The financial planning industry needs to take the intent of the Government’s Future of Financial Advice (FOFA) reforms and build on them into the future so the Government isn’t compelled to intervene again, according to chartered accountant and former financial adviser Robert MC Brown.
Despite giving credit to bodies like the Financial Planning Association for plans to improve the professionalism of the industry, Brown described it as "too little too late".
Brown said it was disappointing that at no stage through the FOFA consultation process had the industry shown a modicum of contrition for past sins or conceded that FOFA might be an own goal caused by its lack of willingness to "comprehensively self-regulate its vertically integrated product distribution structure".
Instead the industry insists there are a few bad apples that need to be removed by the regulator after which all will be well, he said.
There has been emotional and at times petulant criticism of the proposed legislation, which is now full of compromises that will allow the industry substantial scope to avoid the legislation’s spirit and intent, he said.
Industry leaders have stated their organisations will circumvent the legislation through actions including white labelling product platforms within advisory groups, effectively allowing them to sell their own products, which is clearly not the intention of the reform package, he said.
"If we claim to be a profession we should take on board the principles in FOFA, support that and then go further," Brown said.
The industry cannot claim to be a profession while persisting with conflicted remuneration structures, which includes not only trail commissions but any asset-based fees, as the Storm Financial disaster highlighted, he said.
If we remove all those conflicts, then the criticisms being levelled at the industry from the likes of the industry super fund sector will go away, he said.
It’s not just about disclosing or managing conflict but removing the potential for that conflict, and the industry will not become a profession until it creates an environment where there is absolute trust from the consumer, he said.
