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AMP Chief Questions Industry Definition of “Financial Advice”

At Approved Financial Planners, we offer financial planning and other services to residents in the Perth area and across WA. We now have the benefit of having AMP Australia as a parent company. We chose to partner with AMP because they embody the same commitment to professional, ethical service that we do.

Industry Definition of Financial Advice

We are on the side of high standards for the entire financial planning and financial advising industry, making AMP the perfect parent company for us. Consequently, we were proud to hear of remarks made by AMP Limited CEO Craig Meller recently, addressing what our industry currently defines as “financial advice.”

Mr Meller was speaking about vertical integration, a model practised by AMP. During the speech, the subject of financial advice arose. He questioned the nature of financial advice as practised by many in the industry. According to Mr Meller, “Too many…self-interested parties…dumb down the definition of financial advice to (only include) product selection.” *

Mr Meller would go on to opine that this kind of “advice” was usually meant to “justify a certain position” and that it is “a million miles away from where the true value of advice lies.” *

Mr Meller stressed the point that vertical integration was a business model that had enabled AMP to not only provide more services, but to raise standards as well. Using the vertical integration model, AMP has been able to invest more money in financial advice and bring more financial advisors into the industry than any other financial services organisation. *

Mr Meller also remarked that the business model of vertical integration enabled AMP to train financial advisors to higher standards than industry norms and then stand behind that advice. He would go on to mention that AMP supports higher standards for the financial services industry, especially pertaining to entry-level standards. *

To learn more about Approved Financial Planners and AMP, call 08 6462 0888.

*Money Management, 30 September 2014. “Advice about more than product selection.”

FPA Proposes Reform of Educational Requirements for Financial Planners to Parliamentary Joint Committee

If the Financial Planning Association of Australia (FPA) has anything to say about it, the educational standards for financial planners and advisers, in Perth and across Australia, are about to receive a boost. As far as we are concerned, it can’t happen fast enough.

Approved Financial Planners and AMP

We would like to give a little background. Approved Financial Planners and our parent company, AMP, are on the record as being in favour of educational reform for the financial services industry. We have felt for a long time that the standards for entering the industry, both in Perth and nationally, are not stringent enough.

Reform of Educational Requirements for Financial Planners

AMP has internal standards that are far more stringent than industry minimums. That is one of the main reasons we decided to partner with them. We feel that it is our responsibility to educate ourselves fully about the products we offer and about how our decisions affect our clients’ well-being.

One of the sadder parts of being a financial adviser in Perth is listening to clients tell us how other financial advisers had mismanaged their funds, either out of ignorance or out of a lack of ethics. We find both of these situations to be unacceptable.

We have long felt that the solution is to require more field-specific education to become a financial planner or adviser. We don’t like the perception that a person can take a weekend course and become a “financial planner.” We don’t like it when uninformed or misinformed “financial advisers” make recommendations or take actions that reflect poorly upon our industry.

We feel that stronger educational requirements are the best way to increase the level of service and commitment to excellence in our chosen field.

The Proposal

Here are the basics of the proposal.

Approved Degree: By 1 January of 2018, entry level financial advisers and planners will be subject to a minimum educational standard of an AQF7 level degree for eligibility to dispense tier 1 financial advice. In addition, they must prove that they have one full-time year of “relevant experience” within the previous three years.*

Existing Financial Planners not grandfathered: Those who are already financial planners have until 1 January 2019 to become compliant with the new educational standards.*

New Curriculum: Financial adviser education within a holistic framework will replace the current RG146 curriculum. In addition, the Financial Planning Education Council (FPEC) will approve a new AQF7 level curriculum.*

CPD Requirements: 90 points or hours of continuing professional development (CPD) courses will be required for all financial planners every three-year period.*

No National Exam: Those who successfully complete the new requirements for certification will not be required to take the national exam.*

Implementation of Co-Regulation Design: A framework will be developed by which “recognised” regulatory bodies can play a major role in helping to regulate and achieve consumer confidence and consumer protection requirements.*

Professional Bodies: Qualifying criteria such as those from the Professional Standards Council will be used to recognise professional bodies.*

Certification Required: The terms “financial adviser” and “financial planner” will only be allowed to be used by certified members of recognised professional bodies.*

Redefinition of General Advice: General advice will be known as “general or product information” and will only include factual explanations and/or information pertinent to financial products.*

What We Think

This proposal would provide a great service to the industry. We are firmly committed to supporting the strengthening of professional standards.

Raising standards would remove a lot of risk for the consumer. At this point, minimal industry standards are so minimal that many people calling themselves “financial planners” or “financial advisers” are not qualified to give high-quality advice to consumers. This creates too much risk and uncertainty for consumers because they don’t know if their financial planner is going to help them or lead them astray. Higher standards will eliminate those who don’t know what they are doing.

Second, as educational standards are raised, performance rises. When performance rises, the customer wins.

Call 08 6462 0888 today.

*Financial Planning: “PJC submission calls for a lift in standards.”