Today, the Senate Economics References Committee hearing for the Scrutiny of Financial Advice inquiry begins.
After your health, your finances are the second most important influence in having a comfortable life. So when you need help, you want to be able to trust your finances to a professional. Despite a strong push towards professionalism from parts of the financial planning industry, the last 10 years has seen a number of financial planners in the news for all the wrong reasons.
While there is debate about the culpability of planners in the collapse of several high profile investments and losses suffered by consumers during the GFC, certain planners in the past have contributed to losses by clients by not properly understanding their clients or the investments they have recommended for them. The reputation of the industry has also taken a hit with divergent views over the implementation of the Future of Financial Advice (FOFA), the acceptance of product commissions and recent revelations around planner misconduct. These all add up to a general sense of distrust by the public of the financial planning industry.
The good news for both consumers and financial planners is the next piece of the professionalism puzzle will shortly be put in place.
While the FOFA enhancements to the Corporations Act introduced laws to improve the conduct of financial planners – which given sufficient time to be embedded will significantly improve advice outcomes for consumers – the industry, given its importance to the community, still lacks appropriate initial and ongoing minimum education standards.
Currently, anyone wishing to enter the financial planning industry can achieve competency by completing a short diploma course – and assuming they can find someone to employ them under their Australian Financial Services License – they can call themselves a financial planner and help you look after your money in as short as a month of starting a course.
In a positive move, most of the large players in the financial advice industry have announced that they now require all their planners to hold relevant degree qualifications and complete professional certifications over the next 3 to 6 years. The Government has also now released the findings of an inquiry into how to raise the competency, ethical and professional standards of financial planners.
When enacted, all existing financial planners will be required to join a professional association – which meets international standards on codes of conduct, ethics and ongoing education standards. All planners will also be required to sit a mandatory knowledge test to ensure a minimum level of knowledge and be registered on ASIC’s new financial planner register. Further, all new entrants to the industry from July 2017 will be required to hold a relevant bachelor level or higher degree and complete a supervised professional year.
There is no doubt that once financial planners are required to act as professionals and are trained as professionals, the financial planning profession will soon be able to look forward to a time when they are among the most respected members of our community and rightly be looked on as trusted advisors to Australian consumers.
Feature Image:Copyright: / 123RF Stock Photo