A public fight has broken out over the tricky task of rehabilitating the financial planning industry.
At stake is the fee-rich self-managed superannuation sector which now represents almost one-third of Australia’s $1.8 trillion retirement pool.
On one side is the Financial Planning Association which is made up of mostly smaller groups of planners who advise individuals on how to best save for their retirement and other personal finance issues.
On the other is the Financial Services Council, headed by a former NSW Liberal Leader John Brogden, and mostly representing the bigger end of town including AMP and BT Financial.
And the third player is industry super funds which generally give better investment returns to members than retail or corporate funds run by the big banks and insurance companies.
It’s all about rebuilding the public trust in financial advisers following high profile failures including the Commonwealth Bank’s financial planning business which lost money for customers.
Both sides agree that change is needed but they diverge on how to rebuild trust.
The Financial Services Council is advocating a statutory, independent, Advice Competency Standards Board for financial advisers to rebuild the trust of consumers in financial advice.
CEO Brogden says: “Self-regulation is no longer a credible option for establishing higher standards.”
However, Mark Rantall, CEO of the Financial Planning Association, says this is a band-aid solution which masks underlying, systemic issues.
“We don’t need a new Board to oversee the Australian financial advice industry,” he says. “What we do need is long-term, effective change that is transparent.”
He says industry reform effort will require significant work on the part of individual planners and the organisations which lead and manage them.
“It isn’t a job for government,” he says.
The role of government and regulators is to set minimum standards and enforce them legally.
The Financial Planning Association wants product sales to be separate from professional personal advice, a lift in educational standards so every new financial planner has a degree, and enshrining the term “financial planner” in law to ensure that Australian consumers can trust the planner they find.
Peter Collins, the chair Industry Super Australia and a former NSW state opposition leader, says the proposed Standards Board for financial advisers is a distraction by the banks.
“Confidence in financial advice is important for the wellbeing of many Australians, particularly as superannuation account balances grow,” he says.
“This confidence will come from financial advice that is genuinely impartial, backed up by an unqualified best interests test and a comprehensive ban on sales incentives.”