Why financial planners should aspire to be more like doctors (and less like lawyers)
Mike Taylor argues that if financial planners are to follow a template for becoming a profession, they should choose medicine over the law.
Amid the prolonged debate which has surrounded the desire of financial planners to become part of a profession, many comparisons have been made with the acknowledged professions of law and medicine.
However, while it is true that medical practitioners operate within comparatively exacting clinical and regulatory regimes, the same cannot be said of lawyers or law firms, many of which these days are given to pursuing business models which might evoke notions of huckstering, mis-selling and "product flogging".
Money Management late last year found itself fending off legal threats when it used the term "ambulance-chasers" in the headline of a story referencing lawyers touting their services to unhappy financial planning clients.
This publication used the term "ambulance-chasers" because we saw a distinct similarity between those lawyers who are deemed to chase ambulances in the hope of finding a client willing to pursue a personal injury claim and those lawyers who seek to make a living out of pointing out to people how unhappy they must be as financial planning clients.
Of course no one argues that lawyers should not be pursuing work in the case of events such as the collapse of Storm Financial and Westpoint, or the illegality which surrounded Trio Capital.
The class actions and other cases mounted by law firms with respect to Storm and Westpoint were entirely justified and helped a number of victims recoup a sizeable portion of their losses.
However the activities of some law firms appear almost predatory where financial planning has been concerned.
Indeed, planners need to worry about more than just the delivery of regular advice when it comes to lawyerly aggression.
They also need to be alert to issues such as advice around estate planning, and the propensity of lawyers to ramp up litigation around wills and estates.
They need to be aware of a legal profession elements of which have adopted emotive selling techniques and a predatory disposition.
Any reading of the display advertisements within Australian suburban and provincial newspapers will reveal advertising by law firms promising visits by lawyers, even to small country towns, with the offer of free initial consultations.
Then, too, there are those law firms which advertise on television suggesting that they can help you with everything from workplace disputes and injuries to your own version of justice with respect to the contents of a will or its administration.
As well as offering potential clients formulas such as "no win, no pay", a number of law firms also offer time-payment and other solutions which would be deeply frowned upon if they were offered by a financial planner.
The bottom line, of course, is that if a financial planning firm pursued similar tactics in pursuit of clients they would be accused of all sorts of misdeeds, not the least of which would be "product flogging" and, quite possibly, mis-selling.
Certainly, they would find it difficult to sustain the argument that they were necessarily acting in a client's best interests.
The difference, of course, is that while financial planners can find themselves being publicly named and shamed by the Australian Securities and Investments Commission (ASIC), the same does not apply to lawyers who err.
The requirements around external dispute resolution and the existence of the Financial Ombudsman Service (FOS) has served to reduce the degree to which lawyers can pursue issues within the financial planning arena, but it clearly remains fertile ground for those who seek to make their money from litigation.
There have been suggestions from within the Federal Opposition that, when it becomes the Government, it will review the external dispute resolution regime and the role of FOS.
If this is to be the case, then a Coalition Government should also fully review the manner in which the activities and practices of law firms are impacting the financial planning industry, not least the cost of maintaining professional indemnity insurance.
The bottom line for the financial planning industry as it seeks to become a profession is that under the oversight of ASIC, financial planners are being held to a much higher level of accountability and conduct than are lawyers.
Indeed, unlike lawyers, financial planners do not have the luxury of working within an industry which is largely self-regulated and within which too many practitioners seem to regard ethics as a county in England.
So if financial planners wish to model themselves on a particular profession, they would be best served looking to a profession which is subject to an element of third-party oversight and some genuine inhibitors with respect to the business models and practices they pursue.
Like many a school leaver, the planning industry should choose medicine over law.
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