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FPA Strategic Policy Framework�e four policy pillars June 2011

Strategic Policy Framework THE FOUR POLICY PILLARS | DATE: JUNE 2011

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Introduction The Financial Planning Association (FPA) is committed to ensuring that the Government, media and most importantly consumers recognise and embrace the value of quality financial advice provided by qualified financial planners.

In Australia, there are approximately 45,000 authorised representatives who are licensed to provide ‘financial product advice‘, as defined under the Corporations Act. Such people might work as bank tellers, financial advisors, or fully-fledged financial planners. It is estimated that of the 45,000 authorised representatives, 15,000 to 17,000 are financial planners.

However, of the estimated 15,000 to 17,000 financial planners in Australia only 8,000 of them are FPA members and approximately 2,000 are members of professional accounting bodies. This means there are 5,000 to 7,000 financial planners – more than a third – providing financial advice to consumers without a requirement to comply with the additional standards of ethics, conduct and education. This significantly reduces the consumer protections available to the clients of a third of financial planners currently operating in the market.

It is our purpose to help financial planning become a universally respected profession and the FPA will act in the public interest by setting, promoting and enforcing the highest standards of professional conduct among its members. It is our goal to inspire trust and confidence in the community.

Professional obligations sit at the heart of any profession. A profession cannot exist without such obligation and accountability to standards higher than those in the law. The evolution of an industry into a profession serves to assist Government in protecting consumers by raising the bar of accountability, ethical obligations and education of its members, beyond the requirements of the law.

It is in the public interest for the Government to encourage and support the development of professions, particularly in the financial services sector, which influences the financial wellbeing of all Australians.

As part of our longer-term professional mandate we will be seeking for equivalence with the other professional bodies on issues such as:

• Enshrining the term Financial Planner • Becoming a recognised Tax Agent Association • Professional privilege • Tax deductibility of upfront financial planning advice

Each of the above mentioned goals underpin the strategic direction of the FPA and will bring us closer to equality and acceptance along side our colleagues in the accounting and legal professions. As we embark on this journey there will be many other issues that will need to be analysed and the development of Policy will be required. We are currently facing the biggest change to the financial planning profession since FSR with the Future of Financial Advice Reforms. These reforms have


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presented many challenges to the FPA in development of Policy especially in a time of change within the FPA itself. The biggest internal change that has challenged the development of Policy is the removal of principal (licensee) membership and a dedicated focus of individual practitioner membership. Many conflicts that previously may have existed such as the requirement to find a balance between individual professional expectation and business/commercial objectives of principal members have now in principle been removed. This paper provides the FPA with a unique opportunity to reposition the thinking to that of a professional association of individual practitioner members and develop new guiding principles that will direct our Policy position. These guiding principles are known as the Four Policy Pillars:

These four Policy Pillars are the guiding principles for measuring whether our Policy positions are meeting the ‘profession test’, however this paper also outlines the process and member engagement expected to develop Policy for consideration. This includes the involvement of the recently formed committees, special workshops, the chapters and general member communication to help engage members through this process.

1. Public Interest

2. Professional Practitioner

3. Government & Regulatory 4. The Code

Policy Pillars


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The Four Policy Pillars

1. Public Interest

The first pillar states that all Policy must be created in the public interest. Financial planning is a service of national public benefit, capable of addressing the growing inequality in the financialisation of Australian society. Therefore as a professional association the FPA has a responsibility and obligation to develop Policy that is in the public interest. The pillar of public interest also allows the FPA to differentiate us from other associations as well as communicate in a way that allows the community, the Government and the media to engage in that difference.

2. Professional Practitioner

The second pillar is designed to continue the path of professional respect and community. Policy must meet the interests of our professional practitioner members in a way that helps deliver this respect and encourage a sense of community for our members. Policy must deliver on encouraging an affiliation with the FPA and confidence in each other’s professional competence and their professional organisation. The pillar of professional practitioner will enable the FPA to cement a leadership position as an association for professional practitioners with the respect and sense of community we deserve. This pillar should, in theory, not conflict with the pillar of pubic interest. However, if there is ever a position when there are competing interests, the public interest must prevail.

3. Government & Regulatory

This third pillar is effectively looking at whether our Policy will contribute to creating efficient and effective regulation. The FPA must continue a positive role as a regulatory participant; demonstrating capacity to negotiate professional norms and maintain the authority of its ‘accountable space’, so as to evidence its legitimacy to Government. As a result when developing Policy the FPA must be conscious in not creating unnecessary regulation, duplication and red tape but rather look to minimise and remove regulation without compromising what is best for the consumer. Policy should always be a positive addition to community and Government while creating both efficient and effective regulation. Further our focus on self regulation should by definition reduce regulatory over governance.


