When name calling hurts

A number of financial planners last month took Money Management to task for publishing a report about a 'financial planner' who had been permanently banned from providing financial services by the Australian Securities and Investments Commission (ASIC) after it was found he was unlicensed, acted dishonestly and made false or misleading statements.

Trouble is, the person banned by ASIC was not a 'financial planner', nor was he a 'financial adviser' in any sense which would be accepted by either the Financial Planning Association (FPA) or the Association of Financial Advisers.

It transpires that the man in question would have been better described as a 'property fund promoter', though many of the financial planners who complained to Money Management had far less complementary descriptors for the man in question.

As it happens, it was not Money Management which originally gave the man the title of 'financial adviser' - it was ASIC.

The opening paragraphs of its media release on the issue read as follows:

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"A Sydney-based financial adviser has been permanently banned from providing financial services after it was found he was unlicensed, acted dishonestly and made false or misleading statements.

Ropati Broederlow, of Punchbowl, NSW was the sole director of RN Property Pty Ltd.

An ASIC investigation found that between August 2010 and July 2011 Mr Broederlow advised RN Property's clients to deposit funds into a trust account looked after by his company. He told clients that their savings would be used by them to purchase a house, with the assistance of RN Property.

However, when the clients called for their savings, both RN Property and Mr Broederlow failed to use the funds on their clients' behalf or refund the invested money." 

Little wonder, then, that a number of financial planners were upset that this publication perpetuated ASIC's use of the term 'financial adviser', and even used the somewhat interchangeable term 'financial planner'.

A few weeks later, ASIC issued a further media release in which it was arguable it used the term 'financial adviser' in an appropriate context.

The opening paragraphs of that media announcement read as follows:

"ASIC has permanently banned Mr Colin James Oberg, formerly operating out of offices in Miranda, NSW, from providing financial services after he withdrew over $1.55 million of client funds without their authorisation or approval. 

ASIC found that Mr Oberg, who was a financial adviser and authorised representative of WealthSure Financial Services (WealthSure), withdrew client funds between September 2007 and October 2008." 

All of which brings us to the question of the legitimacy of the FPA's campaign to have the Federal Government legislate to restrict use of the terms 'financial planner' and 'financial adviser'.

The Minister for Financial Services and Superannuation, Bill Shorten, promised this legislation as part of the deal which presaged passage of the Future of Financial Advice bills through the House of Representatives and has more recently signalled that the necessary bills will be introduced when Parliament resumes in the next few weeks.

However, the Opposition spokesman on Financial Services, Senator Mathias Cormann, has signalled that the Coalition parties remain to be convinced on the legislation in circumstances where a restriction on the use of the term 'accountant' is not similarly enshrined in law.

It follows that if the FPA's campaign is to be successful, the Government will have to ensure the legislation is passed before the next election and the Opposition will have to concede that no great purpose will be served by rescinding that legislation.

Either way, the reputational damage inflicted on the financial planning industry each time some miscreant is inappropriately described as a 'financial planner' or 'financial adviser' is substantial.

Money Management accepts that as a publication dedicated to serving the needs of the financial services industry, it should do its utmost to ensure that those to whom it refers as being 'financial planners' or 'financial advisers' are precisely that.

Certainly, this publication and the regulators should be careful not to allow property spruikers and credit card marketers to be described as 'financial planners' or 'financial advisers', when clearly, they are not.

In the end, it might not matter if use of the terms 'financial planner' and 'financial adviser' was not ultimately restricted by law. It might simply be a case of calling things what they really are.

ASIC might like to start the ball rolling.