Should the FAAA support the new class of adviser?

Speaking on a Financial Advice Association Australia (FAAA) webinar last week, chief executive Sarah Abood said there is no consensus on whether the FAAA should support any new class of adviser that would be introduced through the second tranche of the government’s Delivering Better Financial Outcomes (DBFO) reforms.

First announced in December last year, there are still few details about exactly how the new class of adviser would work when it is eventually introduced. However, the FAAA wants to hear from members on whether it should include them.

“A specific question we've asked members to get back to us on is should we be supporting the new class of adviser?” she said.

“There's views on both sides. At the moment, I don't think that there's a strong view either way. We have some members who are saying, ‘yes, absolutely, you should support them. We need to ensure that they're doing the right thing, that they become a feed through class of member to full professional advice that we're kind of keeping an eye on them and ensuring that the advice they provide is good and is not going to bring the profession into disrepute.”

“We have another group of members who are against that and feel that it would dilute our focus on professional advice and that we should not have anything to do with them.”

The question of how to ensure that the new class can eventually become a full member of the advice profession becomes increasingly important in the face of what FAAA chair David Sharpe called an “existential threat” to financial advice – dwindling adviser numbers.

“We need to make it easy and become that trusted profession where we're allowed to get on and do what we do. But if we have the headlights on our bike just looking down at the rocky path we're currently riding on, we might miss the cliff that's coming,” Sharpe said.

“The declining numbers of our profession, if I could be blunt, it's an existential threat to financial planning.”

He added that the FAAA making a decision around including the new class of adviser is looking at it as a “long-term issue”.

“We know it may not be affecting our members right now, but if you've got a business and you need staff in two or three years’ time, it's absolutely going to be impacting you,” Sharpe said.

However, Abood also noted that the concerns around a possible dilution of the financial advice profession are valid, particularly given the changes over recent years to ensure it is indeed viewed as a profession.

“What distinguishes a professional from someone who's been successful in their career or is doing something else is their obligation to put the interests of the client first,” she said.

“That will also set us apart, by the way, from a new class of adviser. One of the most common pieces of feedback I’m getting from members at the moment is that the new class of adviser probably shouldn't be called adviser, or at least if they are, under very limited circumstances, because that term is protected and because those who hold it at present have that fiduciary duty to their clients.

“We want that protected, and we want that made distinct from what the new class of adviser will be able to offer. They will not personally have a duty to their client. It's their employer [that] will have a duty to their client. That's why I would argue that they're not a member of the profession per se.”