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The royal commission has questioned whether there is an “inherent conflict” at the heart of the two main financial adviser associations, with very different responses given by the FPA and AFA.
Appearing before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry today, FPA chief executive Dante De Gori and AFA chief executive Philip Kewin were separately interrogated, with a focus on member disciplinary procedures.
During cross-examination, counsel assisting Rowena Orr QC asked both CEOs whether their very make-up and mission statement may be conflicted.
“How can an organisation that is seeking to make itself attractive to potential members in comparison with other industry bodies, also at the same time as seeking to make itself attractive to regulate the conduct of those members?” Ms Orr asked Mr Kewin.
“Isn't there an inherent conflict in those two propositions?”
Mr Kewin responded that he “didn’t think” there was an inherent conflict, but went on to acknowledge there was a “tension” between the functions of promoting and regulating financial advisers.
Ms Orr put a similar proposition to Mr De Gori.
“The two things are difficult to reconcile, is what I'm putting to you, “she said. “On the one hand you're wanting to promote financial advisers, nd I'm putting to you that it's difficult to do that at the same time as imposing disciplinary sanctions on financial advisers for misconduct.”
The FPA chief executive rejected the proposition, saying the FPA has a “dual purpose” and that the two missions are “equally important”.
He conceded however that the dual purpose is a “challenge” for the association in practice.
The two CEOs also differed in their response to questioning about the current status of the financial advice industry.
“Do you see financial advisers as being part of a profession or part of an emerging profession?,” Ms Orr asked both chief executives separately.
When pressed, Mr De Gori confirmed that he thought the latter, that the industry is an “emerging profession” and that it is not yet equal to professions such as law and medicine that have “been around for centuries”.
By contrast Mr Kewin indicated that the industry is currently a profession, on par with doctors and lawyers. He said that the “majority” of advisers are professionals and the “majority” of clients would see them that way.
Compliance consultant Brett Walker tweeted that the testimony may cause problems for the associations in their bids to become code monitoring bodies under the FASEA regime.
ifa has previously criticised the “dual purpose” of the two associations in two editorials:
https://www.ifa.com.au/editorial/17641-a-cautionary-tale
https://www.ifa.com.au/editorial/17334-hunted-becomes-the-hunter
The royal commission financial advice hearings continue live: https://www.ifa.com.au/strategy/25404-royal-commission-financial-advice-hearings-live-blog
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Comments (34)
Hopefully this is the first nail in the FOA’s coffin. I don’t know a single smart planner who wants to be associated with the FPA. God knows why anyone would.
They forgot who they are representing over a decade ago. It’s a joke.....an absolute joke.
I have, as others, joined the FPA in hopes that this body would represent us as we come up against issues in our profession. Which, since I have joined has not really happened. I find this deeply concerning that the CEO (either from the FPA or AFA) does not appear to have it's advisers in their best interest.
As part of my message, would hope that other members approach their respective representatives and ask for further information regarding breakdown of revenue from (1) members; (2) professional partners; and (3) partnership with product providers. I would like to highlight this is without bundling fees as I know has been done previously. I only ask this as a means of total transparency; which does not appear to have happened as part of the commission.
Professions have some fundamental characteristics such as:
a. based on specialized theoretical knowledge, i.e. not RG146, generally a minimum of a post graduate degree
b. articleship - i.e. white collar apprenticeship for a defined period, i.e. 3 years or longer
c. autonomy - control over and ultimate responsibility for their work, financial advisers work under an AFSL responsible managers authority
d. ethical constraints
I am also a member of an industry association and I am happy with that because they tell me that's all they are. However the FPA advertises they are "professional"....when clearly they are not.
My point is we need a professional association in the industry in an attempt to prevent Government regulation.
In addition, because Medico's are seen (rightly or wrongly) as entirely trustworthy professionals, the Govt don't want to be seen attacking " my very helpful and kind GP" , but they love taking a massive stick to every financial adviser in the country and beating them senseless for year after year because it's an easy target and they are much further down the pecking order of loved occupations.