The release of the updated Financial Adviser Standards and Ethics Authority (FASEA) guidance on education pathways was significant for two things – the clarification of the options open to existing advisers and a clear signal from the Federal Government that advisers are faced with a fait accompli.
When representatives of major planning groups such as the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) first sought to argue their case around the first iteration of the FASEA education pathways issued before Christmas they received a clear message from Canberra – the financial advice industry must accept that it has few friends within either the Government or the Federal Opposition.
The corollary of that absence of friends in Canberra is that while there may be room for some refinement and better targeting of the FASEA approach via the consultative processes put in place, financial planners must accept that there will be no stepping back from the underlying intent of the FASEA regime. It will not change. They must change or, alternatively, exit.
This much was made clear by the Minister for Revenue and Financial Services, Kelly O’Dwyer in a succession of statements on the issue last week starting with her address to the annual Australian Securities and Investments Commission Forum and then her media release attaching to the release of the new FASEA pathways.
O’Dwyer told the ASIC Forum: “… it is important to remember why these reforms are necessary – repeated instances of inappropriate or just plain bad advice has significantly eroded trust and confidence in the financial advice sector.
“Every adviser has a role to play in rebuilding that trust, and these new educational requirements are a critical step towards professionalising the sector.
“Ultimately, the professionalisation of the advice sector will be in the best interests of all advisers, existing and new, because it will ensure enduring consumer trust and confidence in the financial advice sector.”
In other words, there is a bipartisan view in Canberra that the FASEA regime has been made necessary by the failings of the financial advice industry and, in the words of O’Dwyer, “repeated instances of inappropriate or just plain bad advice”.
Her comments reflect just how far the Coalition Government has moved from the days when, following the election of Tony Abbott as Prime Minister, it sought to accommodate the complaints of financial planners by winding back some of the more draconian elements of the Future of Financial Advice regime introduced by the then Assistant Treasurer, Bill Shorten.
The problem for the lobbyists representing the financial planning industry is that over the past seven years, newspaper headlines have traversed a range of scandals attaching to the activity of planners involving the Commonwealth Bank, National Australia Bank and Macquarie just to name the most notable.
What is more, with the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry under way, there is a high probability that those issues will again be examined and questions asked about whether anything meaningful has changed.
In reality, a great many things have changed but it is the FASEA regime and the further empowerment of the financial services regulators on which the current Government is intent on hanging its hat in the knowledge that it will not be unduly criticised by its political competitors.
The AFA last week reflected the concerns of many of its members when it stated that a higher priority needed to be placed on retaining existing advisers in the industry.
The reality, however, is that unless some of those highly experienced existing advisers are prepared to undertake the education and bridging courses entailed in the pathways being outlined by FASEA and backed by the Government, then their exit from the industry becomes inevitable.
There is currently little political capital in defending financial planners and therefore they have very few truly influential friends in Canberra.
