You can’t legislate ethics
For as long as I can remember the financial services industry, and in particular the financial planning sector, has been going through a ‘reform’ or ‘enquiry’ of some sort. I am sure that many Australians share the same sentiment.
If you haven’t heard of the Future of Financial Advice (FoFA) reforms, the Financial Services Reform (FSR) Act 2001 and the FSR (Consequential Provisions) Act 2002 or more recently the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016, or some sort of banking enquiry, then you haven’t seen the front page of a newspaper in almost a decade.
While the media has most certainly realised that bashing the perceived ‘white collar criminals’ that are financial service professionals sells A LOT of newspapers, the truth is there are some bad seeds out there. These ‘dodgy’ operators include mortgage brokers, accountants, financial planners/advisers all the way through to banking executives.
The issue is that there are unethical operators in every profession in every country in the world. Yes EVERY profession. From the Church and Charities to the Entertainment Industry, which is the current flavour of the month.
So why has Financial Services received such sustained scrutiny? Well to put it simply, because it effects every single one of us. If you have a mortgage, life insurance, superannuation or even a bank account (remember the ATM fees debacle), then you have had your service discussed and scrutinised in the media. So we can all relate as it interests us all.
Now I am not saying reform is a bad thing by any means, but having issues blown out of proportion does have some unintended side effects. In the case of Financial Planning there has been so much legislation introduced, amended and redacted that it has made many a financial planner question their chosen career path.
At a time when more and more Australians need good quality financial advice to achieve their retirement goals, in part due to the tightening of the Age Pension qualification criteria and in part due to Australians recovering from the effects of the GFC on their retirement nest eggs, the number of Financial Planners providing advice to Australians, does matter.
The other effect, and the most concerning, is that the cost of being in the financial planning business has increased considerably. The legislation and reforms have mandated many extra steps in the planning process and set relatively high minimum education requirements. Being that it is business after all, these costs ultimately get passed on to the consumer, the everyday Australian who just wants some financial advice on their super or insurance. This affects the people who, in my opinion, need financial advice the most.
The sad reality is there will continue to be dodgy operators in every industry, they have and always will find a way, because you can’t legislate ethics. Almost every adviser behaved ethically before the reforms began and will continue to do so in the future, so my question is, have these reforms gone too far?