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4. Code of Professional Practice

The fourth pillar creates the greatest differentiating factor between the FPA and any other association in the market place. Therefore when developing Policy alignment with the Code as a fourth pillar is required. The Code represents professional respect and acceptance and aligning Policy with the Code will provide greater community standing of our members. The FPA has over 12,000 members and 8,000 professional financial planning practitioner members. FPA members advise over 3,000,000 Australians and are entrusted with over $630 billion of life savings of Australians. What FPA members do every day makes a difference in peoples lives. The professional obligations and standards set by the FPA‘s enforceable Code of Professional Practice plays a fundamental role in protecting consumers and the financial wellbeing of Australians, and is vital to ensure our members provide quality advice to their clients. The FPA‘s Code sets professional obligations specifically to protect consumers when receiving financial planning advice. The FPA‘s Code is enforced through an appropriate compliance system and consumers are encouraged to and supported in making complaints against FPA members not acting in accordance with their professional obligations.

The Outcome or Objective of the Four Policy pillars The ultimate outcome and objective of Policy is Professional Respect. The four Policy Pillars are designed to influence Government policy positions and produce more efficient and effective regulation on the financial planning industry. This in turn will help deliver professional respect, equality and recognition by the community, Government, media and our professional peers in other disciplines. While FPA members have professional obligations that are of a higher standard than the requirements of the law, the behaviour of non-FPA members can influence the community standing of the profession. Hence the impact on community professional standards by non-FPA members needs to be considered when determining Policy.

The minimum standards set by Government regulation can assist in increasing community standards of the profession more generally, therefore the success of FPA Policy must be measured on who influential it is on Government and regulation.

Policy Process The development of a process for which Policy is considered and tested against the four Policy Pillars is fundamental to the success of the strategic Policy Framework. Further it enables appropriate engagement points for members and delivers on the information needed for the Board in making Policy decisions.


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As agreed to at the March 2011 Board meeting, FPA Policy changes can only be recommended to Board via a Board Committee or initiated directly by the Board itself.

A crucial component of the Policy process is the role of FPA committees. The purpose and activity of the committees need to reflect the strategic issues and work program of the organisation. Please refer to Figure 1 for an indicative flowchart process of Policy development.

The committee structure

The four key strategic goals of the Board committees are:

1. Differentiating FPA and FPA members from other participants (amongst consumer and member audiences)

2. Building and supporting a professional community (that deepens relationship with individual professional identity and the FPA).

3. Ensuring the FPA operates effectively as a professional organisation (acting to build trust and confidence in the professionalism and services of its members along with financial viability)

4. Ensuring the FPA is perceived and respected as a channel of professional financial planning by the Government and Regulatory community.

FPA Board

Board Professionalsim & Policy

Policy & Regulations Committee


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Board Professionalism and Policy Committee In particular, the Board Professionalism and Policy Committee has strategic ownership of the last two goals as stated above, which are crucial to the process and success of the strategic Policy Framework. This is a Committee of the Board and is to focus on ensuring that Policy delivers on the Four Policy Pillars and:

• assures consumer confidence and trust in FPA members; • contributes to raising consumer confidence and trust; • leeds the professional development of the industry; and • advocates for the professional community of FPA members within its public interest capacity

This Committee is able to formulate Policy and make recommendations directly to the FPA Board for consideration, when Board approval is required.

Policy and Regulation Committee Further, the Policy and Regulation Committee, as an FPA management committee, has an important function for continuing the positive role of the FPA as a Regulatory participant; demonstrating capacity to negotiate professional norms and maintain the authority of its ‘accountable space’, so as to evidence its legitimacy to Government. This Committee is to advise the Board Professionalism and Policy Committee on strategies, activities and policies that will ensure the FPA:

• maintains a positive role as a credible Regulatory participant; • negotiates with Government for effective legislative and Regulatory solutions that impact on

financial planning professional services; and • promotes and demonstrates its legitimacy as a professional association to Government.

The Committee is able to contribute to Policy development that is aligned to the four Policy Pillars while focusing on considerations, consequences and recommendations for:

• legislative and Regulatory issues effecting or likely to effect FPA members and/or their clients in relation to the provision of advice;

• the provision of financial advice by FPA members and the protection of that service; • the regulation of the services offered by FPA members; and • builds effective alliances around advocacy with other organisations related to the delivery of

financial planning professional services.


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Figure 1: Indicative Policy Framework Process

Identify the need for Policy or is it a change to existing Policy position?

Add issue to Policy & Regulation Committee agenda for discussion

FPA Members External (other incl. Public)

Government (changes to Legs/Regs)

Does it meet the Four Policy Pillars?

