Enshrinement of 'financial planner' - an improvement but not a panacea

It was appropriate that the Government’s introduction of the legislation necessary to enshrine the term ‘financial planner/adviser’ coincided with the holding of the Conference of Major Superannuation Funds (CMSF), because it represented the anniversary of the deal which sealed key elements of the Future of Financial Advice (FOFA) changes.    

It was during the 2012 CMSF conference that reports emerged that a deal had been struck capable of convincing the cross-benchers in the Parliament to support passage of the FOFA bills, including opt-in. 

This is probably why the Shadow Assistant Treasurer, Senator Mathias Cormann, was last week remaining less than enthusiastic about supporting the passage of the ‘enshrinement’ legislation. 

Discussing the issue with Money Management last week, Cormann said he still believed the FOFA opt-in provisions would have been defeated in the House of Representatives if the deal entailing ‘enshrinement’ had not been struck. 

Beyond his belief that the underlying deal which led to ‘enshrinement’ was politically unsavoury, Cormann continues to argue that enshrinement of the term ‘financial planner/adviser’ is not warranted and sets an undesirable precedent. 

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He points out that no similar ‘enshrinement’ applies to the term ‘accountant’, and that planning groups could act to protect the status of planners/advisers via existing mechanisms, including via the use of Australian Financial Services Licences (AFSL). 

On this basis, Cormann would like to see the ‘enshrinement’ legislation sent off to a Parliamentary Committee – something likely to see it fail to fully pass the Parliament before the forthcoming Federal election. 

However, in the event the legislation does pass the Parliament it seems unlikely a Coalition Government would find the necessary motivation to repeal it. 

The bottom line for planners, of course, is that irrespective of how the ‘enshrinement’ legislation was extracted from a Labor Party Government, it will ultimately prove to be of benefit to the planning industry. There is little doubt that it will help identify and remove the unqualified spivs and carpet-baggers. 

However, the planning industry will need to be careful that oversight of the preferred status of the term ‘financial planner’ is not used to bolster the membership structure of any single organisation. 

The financial planning industry has suffered severe reputational damage over the past decade. Enshrinement is not a panacea – but it must certainly help.