Part II: A Professional Sector Needs a Professional Structure

The financial planning sector can only take its place as a true profession if it adopts a structure free of product aggregation and conflicted purposes. This paper explores the critical steps needed for financial planning to align with other recognized professions.

The Need for Professional Structure
Unlike established professions like law, medicine, and accounting, financial planning operates under a licensee structure accountable to the regulator. This structure has enabled product aggregation, creating conflicts of interest that hinder professionalism. For financial planning to mature, the focus must shift to a professional mission grounded in fiduciary responsibility.

Challenges Stemming from FSR
The Financial Services Reform Act (FSR) of 2001 sought to simplify legislation but inadvertently focused on product rather than advice. It enabled licensees to participate in product aggregation through margins, creating systemic conflicts and placing financial product sales over client-centric advice.

Separation of Product and Advice
Financial planning must move toward a model where advice and product are economically and operationally independent. The current system, including managed accounts, sustains volume-linked revenues through complex structures. This undermines public trust and fails the “front-page test” of transparency. The Royal Commission reinforced the need for structural separation.

The Case for Individual Certification
Individual certification, as seen in accounting and law, would replace the licensee model with a public practicing certificate structure. This would allow financial planners to operate under Professional Standards Legislation, ensuring fiduciary alignment and reduced conflicts of interest.

Perceived Barriers to Certification
Professional Indemnity Insurance: Transitioning to individual certification will require collaboration among professional bodies, insurers, and brokers to address liability issues.
Approved Product Lists: Retaining investment committees and quality product vetting can assist in the transition to certification.
ASIC Oversight: Direct data submission from advice businesses to ASIC could streamline compliance while reducing reliance on licensees as intermediaries.

Role of Licensees as Value-Adding Advice Groups
In the long term, the licensee model should evolve into advice groups offering genuine value to advisers, such as business efficiency tools, client review systems, and professional networks. Licensees should no longer rely on product aggregation to subsidize fees, fostering true competition based on value.

Technology and the Future of Regulation
The rise of RegTech and advanced analytics positions ASIC to manage compliance efficiently, requiring businesses to provide data directly. Licensees will need to add value beyond acting as intermediaries, helping advisers navigate complexities and adopt technologies like APIs for seamless regulatory reporting.

Conclusion
Financial planning’s transition to a profession requires structural reform, individual certification, and a focus on client-centric advice. The industry must embrace change, eliminate conflicts, and leverage technology to enhance efficiency and transparency. True professionalism is within reach if stakeholders commit to this vision.