TheFinancial Planning Association(FPA) has come under fire for shutting down a voluntary committee looking into the issue of risk profiling, despite some members claiming it had made significant progress towards resolving the use of risk profiling within financial planning.
However, the FPA has countered this stating the committee had completed its task and there was no further need for it as it will release its policy paper on the issue at the end of the month.
Committee member Paul Resnik says the group had met for the first time in February this year and had reached a consensus on a risk profiling definition. At the same time it also rejected processes of choosing investments based on whether investors were risk sensitive or risk tolerant.
He also says the group held a second meeting to clarify the issues but was then notified it would no longer be required.
Resnik claims the reason for the group being wrapped up was the findings would not have been approved by the FPA.
“Questions remain when the process failed to take into consideration the findings of the group, which was then shut down without ever recording a formal result.”
The committee included Resnik and Proquest’s Geoff Davey,Centrestone Wealth Managementchief executive Rob Keavney, Prescott Consultants’ David Middleton, Diversified Portfolio Management’s David Williams, FPA investigations manager Mike Butler, former FPA chair Wes McMaster,MLCtechnical manager Chris Drummer and was chaired by Peter Bobbin from legal firmArgyle Partners.
Keavney and Middleton have been critics of risk profiling in the past, and Middleton agrees the committee did reach a common ground but says the work of the group had effectively come to an end with the release of Policy Statement 175.
“We had been dealing with a statement from theAustralian Securities and Investments Commission(ASIC) which covered the ‘know your client’ rules, which made the issue one of practice standards,” Middleton says.
“The recent release of PS 175 has almost removed the requirements the committee was considering, so the discussions we had were taken onboard by the FPA for inclusion in its own paper.”
The paper will not contain any recommendations from the FPA and will be reconsidered in 12 months.
