This year’s FPA annual conference ran under the banner Professional Edge.
With the industry under siege following a string of failed investments on the back of commission arrangements, the FPA is finally moving towards the recognition that the business of advice is in need of an overhaul.
The association certainly put the spotlight on industry professionalism by opening the conference with the launch of a directive that will compel FPA members to have a degree by 2015.
Already the association has moved to address the issue of commissions, announcing in May that it would phase out commissions paid to its members by 2012.
These initiatives, according to FPA chief Jo-Anne Bloch, were aimed at moving the industry away from embedded conflicts of interest toward professionalism and a greater focus on client needs.
The outcome of the Ripoll inquiry goes a step further.
In its first recommendation, the inquiry called for an amendment to the Corporations Act that will ensure the duty of care of a financial planner to a client is lifted to a fiduciary standard.
The collapses of Storm, Opes Prime, Great Southern and Timbercorp were fuelled in part by lucrative commissions paid to financial planners.
It was these payments, not good advice, that influenced advisers to recommend these investments to their clients.
While codes to address the issue of conflicts of interest by the FPA and the Investment and Financial Services Association were in good faith, it seems regulation is the only answer if the industry as a whole is to prevent another series of large-scale failures.
The FPA conference ended with a panel of speakers drawn from the advice industry, consumer groups and media.
Bloch asked each panel member how they would define fiduciary.
Definitions ranged from a duty of care, to an obligation, to acting in the best interests (the journalist seemed to struggle with her definition).
Varying descriptions, perhaps, but the concept of responsibility still holds in each of the panel member’s definitions.
If implemented, the Ripoll inquiry’s recommendation should compel the industry to hold a duty of care despite the myriad current perceptions.
