What’s in a name?

paul m ifaThe terms financial adviser and financial planner are used interchangeably, but it may be time to separate and refine the two so that consumers can become better informed.

In a submission to the PJC on professional, ethical and education standards I make the point that financial product advice is clearly described under the theoretical concept of ‘agency’. The agency ‘problem’ is that agents (advisers) often act for themselves rather than their principals (clients). 

Consider the problems associated with Storm Financial, CBA and Macquarie. Agency issues are most commonly dealt with through regulation. We have all been frustrated by this experience over the years. An alternative theoretical model is the ‘stewardship’ theory.

This concept describes a situation where the relationship is not conflicted and there is a real goal congruence between the agent and the principal. Financial planners who adopt a code of professional practice, focus exclusively on their client’s goals and utilise a holistic approach should be operating under stewardship theory.

By separating the terms financial adviser (intrinsically linked to financial product advice) from financial planner, the public can make a meaningful distinction.

If not financial adviser then perhaps the harsher term financial product agent, although I’m sure many advisers would find that term unpalatable.

Clearly there are people who call themselves financial advisers but under my definition are actually performing the role of a financial planner and vice versa. However, as long as these terms are both beholden to definitions under Corporations law, the industry is doomed to a one-size fits all regulatory model.

Technically, the financial services reform program of the late 1990’s created the concept of ‘financial product advice’ and deemed everyone who recommends financial products a ‘financial adviser’. In fact one of Wallis’s recommendations discussed a “single set of requirements should be introduced for financial sales and advice”.
Since then, a division has emerged between those who practice financial sales and those who truly offer professional advice. Unfortunately, poor behaviours by people who by law are financial advisers have tarnished the reputation of all of us who act ethically and professionally.

I know something about how names can make a difference. In the 1980s I worked for almost 10 years as a paramedic. I was professionally qualified and highly trained. Of course, the term paramedic was not used in Australia then and so I was often referred to as an ambulance driver. This term grated on those who had been through all of their training, but perhaps more importantly placed them firmly at the bottom of the health system hierarchy.


I was better at treating patients pre-hospital than many other health professions, but that name…

Today paramedics are recognised as an important part of the health system. They are accepted as highly trained professionals at the same level as allied health professionals (nurses, physiotherapists, radiographers etc.).

I would like the public to see my skills, qualifications and experience as a financial planner in the same way as they see chartered accountants, CPAs and even lawyers.

We all have an important part to play in helping people turn their financial chaos into calm.

paul-m.pngPaul Moran is a director of boutique firm Moran Howlett Financial Planning.

He is a Certified Financial Planner and Self Managed Super Fund Specialist Advisor, with industry experience in both the institutional and non-aligned sectors dating back to 1995.

Paul holds a Bachelor of Applied Science, Associate Diploma of Health Science, Diploma of Financial Planning, Master of Business Administration and Master of Taxation and Financial Planning. Paul is currently completing a Professional Doctorate at Victoria University investigating financial decision making.

He was both the Victorian and Australian IFA ‘Financial Planner of the Year’ for 2004 and Finsia Practitioner Award Winner 2003. 

What’s in a name?
paul m ifa
ifa logo

Subscribe to the ifa bulletin

Receive daily online news,analysis, reports and business strategies
By signing up you agree to our Terms of Use and Privacy Policy

from the web

Website Notifications

Get notifications in real time and stay up to date with content that matters to you.