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The July 1 start date for the Future of Financial Advice (FoFA) reforms brings Australia into line with a global movement of consumer-focused reform in financial advice. Individual licensee advisers have, in the main, taken to the spirit of the reform with gusto. But is the big end of town playing ball?
From a reputation perspective, the emerging profession of financial planning is on the cusp of something big. But are the big licensee players on board? Does the concept of consumer-centric reform targeting best interest financial advice sit comfortably with the institutional focus of self-interest product delivery?
Or is the professional advice paradigm (not the product one) a pebble in the shoe of the big players? Revised distribution strategy has been a huge part of internal discussions within the wealth management divisions of the big four banks in particular. The 'tension' between advice and product is the primary catalyst for revised strategy and, dare I say, a number of high profile business restructuring efforts ahead of the changes.
It will be interesting to see how the large players publicly embrace change and indeed, if the support of the consumer case is genuine or simply taking a minimum standard approach. Or even worse playing lip service to the concept.
From the viewpoint of the general public, there is still much ground to make up.
The poles (advice at one end, product at the other) are the opposites between which the reputation of financial planning is really being stretched. And rips in the fabric are especially evident at the product end of the spectrum.
This is critical stuff, especially as the new era of advice reform is supposed to be part of the solution, not the problem. FoFA has its genesis in post-GFC financial disasters, including the Storm Financial case. The fact is that consumer victims of Storm are still – even this very day – having their claims settled. It means that those pursuing the case for professionalism in planning who had hoped the worst of these disaster stories of commercial self-interest would be behind us are disappointed. Because: well, no. They are still among us.
Startling new claims on an old story were revealed recently in a series of articles by Fairfax journalists Adele Ferguson and Chris Vedelago underscoring the degree to which the reputational rips in the fabric are showing.
The story, published over recent weeks, explores the events leading to the action by regulator ASIC against Commonwealth Financial Planning (a division of the Commonwealth Bank). CFP signed an October 2011 enforceable undertaking (EU) following the ASIC investigation and alleged whistle-blowing efforts of various CFP planners who covertly dropped information to the corporate cop.
The EU action followed an October 2010 compensation process initiated by CBA to clients of financial planner Don Nguyen. Mr Nguyen was disqualified for providing financial advice by ASIC in March 2011 for seven years.
Read the entire story and subsequent follow-ups (including the grilling of ASIC over the 16-month delay between the initial contact by whistleblowers and definitive action against the perpetrator). Judge for yourself what the collateral reputation damage is for brand 'financial planning'.
But the point I am making here is that, important as it is to uncover advice misconduct and bring those responsible to account , it is equally as important that the underlying commercial models of the big licensees are also appraised and understood, especially by the end consumers.
The 24-month EU process against the CBA will conclude with a final report due on October 25 this year, a week after the highly visible, professionalism focused FPA Congress concludes in Sydney.
Let's hope this week in October signals the end of one old story and the beginning of a genuine, new story of positive change in our industry.
