In 2009 Quantum Financial was one of the very few independent financial planning practices in Australia asked to appear as expert witnesses before a Joint Parliamentary Committee.
At the time, our views were revolutionary and certainly not very popular in the wider industry. We were among the very first to recommend a complete ban on conflicted commissions; the introduction of a explicit statutory fiduciary duty; the establishment of a professional standards board in financial planning; and the lifting of education standards in financial planning to degree level.
Below we reproduce our introductory comments to the Joint Parliamentary Committee on Corporations and Financial Services as recorded in Hansard, the official record of the Parliament of Australia.
MACKAY, Ms Claire, Director and Certified Financial Planner, Quantum Financial Services Australia
MACKAY, Mr Tim, Director and Certified Financial Planner, Quantum Financial Services Australia
CHAIRMAN (Bernie Ripoll, MP) – Welcome. I invite you to make some opening remarks.
Mr Mackay – Thank you for the opportunity to appear before your committee. Quantum is an independently owned, successful and growing financial planning firm and training organisation. We are both certified financial planners and chartered accountants and between us we hold bachelor’s and master’s degrees in commerce, economics, law and business administration. Claire is also admitted to the New South Wales Supreme Court.
Australians today are concerned about the financial planning industry, and rightly so. They have seen recurring examples of rampant abuse of consumers and a lack of professionalism shown by the advisers they trusted. From Townsville to Geelong to Perth, if you have not been personally impacted then you will know someone who has been. The focus of our submission is recommending practical reforms. With your help, we can boldly reform the financial planning industry so that consumer confidence and our profession will emerge stronger than ever.
It is time for financial planners to be honest with themselves. As financial planners, we regret the actions of those financial planners who have abused their clients’ trust. As financial planners, we take charge of our own destiny today by proudly and loudly pleading with you to give us an explicit statutory fiduciary duty to our clients. We know that many in our industry are sceptical of how and whether an explicit fiduciary duty will work. There are many complicated issues to resolve but as professional financial planners we can make it work.
It is time to empower consumers and increase competition by turning off the ‘rivers of gold’. It is a sad fact that, in financial planning, he who pays me is my boss. No-one would consider allowing lobby groups to pay fees to politicians, yet we allow product manufacturers to pay financial planners and dealer groups. By ‘rivers of gold’, we mean commissions and any other type of financial arrangement between product providers, platform and dealer groups and advisers. The only parties who resist this reform are those who financially benefit from the rivers of gold.
We recognise that it will be hard, unpopular and costly for many in our industry to undertake this reform. We do not accept that voluntary industry codes are sufficient. This reform is not about helping financial planners. It is about helping consumers. I would now like to hand over to Claire, who, if you were wondering, is my sister.
CHAIRMAN – We weren’t!
Ms Mackay – Quantum’s financial planning business specialises in investment, retirement planning, and superannuation advice. We advise our clients. We do not sell them products. It is time to call the salespeople what they are: salespeople. In the interests of consumer transparency and protection, there should be a clear distinction between independent advisers and financial product salespeople. Furthermore, there should be no distinction in the standard to which either is held. They should both have a fiduciary duty to their client. The aim of this is to provide clarity to consumers—not to make it easier for people to sell their products.
It is time for the real financial planners to stand up. We propose the establishment of a professional standards board which is independent, self-funding, with compulsory membership, which sets high and uniform professional and ethical standards. Only members of such a board could call themselves financial planners or financial advisers. Consumers will then have professional titles they can recognise and they can trust. We estimate the cost of this to clients at 1c a day, and we are happy to discuss this further.
It is time to raise the bar. We call on you to raise the financial planning education and experience entry standards. We are proud that our submission is one of the few to recommend how you can practically implement this. We are happy to discuss this further.
As financial planners with a long future before us in the industry, we are passionate and proud of the value we add to our clients. We are honoured to be our clients’ trusted adviser. We are the second generation to advise Quantum’s clients and we want the next generation to be proud of the profession that today we, together with your leadership, helped reform.
CHAIRMAN – Thank you very much. We really appreciate your submission and the detailed work you have gone to, and your presentation today.