Will Bill Shorten deliver on his FOFA promise?

In the lead up to the Federal Budget it remains to be seen whether the Minister for Financial Services, Bill Shorten, will deliver on legislating the restricted use of the term ‘financial planner/financial adviser’.

The financial planning industry should be watching events in Canberra closely over the next six weeks for more reasons than just the handing down of the Federal Budget.

It should also be watching for the Minister for Financial Services, Bill Shorten, to start making good on a key undertaking – legislating the restricted use of the term ‘financial planner/adviser’.

The Financial Planning Association (FPA), with some reason, felt its negotiating efforts around the Government's Future of Financial Advice (FOFA) changes were justified by the undertaking extracted around use of the title ‘financial planner/adviser’.

Ultimately, however, the proof of any pudding is in the eating.

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Two things now need to happen.

First, the Minister needs to make good on his undertakings by starting the processes necessary to deliver the relevant legislation.

Second, there needs to be a formal industry-wide understanding about what actually entitles someone to call themselves a ‘financial planner/adviser’.

Sensibly, if a person is entitled to call themselves a ‘lawyer’ by having completed a bachelor of laws, and if someone can be deemed a ‘medical practitioner’ because they have completed a doctorate of medicine, then it follows that a ‘financial planner/adviser’ ought to hold a similar minimum educational qualification.

Notwithstanding the importance of a ‘code of conduct’ or ‘principles of practice’ with respect to accessing class order relief from ‘opt-in’, membership of an organisation such as the FPA or the Association of Financial Advisers (AFA) should not be held as a legislative prerequisite to being able to utilise the term ‘financial planner’ or ‘financial adviser’.

Nor should the holding of a registered designation such as the Certified Financial Planner (CFP) be held up as the criterion, albeit the educational qualifications of many CFPs undoubtedly exceed the requirements likely to be necessary.

In other words, the question of ‘financial planners’ and ‘financial advisers’ becoming terms of professional entitlement needs to be based on the completion of an appropriate degree. Nothing less should suffice.

All of which significantly complicates the underlying achievement of having convinced the federal Minister to introduce legislation around the use of the term ‘financial planner/adviser’.

In circumstances where there are hundreds of people providing financial advice who do not hold degree qualifications, a regime based around transitional arrangements and graduated designations will need to be put in place – something that will need the industry to agree upon the underlying criteria.

Then, too, there will be the question of which existing degrees are most relevant and whether tertiary institutions will need to offer planner/adviser-specific options.

In short, the apparent breakthrough achieved during the FOFA negotiations represents only a first step on a journey unlikely to be completed within the term of the current Government.