Advisers Down Under face the toughest regulation in the world, according to Australia’s Financial Planning Association chief executive Mark Rantall. But if you fancy living on the other side of the world he knows what you need to do.
The FPA is a professional body for advisers, with over 10,000 members, 7,500 of them financial planners. It is the leading voice for Australian advisers as the regulatory ground shifts beneath their feet.
Rantall has form for the job. During his five years as managing director at advice firm Godfrey Pembroke he helped 200 advisers move to a fee-based remuneration model. After that he helped set up the National Australia Bank’s training centre, The Academy, at which he held the post dean of advice.
Some of the rules faced by advisers in Australia seem less restrictive than those in the UK. For example, there is no independent or restricted test, though advice firms do have to disclose their ultimate owner – often a large product provider. Some independent firms register as such through the Corporations Act regime, which sets out many of the requirements for advisers and the wider industry. This means they can promote themselves as IFAs but this is only around 15 per cent of the market.
Advising on basic banking and general insurance products is subject to lower education standards than advising on pensions – or superannuation – and other more complex products.
However, the Future of Financial Advice legislation set down by the previous Labor government certainly sets out some tough rules.
Among them is a requirement to an opt-in from clients paying ongoing fees every two years. Advisers also now have to take “any other step” which could “reasonably be seen” to be in the best interests of their clients, something Australian finance minister Mathias Cormann has described as an “open-ended” requirement.
“Overall it’s probably the most stringent regulatory and legislative framework in the world. Opt-in doesn’t exist anywhere else that we are aware of. Do you even need all of this additional paper work and red tape on top of removing commissions and fee disclosure statements?” Rantall says.
“Whether it actually serves to protect the consumer is still a question. Maximum consumer protection comes from evolution and development of a profession. Legislation alone doesn’t adequately do it.”
These rules are only now fully in force because two senators broke away from the coalition running the country, giving Labor enough votes to reverse amendments to them made by the government that removed the opt-in and “any other step” requirements. Rantall says the bill for these two things alone could cost a medium sized advice firm in excess of $50,000 (£26,400) a year.
The government also only wanted advisers to have to provide fee disclosure statements to new clients, rather than new and existing ones as demanded by the Labor rules. As a result of these amendments being overturned, Australian advisers now have to readjust to a set of rules they thought they had seen the back of.
More changes could be on the way. In December, the wide-ranging Financial Systems Inquiry was published. Looking at Australia’s financial system as a whole and known as the Murray Review it set out 44 recommendations. These range from raising the minimum education standard for advisers to degree level to making it clearer who ultimately owns advice firms, potentially through branded literature.
Given how tough he considers the rules for advisers are, it is perhaps no surprise Rantall backs the Murray Review’s call for a body to be set up to oversee the regulator and for key performance indicators to be made public and used to hold it to account.
He says: “We have an economics senate committee that performs a similar function to the UK’s Treasury select committee but something with a specific responsibility for regulation means better oversight and more dedicated resources. We all need to be accountable.”
Rantall also gives a cautious backing to a novel approach to increasing regulatory costs by BW Advisers, an advice firm in the state of Victoria, which plans to charge clients a levy to cover the increased costs resulting from Labor overturning the government’s amendments to FoFA.
He says: “It is a bit of a stunt. But charging a discreet levy is certainly one way of bringing it to people’s attention because it is not something of the financial planners doing and the client can decide whether the cost is justified.”
If any of this makes you feel a bit like heading Down Under and starting again, could you do it on your current level of qualification?
Well, no. Despite the fact the Australian Securities and Investments Commission recognises UK qualifications, you still need an Australian diploma in each area you want to advise in.
There are stories of one diploma taking as little as eight to 10 days to obtain, though Rantall says it is very rarely the case. Getting qualified can take up to a year and usually involves getting several qualifications in different areas of advice. For example, if you want to advise on pensions you need qualifications in financial planning, superannuation, taxation and managed investments.
You can then work as an authorised representative under a licensed adviser but you would be subject to an experience test before you can be fully licensed and solely responsible for giving advice.
“The technical landscape here is completely different to the UK,” he says. “There would be a lot of technical learning needed before you could work here.”
But you had better be quick. The government is now consulting on the Murray report and its recommendation for advisers being educated to a degree level – a call subsequently backed by a Parliamentary review into adviser ethics. This is a move Rantall backs, a relevant degree being a prerequisite for certification by the FPA.
If you still fancy upping sticks and heading Down Under, Rantall has an offer for you to think about.
“If you’re willing to come here, get into the certified financial planner programme and finish it, I’m more than happy to say you’re qualified to give advice in this country.”
What is the best piece of advice you’ve received in your career?
Believe you can change other people’s behaviour by changing your own.
What is keeping you awake at night?
Global financial stability, global peace and our impact on the environment.
What is the most significant impact on financial advice in the past year?
The vote to retain the future of financial advice reforms.
If I was in charge of the regulator for day I would…
Protect the term financial planner in law and introduce a director fiduciary duty for companies manufacturing investment products.
Any advice for new advisers?
Improve your education standards and put your clients’ interests above anyone else’s, including your own.
2010-present: Chief executive officer, Financial Planning Association
2008-2010: Dean of advice, The Academy, National Australia Bank
2003-2008: Managing director, Godfrey Pembroke
2000-2002: General manager, financial services, Stockford Limited
1992-2000: State manager for Victoria, South Australia and Tasmania, Sealcorp