Financial Planning

Professionalism held back by licensing regime

advice licensing regime

Financial advice will not move forward as a profession while practitioners are dependent on licensees to allow them to practice, according to an industry body.

The current licensing regime for advisers is holding back the shift to professionalism and is inconsistent with the obligations being placed on individual advice practitioners, according to the Financial Planning Association (FPA).

FPA chief executive Dante De Gori said the need for financial advisers to be authorised to act under an Australian financial services licensee prevented them from being viewed as professionals in their own right, as well as not being tied to product recommendations.

“If you think about lawyers, accountants, doctors, architects, engineers, they’re all professional service providers, but their employer isn’t the person or the organisation which appoints them as their said profession,” De Gori said during a panel session at the recent Stockbrokers and Financial Advisers Association 2021 Hybrid Conference.

“The hospital doesn’t make you a doctor, the law firm doesn’t make you a lawyer, but in our space, the financial advice firm makes you the adviser.

“In order for us to progress to the final point of individual professionalism of financial planning, the individual needs to be a professional in their own right and needs to have the recognition as an individual adviser in their own right.”

Tying adviser authorisation to a licensee also created a restriction of trade in that unless a licensee authorises an adviser, they did not have that standing in the eyes of the law and unless a licensee deauthorises an adviser, they cannot move to another employer, he said.

He also rejected suggestions the FPA was promoting the self-licensing of advisers and said advisers would continue to work under a licensee model, but their status would not be dependent on that employment.

“We’re not saying that everyone should become self-licensed. What we are saying is the licensing regime needs to change and one key element of that is the way advisers become authorised,” he said.

“Individual registration of financial advisers is recognising that individuals are professionals in their own right and they can work in a firm, which would have the accountability, and they could work for themselves, and that exists today.

“Under the system we are proposing, if that person is a bad egg, the licensee would report that person to a single independent authority and that person could then lose their right to practice, which means no one will be able to authorise them.

“We are suggesting that there is already a greater level of accountability and responsibility on individual advisers and they are being asked to do a lot more than they ever were and should be afforded the right to be seen as individual professionals.”

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