CFP Conference preview - All a matter of ethics, not rules
What does it take to be ethical in financial planning? Professor Stephen Cowan, who will be presenting at the CFP conference in Hobart, says it is all about ex-cellence. JULIE BENNETT reports.
What does it take to be ethical in financial planning? Professor Stephen Cowan, who will be presenting at the CFP conference in Hobart, says it is all about ex-cellence. JULIE BENNETT reports.
"Ethics is not an inoculation. In the whole area of compliance, there are regu-lations, rules and statutes designed to compel people to do the right thing. But that's not what being ethical is about. Ethics is not about having a minimum professional standard, it is about excellence."
That is the message Professor Cowan will be delivering to over 200 CFP confer-ence delegates this week.
"I'm impressed that the Financial Planning Association (FPA) has come up with some very good ideas regarding compliance, and that those ideas have been taken up by the Government and made law," he says. "Now those requirements become the baseline for everyone, rather than a top end benchmark."
However, rules and regulations will never make people ethical and while ethics may be ultimately good for business, being ethical may not necessarily benefit the bottom line. "Ethics," says Cowan, "is, in fact, a cost but that cost is worthwhile in itself. Ethics is something which is pursued not out of self-interest but for some other reason. Why be ethical? The answer is simple - be-cause you want to be. The impetus comes from within, not from without."
Cowan does, however, acknowledge that the standards formed by the financial services industry are crucial to the delivery of high quality financial planning advice.
"An ordinary person making decisions about his or her own financial future might make mistakes - actually, you'd expect them to. But for a professional to make those mistakes is inexcusable, it is not good enough."
Cowan says that the challenge for the industry now is to put principles into op-eration, to sit alongside the rules and regulations.
"Codes of ethics necessarily involve the professional in discretionary moves - people have to exercise discretion. They must be able to justify why they're do-ing what they're doing within the range of choices they have available to them. A practice rule might say in this circumstance, do this, but the principle talks about being impartial, recognising a conflict, being fair. Fairness is very im-portant but it's not something that can be spelt out. All of these things re-quire judgement. That's where ethics comes into the picture."
The difference between a practitioner and a professional practitioner, according to Cowan, is the difference between training and education.
"Financial planners must be excellently trained, but ethics is about education. It's about making up your mind about the best course of action and executing it. And then being able to explain the reasons for doing what you've done."
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
