Too much of FoFA ‘lost in translation’. Professionalism key to getting reforms back on track, FPA tells parliament
While reiterating broad support of the intent behind the original FoFA reforms, head of peak professional body the Financial Planning Association (FPA), Mark Rantall, today warned the Parliamentary Joint Committee (PJC) examining the latest round of FoFA bill proposals that some of the reforms had lost their way.
While acknowledging that the reforms are likely to improve clarity around the conflicts in financial services and a lead to potential improvements in quality and process at the lower end of the market, Mr Rantall also said that there had been a fundamental flaw in the legislative process because no appropriate regulatory impact analysis had been conducted on the cost implications of the reforms either to industry or, more importantly, to consumers.
He also said that, although appreciative of the inclusive process and the fact that the FPA and other organisations had been allowed an active role in the FoFA development process, there still remained some confusion as to how and why certain decisions had been made.
It was therefore in the interests of all concerned to get back on track with the original intent of the FoFA reforms, which are to ensure that:
- Financial advice must be in the client’s best interests – distortions to remuneration, which misalign the best interests of the client and the adviser, should be minimised; and
- In minimising these distortions, financial advice should not be put out of reach of those who would benefit from it.
Mr. Rantall went on to point out a number of issues with the proposed changes. These include projections showing that they would lead to a fall in adviser numbers from 15,400 today to 8,600 in 2024, a concerning figure for the future of the profession and accessibility to all Australians.
Further, without a regulatory approach that encourages long term trust in ‘professional advice’, the FoFA reforms are, on their own, unlikely to achieve what they set out to.
“The crux of the matter is that without regulation that allows consumers to differentiate between professional participants and others, they will continue to be subject to unnecessary risks,” said Mr Rantall.
For that reason, the FPA welcomed the Government’s commitment to reviewing a consultation paper on restricting the use of the term ‘financial planner’ to those who have appropriate, agreed qualifications.
“The FPA looks forward to working with Treasury and ASIC on developing the paper,” said Mr. Rantall.
The PJC, led by the Minister for Financial Services, Bill Shorten, is holding public hearings this week to collate and examine submissions from prominent industry stakeholders about the draft 2011 FoFA reform bills.
The FPA, which represents nearly 10,000 of Australia’s financial planners, has been an active advocate both for its members and for consumers throughout the FoFA debate, and has led the way on many proposed reforms. Its remuneration policy banning investment commissions is due to commence on 1 July 2012; the number one principle in the FPA Code of Professional Practice requires members to place the interests of their clients ahead of their own; and FPA practitioner members all work to higher professional standards than required by law.
The FPA was represented by Mark Rantall, Chief Executive Officer; Dante DeGori, General Manager of Policy and Government Relations; Deen Sanders, Chief Professionalism Officer and architect of the FPA Code of Professional Practice; and John Bacon, its General Manager of Professional Standards.
In the interests of clarity Mr Rantall concluded his remarks by reminding the Committee of the FPA’s specific recommendations on FoFA to date and highlighted the FPA’s ongoing commitment and availability to assist with achieving them.