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FPA submission doesn't go far enough: Plan B
The Financial Planning Association of Australia's submission to the Joint Committee of Corporations and Financial Service Inquiry doesn't go nearly far enough according to Plan B, one of Australia's largest non aligned wealth management groups. Plan B says the reforms proposed by the FPA need to be strengthened in three critical areas:
Educational qualifications: personal financial advice should only be offered by those with significantly higher educational qualifications than the FPA proposes;
Experience: that there should be a requirement for a minimum level of experience before qualified professionals should be entitled to advise clients;
Trustworthiness: the trustworthiness of a financial advice firm should be established by an independent audit and certification process, such as that provided by CEFEX.
Denys Pearce, Managing Director of Plan B Group Holdings says: ‘The problem we have is that our industry comprises two essentially different groups of people. One group comprises salespeople who are in business to sell financial products. The other group seeks to provide holistic personal financial advice, which is an altogether more complex and demanding profession. You can't have the same set of standards to regulate both groups. Perhaps the solution is to allow the current regime to deal with product sellers, but apply a much more rigorous set of standards to true financial advisers.'
Plan B says that the complexity, competency and responsibility required in providing personal financial advice demands training at a Vocational Graduate Diploma level. This is a substantial increase on the current diploma level qualifications and would be a barrier to entry for some. But lifting the qualifications bar is needed to enhance the standing of practitioners and improve confidence in the industry.
Plan B also says the current absence of any requirement for experience is a problem and that consumers have the right to expect the person providing them with advice has the necessary experience to do so. Plan B's own professionals are required to work for three years under an adviser before providing client advice on their own.
Screening for only people of good character, following the correct fiduciary processes, is a third, critical element for improvement. FPA's submission states: "It is impossible to objectively assess a "best interest" fiduciary model of advice." (4.2.1., p44). But Plan B says that global standards of fiduciary excellence for Investment Advisors have already been defined, their legal substantiation in the Australian regulatory environment have already been done, and independent auditing of adherence to these fiduciary practices is available in Australia through the independent Centre for Fiduciary Excellence (CEFEX).
"CEFEX certification shows that a financial adviser has the correct processes in place to avoid typical fiduciary problems such as conflicts of interest, and to ensure diversification of assets to suit the objectives and risk profile of the person being advised."
In its own submission, Plan B points out that the Association of Superannuation Funds of Australia has introduced CEFEX aligned training courses and Accredited Investment Fiduciary certification for Superannuation Trustees, and that the same requirement should be made of financial advisers.