose to provide Independent Advice, as defined by section 923A of the Corporations Act, by simply refusing to accept any commissions or benefits that would reasonably be expected to influence their advice, provided their licensees agreed. My guess is that the lure of commissions, volume bonuses, and other “kickbacks” prevent many from making the break. However when you do make the break, there is a great sense of achievement in being able to call yourself a truly independent professional with absolutely no conflicts of interest.
Great comment Johno and sums up most advisers true feelings. No amount of ongoing education, study, industry memberships will make you a good adviser. No amount of courses or study will give you morals. You and I are measured by what we do and our business suffers or benefits by this. I will no be involved with the FPA forever more, they have hijacked my industry too often. The FOFA insult and backstabbing they did was ridiculous. If the FPA were anyway serious about cleaning up this industry they would of made 5 page SOA’s mandatory by now (as just 1 example of their lack of effort).I know how to invest my clients money, i know how to protect them with insuances, I KNOW FINANCIAL PLANNING! I dont need another course STEALING my time. Danny & Domenic, we have all had enough of the politically Correct “Linkedin” friendly buzz words saying how great this will be etc. Its not needed for experienced advisers with a 100% clean record. Leave me alone FPA to do business. Its a false flag.
Doing research in this space, I totally agree with Mr Johnson. Regulators and industry participants are focussed on how to reward or punish behaviours of financial advisers to eliminate or manage conflicts of interests. If the industry wants to eliminate conflicts of interests then it has to go to the root cause of the conflict. Change the root cause and the behaviour of advisers will follow from association and vertical integration and financial advisers will find it easier to behave in the best interests of clients
Spot on Gerry….first you have the “industry”, then you have he “industry body”, its a whole new cottage industry all by itself. Government’s like it because it means they can plausibly only talk to one entity, and not deal with many, and ex-pollies love it because it employs lots of them where they still get to be relevant. Over time, there will be lots of Committees and Guidelines developed until, finally, the quango gets the squirrel grip on those that actually work for a living by becoming their de-facto regulator and dispenser of accreditation certificates. Then they own you.
Why a 10 point plan…does 10 make it look sexier? Did the FPA board say “lets think of a 10 point plan” or did they come up with some ideas which just happened to add up to 10.
All the chiefs in this industry ever come up with is more codes of conduct, more regulations, more boundaries, more conformity….the advice industry is fast turning into a product itself, a very outdated one.
I see myself a a true professional, in every sense of the word. I also see my business as a truly professional business. My clients and those who my business associates with would all agree on both points. I don’t care if the industry is seen as professional or not. I am, my business is, we get heaps of leads and do heaps of business.
I should also clarify that to my clients and others I know, my level of professionalism (as seen through their eyes) has NOTHING to do with how many hours I spend studying, my ongoing CPD points, my memberships, associations, qualifications, etc. By far the primary measure of my professionalism (in their eyes) is simply how I conduct myself and my business (i.e. the level of advice and service I provide). If the industry wants to move towards being a ‘true profession’ then the focus should be on what consumers consider this means, not what the FPA thinks this means.
Agree with Robert. My comment from another thread:
“Unfortunately the industry has been allowed to develop such that product manufacturers own distribution, and this inherently conflicted vertically integrated model is the root cause of all these problems. It is nave to expect that clients get “independent” advice from a planner who is effectively paid by the manufacturer and whose APLs make it far too difficult to use non-aligned product. The industry must ultimately be broken in two as an anti-trust action, and participants must decide if they are in the advice businesses or the manufacturing business. Trailing commission (or even “client directed fees” – why not just invoice them??)must go, and the industry charge the real economic cost in a transparent way”
Heres an idea. Lets separate advice from product once and for all. Lets have all advice in a three page “Strategy Advice Letter disclosing the cost of the advice in $ terms and the cost of reviewing that advice in $ terms. There should also be proof that the Strategy Advice is in the clients best interests.
Then, lets have all product advice in a separate three page Product Letter which details the product being recommended, the reasons this product is being recommended over other products (including the clients existing products) and then proof that the product advice is in the best interests of the client.
The pendulum needs to swing back – for the client’s benefit!
Gerry As for the commissions ban, it does not paint advice over past decades as inadequate or poor rather it is an acknowledgement that public perceptions and expectations have changed over the past decades. Some of the best and most professional advisers I know worked on a commission basis for years however have also been able to adapt to the changing times and modified their business model to reflect that change. Again the FPA does not say that the only way to be a good adviser is to be an FPA member but it does set minimum education standards and binds its members to a code of ethics and professional practice. Remember membership is not compulsory, it is your choice. Finally I don’t need an organisation to make me look professional, professionalism is not how you appear it is how you conduct yourself and the consumer will pretty quickly sort the wheat from the chaff regardless of whether someone is a member of a professional body or they are not.
Anti-VI,nowhere is it said that the FPA is or will be the only Asic sanctioned professional body. I would think there will be a few like there are for accountants.
I actually like the 10 point plan and think the initiatives such as defining Commission, calling General Advice “product information” and an ASIC public register for all financial planners/advisers are a positive step.
Consumers today do have a problem trusting us – it’s quite simple. They want to know who to trust and we want to be seen as trusted!!
I view the 10 point plan as a means to this.
I tend to side with Steve. FPA made a big song and dance over banning commissions which painted previous advice over the past decades as less than adequate. FPA is pursuing a professionalism dream which makes all current advisers look less than professional. From what I can see the FPA thinks the only way advisers can become good advisers is by joining the FPA and if you don’t you’ll be an outcast and not worthy. If you need an organisation or a protected title to make you look professional…then I would suggest you have internal guilt issues or lack confidence in your own ability.
Danny, you make a fair enough point but if the 10-point plan is put into practice – which is a big if – then Steve will have no choice but to be a member of an “ASIC-sanctioned professional body” i.e. FPA. What’s next? compulsory unionism? Forgive us for being cynical about the motives – CFP cash cow all over again.
I agree Dominic.
Steve The FPA are not Labelling anyone as a Moron and indeed are not accusing anyone who is not an FPA member as being dishonest as you imply. All they are doing is striving to lift the standing of our profession which unfortunatley has a pretty poor perception in the eyes of the general public. If consumers can have confidence that they are getting genuine advice and not merely being peddled a product than this has to be of benefit to all and may even encourage more people to seek advice. Steve,it is important that we have a strong professional membership organisation and that is what the FPA has become under the current leadership. If you don’t agree you don’t have to be a member,but if you meet the minimum criteria for being a member and you choose to join, then you agree to follow the code of ethics and code of professional practice which are the cornerstones upon which true professionalism and most importantly consumer confidence are built.
Whilst I can understand “Steve’s” frustration at the constant barrage of bad publicity directed at Financial Advisors, the majority of whom do the right thing by their clients, it is the minority of “duds” that cause the problems, not the FPA. In fact the FPA has done an outstanding job in acting as a true professional membership organization of late, and we should all support this their latest initiative, even if, like myself, we do not agree with every last detail…its the thrust of striving to create a true Profession that is important!
I and every Planner i know and talk to are just sick and tired of the FPA’s attitude to its industry. IE Label everyone a complete moron and dishoest adviser unless tey jump through their hoops which always involves further study, further compliance burdens, More cost and of course enrolling on more of their courses. LEAVE E AND ALL US GOOD ADVISERS ALONE!! WE are sick to death of you telling us how bad we are or can be. Your pathetic online course wont fix a thing. You can not educate Morals. Stop chasing us and go chase the very very few bad guys. Get off your behinds and do something for the industry for once and not yourselves. Your on notice FPA!