The Commonwealth Bank announced a range of new compulsory education requirements for salaried advisers on Friday, including the Certified Financial Planner designation for existing senior financial planners amid a raft of changes at the bank’s financial advice arm.
Speaking to ifa yesterday, Ms Perkovic said she hopes the move will not only raise professional standards in the bank’s advice channels, but also across the financial planning industry.
“We started a process with the salaried planners because that’s where we have the control and can set the standard,” Ms Perkovic said.
“As a business and as an industry we’ve talked about increasing professional standards across the board… It’s a really good step forward for the industry and I hope others will follow. It is just one step, but it’s one step for the industry moving forward.”
The bank has decided to be “proactive” when it comes to advice standards rather than waiting for the findings of the Financial System Inquiry or the newly announced Senate inquiry into education standards, she said.
“If we really believe in what the educational standards should be, we should just go ahead and make it happen versus waiting longer for what will come out of a report,” said Ms Perkovic.
CBA is also mandating industry association membership for all of its advisers – including authorised representatives licensed under Financial Wisdom.
Ms Perkovic said the bank will be paying the full cost of the new educational requirements, including the annual cost of the FPA’s CFP course.
“The fair thing for us, given that we have improved and enhanced the [educational] standards, is to actually fund our existing people for the opportunity to meet the standard,” she said.
Ms Perkovic was unconcerned about the prospect of advisers jumping ship to a firm with lower educational requirements.
“I don’t know whether you would lose somebody for making an investment into their education and qualification,” she said.
“It’s been positively received by the business, and I think it would be disappointing to lose someone if they don’t want the investment the bank’s going to make into them to enhance their educational requirements.”
Glen your response highlights poor management which was my point. Your argument that having a fully implemented solution will AUTOMATICALLY mean that it will be mismanaged is the common mantra. I recommend that we focus on the merits of a fully implemented solution and compare that with advisers trying to do it all themselves. Please note that I do not work for a bank and recommend both fully implemented and personally tailored portfolios so I don’t have a vested interest. I am saddened by the sweeping assumptions that often drive this debate.
Couldn’t agree with you more Shane! There are many others and indeed a lot of work ahead for the regulators. At present the regulators are powerless to act under present-day constraints. Many investors that thought they would do the right thing for their retirement and go and see their bank (expecting complete trust) for financial advice! Together with rogue financial planners they are able to act above the law.
I agree with you Peter. But I also think there are others. A lot of work for the regulators! I mean the temptations are there..
The time has come for the term “financial planner” to be applied only to those who are product agnostic.
Those with product alignment could be referred to as sales rep.
Excellent stuff The CBA is going to teach their people it is not ok to make unauthorized transactions on clients accounts,they must not forge peoples signatures ,they must not lie to their clients.I kinda thought by following their license obligations that product disclosure statements and additional SOA and a 10 day notification to the client that switches are made would prevent illegal and immoral activities.Well goes to show the corporations act and the people who enforce those acts and the requirements of holding such a license clearly has no merit .Clearly we all know who are the looses out of all this.Those poor people who thought they would do the right thing with their money and go and see a financial adviser [product flogger ]rather than a financial planner.Come on CBA don’t treat us as fools any further You don’t have to be Einstein to work out if your doing something illegal.These adviser’s knew exactly what they were doing and knew it was illegal.
When David Murray signed off on the purchase of the Colonial Group in 2000 for $8bn., he put in train an agenda to fill the CFS FUM coffers indefinitely. Given that CBA’s 2014 wealth management division will return in the region of $680m, my 10 year old son could do the maths to figure that CBA’s client’s were always going to be the ‘mules’. David Murray (current chair of the FSI), followed by Ralph Norris, followed by Ian Narev, and everybody down 1 or 2 tiers have been very richly rewarded over the years thanks to the Group’s enormous scale. But I question ‘upon thee with great vengeance and furious anger’, who else were the winners???
The CBA will not be setting the industry standard just catching up to the others. EG: NAB encouraged advisers back in 2005 to have DFS and ADFS back then. The poor CBA planners will be so busy with school they want have time write their sales targets.
VI and Rem models go hand in hand – along with restricted APL’s. The bottom line is that the alleged advice group will push for “advice” that leans heavily toward its own products for the double-dipping on fees that it can take advantage of.
How many non-CBA products do you think are on CFPL’s APL? Even if you stop rewarding their sales people for pushing CBA products, they can’t recommend products not on the APL.
As many other comments have noted, the management of CBA were the ones who set up and encouraged the circumstances which allowed this to happen. They then spent years covering it up. Yet apparently it is the “advisers” that need education. This is designed to achieve one aim – to get them out of the headlines.
