Financial planners should have to earn the right to the exclusive use of the term ‘financial planner’ according to shadow finance minister Senator Stephen Conroy.
Speaking at aFinancial Planning AssociationMelbourne chapter lunch on Friday Conroy said if the term was to be restricted then further legislation was needed to do so and there was an obligation that planning raises its standards to a professional level.
He says a number of steps have to be taken before the exclusivity is granted. These include education standards.
“Currently it is industry practice for financial planners to complete four of the eight subjects required under the DFP,” he says.
“This is not sufficient. Financial planners must, at a minimum, reach the level set by the internationally recognised CFP qualification.”
Conroy wants to see this standard of education set as a licensing condition as well as continuing professional development.
“Not only should the licensing conditions include a minimum education requirement. They should also include an obligation for continuing professional development.”
Conroy also wants the disciplinary procedures against planners altered as part of the exclusive use of the planning designation, as he believes the current system doesn’t work.
“Currently complaints about financial planners are made to FICS and they report back to the FPA and they take disciplinary action. This model does not work,” he says.
“It is clear that an independent disciplinary tribunal is required that might be funded by the industry, but it must be structured so that it is independent of the industry.”
The third area Conroy wants addressed is fees and charges as he claims the current payment system encourages planners to invest money in funds with the highest commissions.
“According to the Reserve Bank of Australia, the current fee structure means the majority of financial planners’ incomes are derived from entry fees and trailing commissions,” he says.
“TheASIC/ACA survey found this has created a situation where financial planners have an incentive to ‘churn’ or recommend investing in products with high commissions.
“It is an issue the industry must address and it is an issue we must debate before we restrict the term financial planner.”
Conroy says the Labor Party also has soft commissions in its sights.
“In the UK, they have proposed ending soft commissions by fund managers in order to increase transparency and accountability for investors,” he says.
“In my view, soft commissions for financial planers should be prohibited in Australia.”
