The year in review: The steady road forward

After a very turbulent year for financial planners, there are signs of recovery and cautious optimism among practitioners heading into 2010.

We’re starting to see a twinkle of light at the end of a very long tunnel of government reviews, corporate collapses, changes to superannuation and debates about financial planner remuneration — just to mention a few.

Significant changes have occurred in the financial planning profession as a result, and while there’s still some way to go, the financial services industry overall has learned a lot. Our future will be shaped by the tumultuous year that was 2009. Things will never be quite the same again — and that’s a positive.

This year, the global financial crisis was at its worst, investment portfolios were in decline and super funds were looking grim. Financial planners were feeling the heat, and corporate collapses the likes of Storm Financial and Great Southern served to undermine our considerable efforts over the past few years.

Many in the industry took swift action. The Financial Planning Association (FPA) made significant changes to its professional framework and made recommendations to Parliament to raise the bar for financial planners across the board.

The FPA led the way for its members and, in turn, consumers. In addition to our ground-breaking policy to reform remuneration practices, the FPA recently released for consultation an education policy designed to boost education and training levels for financial planners; a streamlined code of professional practice for its members; and FPA Confidential, an anonymous reporting system designed to encourage consumers and financial planners to report suspected misconduct.

The FPA also contributed to more than 30 government and industry reviews to ensure the financial planning profession is heading in the right direction.

The most recent inquiry to report its findings, the Parliamentary Joint Committee into Corporations and Financial Services (PJC), has made a range of significant recommendations to address cracks in the system. Importantly, the PJC has acknowledged that there is no one silver bullet to address a myriad of issues — and that the Government, industry and Australian Securities and Investments Commission have a role to play.

In particular, the PJC’s recommendation about fiduciary responsibility was well received by many in the financial planning profession. FPA members are already required to put their clients first as part of the FPA’s code of professional practice, but a fiduciary responsibility will require all financial planners to do so as a matter of law.

The PJC has also suggested that the banning of commissions not be legislated, while making it very clear that product-directed payments to financial planners should cease. The FPA and the Investment and Financial Services Association demonstrated that the industry has taken this forward already. The FPA was the first professional association to move away from commission-based remuneration, finalising our approach in October this year. This year also saw significant changes to superannuation. Changes in the 2009 Budget and, later, the introduction of intra-fund advice will affect consumers — particularly retirees — for many years to come.

Intra-fund advice, in particular, took centre stage for some time. Superannuation trustees were allowed to seek relief from normal legislative sanctions to deliver limited personal advice to fund members on the basis of a ‘special relationship’ with their fund members. While the FPA was pleased that more Australians would receive financial advice, it was concerned that trustees would be able to provide advice without a reasonable basis — and therefore escape criminal sanction — simply because the advice relates to a few scenarios within a superannuation fund.

Not everyone in the financial services sector agreed with the FPA’s position on intra-fund advice, but the FPA believes industry debate will ultimately lead to improved services for consumers. Trustees will take a cautious approach to advice when they realise the implications of licensing. When their financial planners are required to become fiduciaries, the game plan will change again. A fiduciary duty of care requires more than recommending a low-cost product.

Financial advice is valuable and it is an important contributor to the wellbeing of so many Australians. As we move towards 2010, it is important we do so with confidence in our profession, in our regulatory framework, and in the quality of advice delivered.

The next short-term period will no doubt continue to be difficult as we air and address all the issues, but the common themes are on the table — and the desire is there to make sure we achieve the recognition that our profession deserves.

Jo-Anne Bloch is chief executive of the Financial Planning Association.