Keith Richards has outlived many of his peers! Who knew?? CBA probably will, too. We ALL know that… sad isn’t it?
VI is not the problem, it is the rem model that gets applied by the stinking head of the fish (to use an earlier point).
If the planners are motivated to act in the clients best interests and not their own by the institutions rem model then VI will become irrelevant.
I don’t see education as the answer, the problems at CBA weren’t caused by people who were ignorant of what they were doing, on the contrary, they were completely aware. It is a red herring to divert attention from the true problem, remuneration structures.
Given that CFP’s were originally issued from corn flakes packets further puts into question this strategy.
…a bit like Jordan Belfort giving ethics training. Or ASIC showing the CIA how to investigate.
But you must admire their enthusiasm. For many years they allowed sales to pervert the quality of their advice and hurt many of their clients. Now they are looking to set the industry standard.
I for one – as a part of that industry – can’t wait to see what they come up with. Because we all see CBA as an organisation who we want to follow and aspire to.
I also can’t wait to buy the next healthy living how-to book by Keith Richards.
I think its important everyone looks at the strategy that CFP is employing here. They can’t help but appreciate the gravity of the mess they have created, not only for themselves but for their good planners and for all of us trying our hardest to professionalise the advice industry. This is part of a larger campaign to hang onto their quality planners. They will be hearing in many different forums and from many different levels of the executive and from management how valued and important they are over the coming weeks and months and the offer of free education and a CFP to boot are a pay-off (if you like) for sticking around. It will even encourage altruist young advisers to join them thinking they will lead the charge to professionalism. But it is sycophantic in the extreme and I will reiterate the point that you can have brilliant and ethical advisers but if the structure is conflicted and to keep their jobs they must sell, sell, sell, then they are salespeople pure and simple.
Hi Anti V-I, No, AU has businesses including a managed funds arm but there are no ownership or or other conflicts at play. We work hard to ensure that we maintain that independence as it is one of the aspects of our offer that our IFAs and employed planners value most.
Blame the Indians, who were instructed as an employment condition to sell the product. The product failed! If the product did not fail, the advice was brilliant.
Does anyone else see a similarity between these events Aesop’s fable “the Emperor’s new clothes” and the situation at CBA?
Build better product, remove 80% of the management (pareeto’s rule, 80% are contributing nothing)and remunerate the planners based on balanced portfolios i.e. the planner is paid the same for a cash / TD recommendation as for a market linked product. Yeah I know that a kids bed time story as well.
CFP is suddenly an authority on ethics and standards??? Thats RICH!!
Their advisers can undergo all the training in the world and it wont make a difference if their executive management team pushes their Colonial products down everyones throats! It was management who orchestarted the coverup mind you not the planners. There is an expression that states when the Fish begins to stink.. it stinks from the Head (helm) downwards. They need to get rid of their executive management team at CFP!!!
Glen you have it in one. Sorry Funky Goose Glen you should head up the FPA or better still a new body that understands the conflicts and refuses to accept conflicted memberships! I would join that industry group right now.
Funky Goose, I am sorry but I believe your analogy is not quite right.
VI is more akin to, say, Ford producing a delivery van and then telling the driver how many deliveries they need to make each day. Ford increasing the target until the only way they can be made is by speeding and skipping services.
Ford then is given the power to decide if the speeding tickets & defect notices are issued or not.
When a crash happens, is it the drivers fault or Ford’s? The driver may be very good, but the pressure to keep their job is what leads to the accident.
The assumption that vertical integration is the root cause of poor advice/service is simply wrong. It is akin to blaming the car not the driver in a car accident. In the case of the banks and industry funds it is poor management and poor recruitment of advisers (drivers) that is the core problem and the assumption that the advice process (car) can drive (manage the client relationship ) itself.
Has the “tribe” spoken?!?
Is the vertically integrated model disintegrating before our eyes?
Craig good point, but isn’t your business also vertically integrated?
I applaud higher education standards across the profession but I would much more like to see the CBA (and all vetically integrated advice businesses) address the structural conflicts at play where a product manufacturer owns the advice channel. For instance, even a highly qualified adviser is conflicted when faced with high sales targets where the quality of the strategic financial advice comes second to the impetus to sell product, raise FUM and risk premium and keep their job. Marketing the higher education angle looks good for public confidence but it is a slap to CBA financial planners because it infers they are the (only) problem that needs fixing rather than reviewing the sales culture that David Murray was instrumental in creating. I would prefer to see swift action to address the conflicts inherent in CFP and Fin Wiz and the inadequate response to redressing impacted clients.
There is a certain institutional mindset that pervades Ms Perkovics comments.
We are still an ‘industry’ not a ‘profession’ – and no acknowledgment from Ms Perkovic that increasing educational standards (and improving ethical behaviour)is a move towards professional status.
