Financial services lawyer Sean Graham says that planners need to address consumer concerns about integrity, rather than ‘shooting the messenger’.
The emerging financial planning profession has many positive characteristics; a deep and abiding focus on clients’ interests, a broad perspective and a keen understanding of clients’ lifestyle and financial needs. It does however demonstrate some equally strong negative characteristics; a lack of introspection, reactionary responses to criticism and a too common tendency to “shoot the messenger”.
Consider the ASIC Stakeholder Survey (September 2013).
This Survey Report is hardly game changing. In some respects it does little more than document industry practices and make some broad observations, but online comments (which are not necessarily representative) seem entirely predictable; they dismiss the regulator’s views entirely, point the finger at accountants and lawyers and assert that the criticism is unfair (or politically motivated).
In reality, the overwhelming majority of financial planners do a great job; they provide the advice and support that enables many Australians to lead better lives and enjoy a better retirement. Most Australians would be better off, and have a better quality of life, if they sought advice – but only one in five Australians do actively seek advice.
Let’s be clear, 80% of Australians do not actively seek financial planning advice.
There are of course a number of possible explanations why they don’t, from cost to accessibility to apathy; however their perceptions of the financial planning industry may be a more important factor than we currently appreciate.
The ASIC Stakeholder Survey noted that 30% of respondents didn’t believe that “financial advisers operate with integrity”. This response rate increases to 34% if you exclude from the survey those that didn’t provide any response at all.
Predictably, online commentators took the report personally; they referred to their own successful practices, the small sample size and the source of the report to dismiss these observations. But perhaps a more mature and productive approach might be to accept the thrust of the issue, acknowledge the impact that failures like Storm and Westpoint had on public confidence and consider whether consumers’ concerns about adviser integrity might be an important reason why more Australians don’t actively seek financial advice.
This doesn’t require us to believe that financial planners don’t act with integrity (clearly you and the majority of your colleagues do) but shouldn’t we at least acknowledge the elephant in the room.
As much as we may disagree, the introduction of a best interest duty is an obvious demonstration of dissonance between our views of financial planners and consumers’, legislators’ and regulators’ views of financial planners. The statutory test, a redefinition of appropriateness, a renewed focus on conflicts of interest and the introduction of the client priority rule, all suggest that there are concerns about aspects of the financial planning industry.
These perceptions may be inaccurate, unfair, unrepresentative and unreasonable, but they still need to be acknowledged and addressed.
In fact, both the FPA and the AFA are doing so and they have dedicated significant resources to promoting a more positive (or more balanced) view of our industry. They continue to be strong advocates for the value of advice and the advice profession, but they don’t make the mistake of ignoring the past, apologising for the emerging profession or pretending there haven’t been mis-steps along the way.
Instead of rationalising high profile advice failures, or ignoring the elephant in the room, they’ve chosen to drive for higher standards, better education and better behaviour. It seems to be working, and they note that an increasing number of consumers are seeking financial advice.
Perhaps it’s time for us all to take a similar approach and work at improving the lives of the 80% of Australians who wouldn’t have previously sought advice.