The current licencing regime has fundamental problems that is “handbraking” financial planning from being a genuine profession, according to an association.
Speaking to Money Management, Financial Planning Association of Australia (FPA) chief executive, Dante De Gori, said the industry had the hallmarks of becoming recognised as a genuine profession being best interest duty, conflicted remuneration had been removed, and needing a degree qualification.
However, the final missing piece was how financial planners were being admitted into the practice.
“If you think about lawyers, accountants, engineers, they get admitted into the profession. In our space, you become a financial planner through an employer or licensee. The person you work for ‘anoints’ you as a planner and when you’re not working at that employer anymore you’re no longer a planner, that’s not a true profession,” De Gori said.
“An individual should be completely accountable and responsible for his or her certificate of practice or ability to practice. So, we’re arguing that individual registration should be done by an independent third-party authorisation and should be taken away from licensees.”
With the Better Advice Bill looking to get advisers individually registered by 2023, there were still questions surrounding whether this would add to the ever increasing cost of advice.
De Gori said the cost would decrease with a single set of regulators by removing the Tax Practitioners Board, and the Financial Adviser Standards and Ethics Authority (FASEA).
He noted that being individually registered would take away the responsibilities that many licensees took on and would decrease costs.
“Licensee still chase advisers for CPD [continuing professional development] records and whether they’re going to do the exam, where they are up to with education – they shouldn’t be doing that,” De Gori said.
“Doctors, lawyers, and accountants are individually responsible for their own education. Employers can assist by offering courses but they shouldn’t be chasing advisers like little kids.
“We want to change that and that will change the cost structure in financial planning businesses if that part of the process is no longer an obligation for licensees to do that. It’s also about how to streamline, reduce costs and remove inefficiencies. That’s why we want to restructure the licensee regime.”
De Gori said the FPA was looking to change the licencing regime within the next five years and that there was real momentum given the Australian Law Reform commission was due to be completed by 2023. The commission included licencing disclosure in its reform.
“Realistically over the next five years there’s real opportunity to make real significant reform changes. If we don’t do this, then everything we do or we think we are doing around cost of advice, and professionalising advice occupation is just tinkering the edges,” he said.
“This has to happen if everyone is genuinely serious about financial planning becoming a true profession and without this it can’t be.
“Unlike very other profession, there is still this licensing regime that connects the individual adviser to its master, its employer, and therefore planners can’t be truly independently minded. It doesn’t matter what the legislation says if they have to do if they have conflicts in terms of what their employer requirements are vs what their requirements are.
“It’s not just about the authorisation piece, advisers are authorised to give financial product advice, so this connection of advice being only about product is entrenched in the legislation so that has to be removed. So that separation of product and advice in licensing has to happen.”