The banks and the industry super funds have shot themselves a terminal blow by their pigheaded attitude. Success in the financial planning space is based on long term trusted relationships that are developed by ongoing quality of advice and service. Relying on expensive TV ads highlights the flaw in their strategy.They will both continue to lose clients to trusted advisers and at the same time they keep disenfranchising themselves from these trusted advisers. How on earth do they justify their executive salaries when they are so inept at understanding the business they are supposed to be managing.
Better educated…but no moral compass. The CBA lecturing the industry is insulting. They should focus on the planners who are still employed that failed the many compliance tests…
Nothing changes until the dodgy retail bank culture goes and Commonwealth Financial Planning improve their management, exams will not rid the closet of the skeletons!
Well that’s one way of getting free education and memberships. Where do I sign?
Employees receive instruction from their manager. The manager says this is your weekly product sales target, if you wish to retain your employment meet the target.
Last time I looked the Responsible Manager was responsible for the conduct and advice of the Authorised Representative. Marianne education is required for the management and in particular the Responsible Manager who failed to monitor and supervise the Authorised Representatives.
Whilst the previous government failed on implementation of FoFA, the amendments and the future of those not aligned to product should prove beneficial to the consumer.
There was a career defining opportunity for the person employed at ASIC to deal with the CBA debacle. How sad they didn’t have the backbone or the courage to define their career!
CBA have got to be kidding. Suddenly CBA becomes the standard bearer for how advice should be conducted in this country? They really just should tidy up their own mess and be quiet. It is like getting a lecture on fair play from Arjen Robben.
The issue at CBA was never about educational standards, or the proficiency of their planners, it was about a relentless pursuit by an institution to drive in-house owned product in order to maximise profit for their shareholders, beat their competition and to reward planners and managers of the financial services arm of the bank with performance-related bonuses or incentives.
Being a CFP is not another word for ethical.It is simply an identification of your level of study achieved, but does not make you a better financial planner or a more ethical person.
What financial institutions and licensees should be demanding as an obligatory requirement for all planners or advisers is the completion of a comprehensive course based purely on ethics with a shorter refresher course requirement every 2 years as an integral compliance requirement.
The promotion that the designation of CFP will protect the consumer is misguided and wrong.
Thanks for showing everyone the way Marianne with regard to raising the standards – if only we had all followed the CBA standards before now. Oh, hang on…
my sentiments exactly Rod M
Improving adviser educational qualifications is always admirable, however in no way should the CBA advisers technical skills [or lack of] be seen as the definitive cause for the way many thousands of bank clients were treated in the past.
So called rogue planners acted as they did because the business model rewarded them to act in that manner and moreso given the lack of competent management [compliance] oversight.
If the CBA is fair dinkum about getting their shop in order, they should start with their management practices first.
Ms Perkovic is simply shifting senior management culpability to existing planning staff. The very planning staff who often stood up to the same CBA managers who pressured them weekly to hit their targets.
That is where the problem really is, not whether a planner has a trade group designation or not.
Technical knowledge is one thing that can be improved through further education. The practice of product flogging can only be changed through cultural, remuneration and ownership changes. And those things are controlled by management at CBA, not the advisers.
Maybe the same ‘new compulsory education requirements’ should apply to the CBA Executive General Manager Advice and her Team. You were responsible for the Authorised Reps who put you in this position in the first place !!!!!! Too little too late, not so sure you need to be bringing the rest of the “industry” into the CBA basketcase really
Seriously what the hell does a higher education standard have to do with the ethics and the culture within the bank. It just shows how these big guys still dont get it. You cant legislate for ETHICS. No one at the executive level seems accountable for the disgraceful behaviour.
It is an indictment on the Comm Bank that all of their Advisers have not completed DFP 1-8, before stating what the rest of the Industry should be doing Ms Perkovic should get her own house in order. Sadly all the excellent advisers around Australia now have to put up with the media scrutiny due to the poor compliance and education systems of the Comm Bank.
Please do not place all the terrific Advisers in the same barrel as the few Comm Bank bad apples.
Was that the sound of the gate slamming shut behind the bolting horse?
I think it is far to early for the CBA to be holding themselves up as the example to be followed by other Banks. Particularly when they wont even entertain a genuine independent review of the harm some of their Advisers have caused to clients.
Maybe they could set a really good example by announcing they are no longer going to own both product providers and advisers. Now that is an example I would encourage all institutions to follow.
great to see improving the education standards, all for it. But what about your banks culture of flogging products, being a CFP will not help you there.
So CFPs can’t be crooks? one only has to look at America (or the FPA’s suspension records) to see that’s clearly not the case. This is a weak response from the bank in the wake of unprecedented shame for their brand