Treasurer Scott Morrison’s recent Recommendation 25 seeks to advance the need for advisers to have a relevant tertiary degree.
While advancing yourself through study is never a bad thing, I want to ask if compliance degrees are absolutely the best way to advance the fledgling financial advice profession.
Is the Recommendation 25 advice the missing link for adviser competency? Further to that, will these newly-minted degrees ensure something more than competency in technical advice skills?
In 2002, the Australian government championed the Financial Services Reform (FSR), which sounded great at the time.
In the years since, we have seen an ever-increasing financial product compliance focus that didn’t stop or prevent a parade of scandals, crooks and unprofessional behaviour. Think of Storm Financial in one of the most quoted scandals following FSR, who were regularly assessed as being ‘compliant’ as they advised their clients into products and financial plans that sparked much of today’s conflicted debate.
If raising everyone’s confidence in our financial advice system was the objective of the 2002 legislation, it didn’t work. The intent was good, but as so often happens, the implementation lost its focus.
Moving to 2015, our industry wasn’t surprised by David Murray’s Financial Services Inquiry final report which said “…the current framework is not sufficient…the issue of adviser competency remains”.
Education, development and training (particularly technical competency skills) for financial advisors will always be crucial.
But with the new regulations in place this year (until 2017 for new advisors and 2019 for existing advisors) we as advisors need to ask ourselves if this ‘fix’ will also result in more trust or standing for us as professionals in our industry.
Tom Collins sensibly argued back in 2003 against the alleged benefits of FSR, and predicted the years of compliance roundabouts the industry has been spinning around.
Particularly for ‘experienced’ advisers, the major flaw with instigating a compliance degree to continue as an adviser is that it won’t advance the industry’s desired path towards the profession it yearns to become. This flaw is best illustrated by Henry Ford’s alleged quote: “…if I’d asked my customer what they wanted, they would have said a faster horse”.
Like everyone else who contributed to this debate, I will always support ongoing skilling, development and expertise (in fact, I’m biased because my last thirty years of business has depended upon clients willing to spend money on it!). While I believe 2021 might be a better start date for existing advisers than 2019, I think overall they are missing the point.
The financial advice industry is standing on the brink of becoming a profession.
Consumers are beginning to understand the difference. They are starting to understand the divide between financial product distribution and professional financial advice without real or perceived conflicts.
The recent push for more technically qualified and degreed advisers isn’t acknowledging the fast-growing technology solutions transforming the industry. Robo-advice technologies are fast commoditising the technical skills that forged the tax, superannuation, insurance and mortgage industries.
So will racing to get a degree to become compliant make you a better-qualified blacksmith in a world of cars? Perhaps.
If we look at FSR today, we know that it didn’t engender greater trust in the financial services industry. It did however generate more paperwork, more middle management, more costs, and no improvement in the standing of the advice profession.
What’s our response to this new, regulated world? An alternative solution, particularly for experienced advisers, will be a structured professional program similar to an accountant’s ‘professional year’ conducted in the workplace to professionally agreed standards. It will also require ongoing re-accreditation. To achieve the overall objective of greater confidence in our advice profession, it will focus on implementing professional advice practices.
The current degree solution will bring yet more years of distracted effort and debate about how to become a more qualified product provider. We need to be careful this doesn’t repeat and extend the experience with FSR.
Integrity and professionalism of financial advice has to be our objective, not more years of bureaucratic compliance where the focus is on compliance processes – rather than professional outcomes and advice.
What do you reckon?