There is indeed passion within the LICG. We must not doubt that. We in fact should not deride it. Passion in times like this is critical. Even when, however, it is misdirected. The current arguments of the challenge to the rights of advisers, the failure of leadership of industry bodies to represent their constituents and the challenge to leadership of those very same bodies is an all too familiar story throughout history. It is a shame that we as a collective, as an industry, as a species do not learn histories lessons well

You see this type of rhetoric is characteristic of any period of change. It is actually natural when the status quo is challenged. It reminds me all too well of another time in history. 1964. Specifically the United States Civil Rights Act of 1964.

After Kennedy’s assassination, President Johnson sought to maintain the promise and pass legislation that would see the passing of a bill that outlawed discrimination based on race, color, religion, sex, or national origin. At that time the most fervent opponents were 18 “Dixiecrat” senators from the South, who labelled the legislation “unconstitutional, unnecessary, unwise and extend beyond the realm of reason”. This opposing block sought to break the legislation by blocking it “filibustering” it, over weeks, including an address by Senator Robert Byrd of some 14 hours. The bill ultimately passed, and never in history had the Senate been able to muster enough votes to cut off a filibuster on a civil rights bill.

Why fight it so hard? The world had changed. The South good ole boys, Jim Crow way of doing things was something they wanted to protect.

While the core topic is remarkably different, the similarities in process are the same. Something is changing and needs to. A group protecting its interests does not want to change and is clothing that in democracy and the rights of consumers. Leadership is questioned and challenged. But as President Johnson pondered in 1964, “A president’s hardest task is not to do what is right, but to know what is right.”

So in the current argument what is right? As Tom Reddacliff wrote on 2 September[1] “advisers can focus that energy on a business model that will have less reliance on legislation and life insurers in the long run, and jump on board the first glimmers we’re seeing of product and technology change from life insurers and the underlying advice processes”. Ian Knox challenged us[2] “The whole planning industry is on the right wave at the moment and arguing about the need for a longboard isn’t what’s needed in the world championships”. And our industry bodies are on the abyss of losing it all, “The association would lose years of hard earned respect and relevance”.[3] And someone we have not heard from for a while wrote back in February 2016 “I know you are battle weary.  Your livelihoods and business model and retirement plans and careers have been challenged and shaken and in some cases ended.  It has been awful.  I get it.  But it is now, in this moment as the legislation hits parliament that you need to say “enough now”.  And look deep into your business and shift it.  Do it for you, your families and your clients.”[4]

The answer is not to destroy the establishment. The answer is not to fracture the advice community. The answer is to hold the ship steady whilst charting a new positive course. That’s action, that’s in the best interests of consumers, and with a strong and intact association we as a collective can shape the change for real benefits for consumers by leveraging that position of power to shape the agenda of the insurance and advice industry starting with the product providers who in fact are the groups with the potential and motive to create efficiency, product simplicity and advice engagement. They will not do this from a status quo position. There is simply no motive or reason for them to do so under the conditions where a fractured association with no power and a one policy agenda team is the landscape they find themselves delivered post 15^th September.

So it is vital that AFA members vote in this election. Voting is done on-line this year and you should receive E-Voting instructions via email from the AFA. Voting is reported to close at 4pm Thursday 15th of September.

Now is not the time to leave it to others to determine the outcome. You have the power in your opinion and if you have an opinion, vote, and unlike other legislative changes this industry has faced where advisers had not even read the legislation this is an issue where you should have an opinion.

Now is not the time for apathy. The US faces an abyss themselves right now.

“Donald Trump may dominate television and social media in the United States, but he’s not exactly crushing the electorate. Really, no one is. In the 26 states that have held primary and caucus elections for both parties, Republicans have cast 20 million votes, and Democrats have cast 15.1 million. But there’s a third force that has once again dwarfed both of these numbers: the great American tradition of disinterest and apathy.”

Right now, at this moment in the advice landscape, we do not need a Donald Trump Presidency. We do not need apathy. We do not need to build a wall between advisers and consumers. With only 1 in 5 Australians engaged in the advice process there is enough of a wall already. With disruptors moving into our space it is the time to be relevant and progressive and not the time to cling to processes of the past.

We need a multidimensional leadership team, such as the one currently in place. We need strong relationships with legislators at all levels, on all sides of politics and with product providers.

We need to change to evolve and grow and to be relevant to todays and tomorrow consumers.

As we stare into the abyss, we need your vote, we need your positive voices and we need you to do what is right. After all without that, what is the point?

