When an exam doesn’t pass muster
A leader by definition must have followers. No one that truly understands the issues in financial planning are following Greg Medcraft on the ‘series 7' exam path to build a profession in financial planning.
Granted there appear to be some in corporate management, particularly those with a product manufacturing bias, who view a "series 7" style exam as an expedient way to tick a box for compliant product distribution. These managers do not want to do the heavy lifting to build public trust and confidence in financial planning. They are on a different path to those that believe in the advice profession. These corporate players view the success of their business by product sales, this is how they are measured and remunerated, they know no different. Professional financial planners on the other hand measure success through the positive difference they make in the lives of a client.
ASIC needs to rethink the idea that an exam will somehow provide a panacea for the issues that have plagued financial planning. They have not convincingly prosecuted this argument to consumers or financial planners and they lack the political capital to continue solely down this path especially in the face of bi-partisan recommendations of the Parliamentary Joint Committee into ethics, education and standards in financial planning.
This Parliamentary committee provided a comprehensive framework that, if acted upon by the Government, will provide the foundation for the future of the profession of financial planning.
If we go down the "series 7' exam path they will not look much different from now, apart from financial planners will have been trained to pass a multiple choice exam.
FINRA's website describes the Series 7 as qualifying a candidate for "the solicitation, purchase, and/or sale of all securities products, including corporate securities, municipal securities, municipal fund securities, options, direct participation programs, investment company products, and variable contracts." The exam is not intended to cover the breadth of financial planning and ASIC is confusing advice for securities instruments with financial planning.
It really boils down to this question; is financial planning about the selling of products only? If the answer is yes, then it is appropriate for ASIC to seek out product licensing exams. If financial planning, however, is more than merely product sales and is indeed a profession and we are seeking a test of competency of professionalism and professional standing then this needs to fall to a recognised professional body.
It would appear Greg Medcraft's view is financial planning is product focused, my view on the other hand is that financial planning is profession focused. Our views can co-exist, but a product focused exam is not an appropriate platform to build a profession. However, professional bodies can build their exams to complement and "sit over" the product-based exams to avoid duplication and encourage regulator recognition and exemptions.
I wrote to colleagues in the US to ask their experience and was surprised to find that state regulators in the US give exemptions to those with CFP certification from licensing. This is not something that ASIC appear to have considered in their exam proposal in that they remain silent on qualified members of recognised professional bodies. Colleagues in the US stated the ‘series 7" exam standard is a minimum only and warn against this approach. Perhaps, with the benefit of hindsight our regulators could have had this type of exam in place when RG146 was introduced to avoid the "eight day" courses now the subject of intense media scrutiny. At least we would have known that someone sitting the eight day course could pass the "series 7" equivalent exam — wait isn't this the exact issue that so many of us are arguing against?
It is not just ASIC however that need to consider what is the basis of financial planning — product sales or profession. Financial Planners need to ask this question and understand what it means to be a profession. It is time for those planners that hold themselves out as "professional" without belonging to a professional body or holding a professional designation to reconsider their views on what they want to do — sell product via a license or be a financial planning profession.
It is not enough to tell people you are a "profession" you must show them and whether we like it or not there are recognised frameworks to being a profession and there are rules to being a recognised professional body.
Matthew Rowe is the immediate past chairman of the Financial Planning Association.
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