- Accountants also have a lot of regulatory oversight.
- The current regulatory model developed for accountants reflects a mindset which pigeonholes advisers
What struck me most was the failure of Australia’s regulatory might to influence behaviours. And it got me thinking. What does it take to create a values-based relationship between a service provider and client?
It can’t be the billions spent by banks and financial institutions on marketing and generous community donations. Quality service must be experienced.
Nor can it be public commitments – such as an industry-wide Banking Code of Conduct or lofty statements by CEOs. At best, these are probably regarded as aspirational, not “lived”, goals.
Clients clearly don’t see much values alignment when their adviser’s success metrics are based on commissions, the value of assets under management, or are somehow linked to an opaque, vertically integrated arrangement riven with conflict of interest problems. They cringe when they hear about ostentatious adviser rewards for “sales”.
Put simply, what the Interim Report indicated to me was a lack of professionalism.
The need to re-build reputations is particularly acute in the financial planning sector. Australians – particularly those in the retirement planning phase – need and deserve a quality service offering delivered by skilled, independent advisers who are not only governed by strong ethical principles but demonstrably comply with them.
I’m a glass half-full sort of person. So I’m hoping Kenneth Hayne’s work may ultimately come to be seen as a turning point in recognising the work of those financial advisers – many of whom are Chartered Accountants – who watch over their client’s affairs as part of a long-term professional relationship. But to have that relationship, the conversation which occurs in an accountant’s office needs to traverse a range of financial topics – from financial planning to tax to superannuation.
On this point, I think there is merit in exploring Commissioner Hayne’s comments about the possibility of simpler regulatory models. The current regulatory model developed for accountants reflects a mindset which pigeonholes advisers, with demarcation lines as to who can provide what type of advice.
Accountants also have a lot of regulatory oversight. I had a go at picturing what a CA in public practice encounters now in providing the broad range of services which the community typically associates with accountants.The result was the bewildering Venn diagram reproduced below. Let me know if I’ve missed anything!
I think most CAs would agree with Commissioner Hayne that it is quite legitimate to ask whether there are simpler, more effective approaches.
Don’t get me wrong. I’m not suggesting regulators vacate the field. But more regulation isn’t necessarily the best way ahead.
In his exploration of new regulatory models governing financial advisers in particular, perhaps Kenneth Hayne – a distinguished jurist from a profession which prides itself on a duty to act ethically in accordance with clear principles of conduct – will acknowledge those accountants in public practice who already meet high educational entry standards, have achieved post-graduate qualifications, and sign up to quality reviews and ethical standards backed up by robust disciplinary processes.
We’ll be sure to let him know who they are.