By Ross Johnston

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[1] http://www.financialobserver.com.au/articles/opinion-accept-lif-and-embrace-change#sthash.IxNkkJZn.dpuf

[2] http://shedsocial.com.au/project/afa-battle-challenges-associations-relevance/

[3] http://www.linkedin.com/pulse/afa-being-defined-today-brad-fox?trk=prof-post

[4] http://www.linkedin.com/pulse/time-wake-up-disrupt-perish-andy-marshall?trk=mp-reader-card

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However, parties who’s sole interest is in seeing the destruction of the financial advice industry to improve their own competitive advantage such as directly marketed industry superannuation funds and other directly marketed funds management business seem to be the main players driving the reforms.

The overwhelming majority of advisers are concerned the proposed reforms will not achieve a positive outcome for the industry and feel that the major participants in the industry, “the Financial Planner Practitioners”, have been mostly ignored in the consultative process.

Financial planners feel that any reform needs to be implemented in a positive way that adds value and makes the Australian Financial Planning Industry a world leader. They don’t feel this is the likely outcome of current discussions.  Imposing reforms – such as some of those currently in play – that are designed to give a competitive advantage to one sector of the financial services industry over another will not only damage the entire financial services industry but will also be detrimental to the future wellbeing of our economy and the retirement incomes of many Australians.

Financial planners feel they are the minority opinion in how their industry should be reformed. Financial planners also feel that many of the major industry bodies who lobby Government on behalf of the financial planning industry are dominated by funds management companies – some of which are possibly conflicted in regard to the desired outcome of the reforms and may not represent a balanced view of the entire financial advice industry.

I have put together a reform wish list on behalf of – and based on feedback from – my industry colleagues.

So, in the interests of getting out a point of view which represents the thoughts of a good portion of financial planners, here is a good start to The Financial Planners’ Reform Wish List:

1. A level playing field for all participants in the financial services industry. Financial planners feel that some sectors of the superannuation industry are favoured over others. This creates oligopolies within the superannuation industry and is not ultimately good for competition or the end consumer.
2. A fair approach to transitioning from commissions to fee for service. Financial planning practices need to be given time to implement this change as it is no small task to transition clients to a new fee structure. At the end of the day when many long term financial planners built their practices, commission payments were a legitimate method for being paid for services – as it still is for most other industries in Australia in one form or another.  Look at how these people are paid: the legal profession, real estate agents, advertising companies, general insurance brokers, funds management and so on.  And don’t get me started on how the entire tax system is based not on a flat fee but on a percentage basis.
3. A level playing field for financial planner remuneration. If financial planners can no longer receive commissions paid from client’s fees in superannuation and other investment products, why is it okay for industry fund financial planners to be paid salaries that are funded by client’s fees? Isn’t this the same as – or worse than – a commission? Won’t this lead to the bulk of financial advice being provided by product manufacturers and take us back to the bad old days of 100% biased advice?
4. A consistent legal framework and consumer protection. Financial planners feel that the result of the reforms could see financial advice predominately being provided by product manufacturers especially where product manufacturers can run advice practices that provide 100% biased advice, pay commission-like salaries funded from clients’ fees and in many cases be exempt from the consumer protection rules under the intra fund advice provisions. How can this be good for the end consumer? Exempting some sections of the advice industry from complying with the consumer protections for advice will result in a race to the bottom.
5. A balanced approach to reporting from some sections of the media. The proposed reforms, when announced by the Minister, coincided with another bout of negativity aimed squarely at the financial planning industry by many commentators. Some of the negativity has been justified in small pockets of the industry where there has been some disappointment, however I have never heard of any financial advice industry in the world that has had to endure such a sustained barrage of criticism and negativity. Financial planners feel they are being unfairly targeted to the benefit of other sectors of the industry.
6. Make advice more accessible, affordable and independent.  Financial planners feel that the Financial Services Reform Act already provides adequate consumer safeguards and that much of the proposed reforms to improve consumer protection only drive up costs. The reforms need to help in driving down costs while at the same time improving the quality of the advice.
7. Positive support for the industry from Government. The Government is openly supportive of most of Australia’s industries, and it would be nice to see  the Government also supporting the financial planning industry.  Clearly the lobby groups need to do more work in this area to win the support of the Government, possibly by explaining how much clients can benefit – financially and emotionally – from having a financial planner who develops a solid strategic plan for the client and then ensures the client sticks to that plan.
8. Less paternalistic approach. Financial planners feel we are seeing more prescriptive  approaches that treat advisers and their clients like children.  Examples are the proposed annual opt-in for financial advice fees and the My Super concept. The implementation of the opt in arrangements will only result in increased costs and complexity for clients. At the end of the day every client receives an annual statement and it is glaringly obvious on these statements what fees are being paid to the financial adviser.  If the client wishes to discontinue the service all they have to do is pick up the phone.

The financial planning industry plays a major role in building the retirement savings of Australians and in properly structuring people’s financial affairs to help them become financially independent and make them less reliant on the social security system in retirement.  As one of Australia’s most important industries in delivering economic wellbeing for ordinary Australians, financial planners feel they should have the opportunity to provide feedback on any proposed reforms.

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