It has taken far too long, but the Australian financial planning industry may have crossed a Rubicon this week with AMP, NAB, Westpac and Macquarie indicating that they are moving to impose much tougher education standards on financial advisers.
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My colleague Adele Ferguson has done more than anyone to uncover conflicts, incompetence and dishonest behaviour in the planning industry, and as she noted on Thursday, raising educational standards for planners is only part of the long-term fix.
There are still important unanswered questions about how to ensure that people who need advice get it at a price they will pay.
There is, for example, general agreement that commissions on financial products create conflicts of interest for advisers, but much less agreement about whether alternatives, including up-front payment for advice, can be delivered at prices that make advice affordable for many who need it. Advice is tax-deductible, but additional government subsidies may have to be contemplated. It would certainly be a better investment than, say, a first home buyer's bonus.
The durability of the vertically integrated model that the banks and groups such as AMP pursue is also still in question. Their dual roles as manufacturers of investment products and financial advisers is being tolerated by the regulators here: the focus is on fixing their model, not ending it. In other countries, including Britain, the vertically integrated model is being actively discouraged and banks there have been retreating from it.
Whatever industry model emerges, raising educational standards to a point where clients can at least be confident that the advice they are getting is competent is essential.
CBA has been at the centre of the financial planning firestorm. It announced higher accreditation standards for its planners in July. This week's responses from NAB, ANZ, Westpac, Macquarie and AMP turn it into an industry upgrade.
AMP and the banks vary slightly on the specifics and timelines for the introduction of the new qualifications they will enforce.
The common theme, however, is that they will all require advisers to hold Certified Financial Planner (CFP) accreditation. This is a big leap upwards, given that the current bar for entry to the financial advice industry is set so low that prospective entrants to the hairdressing industry have a longer and harder road to travel.
Definitions vary, but on the one that narrows the field down to those who provide the gamut of financial advice, there are about 18,000 financial planners in Australia, 5500 of whom hold the CFP accreditation. This week's developments ensure that within a few years everyone in the planning and advice business will need to either have the qualification, or be in the process of obtaining it.
The CFP accreditation is run in this country by Financial Planning Australia, an industry group that has distinguished itself in recent years by supporting tougher standards and, this year, opposing the Abbott government's roll-back of some of Labor's Future of Financial Advice reforms.
Like the highly regarded Chartered Financial Analyst (CFA) credential that many sharemarket and listed company analysts hold, the CFP originated in the US and has gone global. Australia was the first country to import it from the US, but there are now CFP-accredited planners in 25 countries.
It differs from the CFA credential, however, in being tailored heavily for this market. Global CFP standards are overseen by an international financial standards planning board, but about two-thirds of the local course is adapted for local rules and regulations. After obtaining the accreditation after two or three years' study, CFPs must also undertake 40 hours of professional development every year to retain the qualification.
Importantly, the CFP is a post-graduate qualification. Only graduates can undertake the course, and degrees that qualify must cover subjects including finance, superannuation, estate planning, insurance, financial planning, taxation, investment and commercial law.
FInancial Planning Australia says the CFP includes professional development commitments and adherence to an ethical charter because it is a designation that has to be maintained, not a qualification that you "get and forget".
It can't clean up the industry on its own. You would, however, have to think that the standard of advice will be significantly higher when 100 per cent of the adviser population is CFP-accredited instead of 30 per cent as is currently the case.
No bad news good news
The June-year profit season is more than three-quarters over, and the good news is there isn't any really bad news.
On Citigroup's scorecard, sales are 1.1 per cent lower than expected, but earnings per share are a negligible 0.3 per cent short of expectations. Citi says 17 per cent of the companies have reported positive earnings surprises, 17 per cent have reported earnings misses, and 66 per cent are in line.
The main theme is payouts in dividends and buybacks, from the likes of Rio Tinto, Suncorp, CSL and Telstra. BHP Billiton, on the other hand, saw its shares fall this week after it announced a demerger, but held off on a share buyback.
Businesses appeared intent on rewarding investors, Reserve Bank governor Glenn Stevens said. Low interest rates could lead a horse to water, but they could not force it to drink.
As the Reserve has often noted, businesses' investment follows consumer demand rather than leading it.
Businesses were unlikely to invest until they experienced "a sustained period of strong demand", the central bank said in the minutes of its August meeting on Tuesday. That sort of demand-led economy isn't evident and won't be this year: dividend hikes and buybacks will be the boardroom priority in the December half, too.