As scathing as the Senate Committee’s report into ASIC’s handling of the Commonwealth Financial Planning enforceable undertaking may have been, the answer does not lie in disallowing the Government’s FOFA changes but, rather, in clearly separating product sales from advice.
Those who have closely monitored the aftermath of the Senate Committee report into the performance of the Australian Securities and Investments Commission (ASIC) and its handling of the Commonwealth Financial Planning enforceable undertaking will have noted what many might perceive as a contradiction.
That contradiction is inherent in the fact that both the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) have welcomed the broad substance of the Senate Committee’s recommendations, while Industry Super Australia (ISA) has sought to use those findings to continue its resistance to the Government’s Future of Financial Advice (FOFA) changes.
Observers might also have noted that ASIC itself has fallen into the trap of seeking to deflect criticism by utilising the generally poor public perception of financial planners as a whole.
So what needs to be made clear about the Senate Committee recommendations is that they evolved out of an examination of events which occurred around seven years’ ago within one of this nation’s largest, vertically-integrated financial institutions.
What should also be acknowledged is that the culprits along with those who might have been held managerially responsible for the failings within Commonwealth Financial Planning have left the organisation, albeit that their successors could arguably have done better in terms of managing the enforceable undertaking.
What should also be understood is that while neither the FPA nor the AFA may clearly voice these sentiments, the Senate Committee report has helped reinforce their argument for a clear separation of product sales from the provision of advice.
The problem, of course, is that instead of being focused on the wrong-doing within Commonwealth Financial Planning and relevant remedies, industry reactions and media coverage has been directed towards the perceived shortcomings of the financial planning industry as a whole.
This undoubtedly serves the anti-FOFA amendments interests of the ISA and self-congratulatory sections of the media which pursued Commonwealth Financial Planning, but it does little to assist those who have worked assiduously to turn financial planning into a profession and to rid it of its bad apples.
As well, the chairman of ASIC, Greg Medcraft, would have been vastly more constructive if he had admitted the shortcomings of both his own organisation and those of Commonwealth Financial Planning at the same time as acknowledging the degree to which the broader financial planning industry had sought to lift its game.
It seems unlikely that the Abbott Government will support the holding of a royal commission or judicial inquiry into the events surrounding the Commonwealth Financial Planning enforceable undertaking, but lessons clearly need to be learned and remedies implemented.
Foremost amongst those remedies must be the clear and immutable separation of product sales from advice in a fashion which ensures clients are made fully aware of the basis upon which their advisers are being remunerated and by whom.
Like oil and water, sales targets and good advice simply don’t mix.
