Scrap the cap

The proposed cap on tax deductions for self-education disadvantages financial planners seeking to comply with regulatory changes

YOU WALK into your local medical centre to see a doctor. The doctor proceeds to examine you, makes recommendations about changing your lifestyle, prescribes some medication and suggests some follow-up tests. Without questioning the recommendation, you walk out, purchase the script and make a follow-up appointment.

This is because you trust that your doctor has an appropriate degree, has undergone years of study, examination and evaluation in order to be admitted to practice. Now, imagine if the same doctor had only had a few months training and the medical equivalent of RG146!

Just as we would all agree that access to such professional medical advice is of national importance, so too is improving the financial wellbeing and literacy of Australians. Access to professional financial advice is arguably as important as access to professional medical advice.

The financial planning sector in Australia has undergone severe criticism, in particular over the past five years. Sensational headlines and the stories of suffering and loss resulting from poor financial advice have been  prominent in recent years.

However, there are many more success stories of financial planners who have made significant and positive differences in the lives and finances of their clients.

There are bad apples in every industry, including the medical profession. However, what we are looking to replicate is the high standing of the medical profession and have financial planning recognised as a universally respected profession in Australia.

SO, HOW DO WE GET THERE?

The financial planning sector has long endeavoured to regain trust and be recognised for the good advice provided by its members. Even more crucially, the industry wants to accelerate the standing of the financial planning profession within the community.

In order for Australians to seek financial advice, they must view it as a respected profession that will add value to their lives. The Financial Planning Association responded by announcing over two years ago that membership would be restricted in future to those that hold, as a minimum, an approved university degree.

This came into effect on 1 July 2013. We believe it should be a requirement for all professional associations. If we want more Australians accessing financial advice, we need to raise standards throughout the profession.

Many legislative and regulatory changes within the financial services sector have created a compulsory requirement for further training and education. For example, the implementation of the Future of Financial Advice (FOFA) reforms has resulted in intensive training programs to help financial planners understand and implement the new measures.

Furthermore, legislation was passed in late June to bring financial planners into the Tax Agent Services Act (TASA) regime, commencing on 1 July 2014. To become a registered tax agent or registered tax (financial) adviser will require additional training for financial planners in the areas of tax and commercial law.

The proposed cap on tax deductions for self-education specifically disadvantages those in financial planning who, as a result of these recent legislative changes, must complete new training and education not traditionally described as ‘self-education’.

We consider education, including both initial qualifications and ongoing professional development, as vital requirements of a profession and a key factor in protecting consumers’ best interests.

The cap would go against the fundamental principles of this government and of the country that support improving the qualifications and skills of our workforce.

The government has its role and responsibility in increasing access for all Australians to quality professional financial advice. This means they need to get serious about education and training – and to scrap the cap! «