No Policy

Yes develop Policy

If Yes then develop Policy position

Proposed Policy referred for consultation

Results communicated to Board Professionalism and Policy committee and Policy position drafted for the Board

Issue Policy

FPA Board approve Policy

FPA Committees Advocacy Groups


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Development and Approval of FPA Policy The FPA develops Policy through the Board Professionalism and Policy committee. The Committee comprises appointees from the Board, the financial planning profession and relevant industry stakeholders including practitioners, licensees, compliance professionals and the legal community. Depending on the nature of the Policy under development the FPA may consult directly with members and other stakeholders during or at the conclusion of the development process.

Potential Sources of referral for the development of Policy The FPA expects that potential sources of referral for Policy will include:

• The FPA Board;

• FPA Committees such as the Board Professionalism and Policy Committee and the Policy and Regulations Committee in response to issues raised in its work;

• The FPA Advocacy Committees in response to submissions made via the Small Licensee or Professional Partner Committees;

• Government and Regulators as changes are made in response to industry or public concerns;

• FPA Members (individual practitioner members (AFP and CFP) are eligible to put forward Policy positions for consideration; and

• Other stakeholders including industry bodies and/or consumer groups may consider it important for the FPA to develop Policy that will inspire trust and confidence in the community

Governance The Board Professionalism and Policy Committee is required to develop and present Policy to the FPA Board for approval, discussion or noting. Policy can only be presented to the FPA Board once it has been approved by the Board Professionalism and Policy Committee. The Policy and Regulation Committee can make recommendations to the Board Professionalism and Policy Committee about the priorities for development of Policy but is unable to present directly to the FPA Board. Note: for urgently required Policy development or response, the FPA Board has agreed that Policy can be developed outside of the approved process. The criteria required is that: (a) if a new policy fits the four policy pillars and is in line with existing policy then management can take it forward without reference to the Board or (b) If not, the Board must decide on the policy position and would convene via Teleconference.


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Composition of Board Professionalism and Policy / Policy and Regulation Committee Please refer to the Board approved paper (March 2011) titled: FPA Committee Structure – Purpose, Membership and Performance, for the approved process and composition of all Committees for the Board, of the Board and those Committees for Management.

Add issue to appropriate Committee agenda for discussion and decision Procedures The Policy and Regulation Committee will confirm receipt of any submission and, subject to satisfying the Four Policy Pillars, will send to the Board Professionalism and Policy Committee for consideration. The completed submission is generally tabled at the next Board Professionalism and Policy Committee meeting for discussion. The Board Professionalism and Policy Committee will then consider the matter and communicate its decision. It will provide reasons if it resolves to reject the submission. Further the Board Professionalism and Policy Committee may decide to table the Policy submission to the FPA Board at the next available Board meeting.

Decision-Making Considerations The development of Policy must meet the Four Policy Pillars and therefore it is inappropriate for submissions to be made for the sole benefit of any individual member, professional practice, small licensee or professional partner. The Board Professionalism and Policy Committee or Policy and Regulation Committee is at liberty to reject any submissions that it considers not to meet the Four Policy Pillars. Prior to making a decision to develop Policy , either the Board Professionalism and Policy Committee or Policy and Regulation Committee must consider any appropriate consultation process with members and potentially with other stakeholders outside the membership such as professional partners, professional practices, small licensees, consumer groups, the Regulator and Government. In responding to Government and/or Regulatory consultations, the timeframes will also be taken into consideration by the Committees.

Proposed Policy referred for consultation Procedures When a proposed Policy position is referred by the Board Professionalism and Policy Committee (or indeed from the Policy and Regulation Committee) for broader consultation, the proposed Policy will be published on the FPA website and communicated via FPA CEO News for member consultation. The document will be held in the member-only section of the website.


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It is intended that the period of consultation with FPA members will be dictated by the period of consultation provided by Government or the Regulator. Therefore no confirmed time period can be committed to in this instance.

However, where no such time limit exists consultation is to be at least 21 days from the date of its publication except when the FPA Board or Board Professionalism and Policy Committee considers that the Policy should be issued as a matter of urgency. In these circumstances, the period of consultation must not be less than 7 days.

Method of Consultation The FPA may adopt any or a combination of the following methods in its consultation with members and external stakeholders:

- Written Consultation – the consultation paper will be published and written responses sought from members and potentially external stakeholders.

- Workshops – members and targeted specialists may be invited to attend workshop sessions whereby aspects of the consultation are put to the group for comment.

- Chapter Discussion Group – the FPA may ask specific chapters to facilitate discussion groups from time to time to assist in the consultation process/feedback from members. This can be very beneficial when trying to reach a greater geographical audience than would otherwise be possible.

- Discussion Forum – stakeholders are invited to a discussion forum facilitated by an expert in the relevant field and stakeholders are encouraged to discuss issues arising from the consultation.

- Survey – the FPA will develop short surveys on specific key questions for members to respond to. Responses are anonymous, collated and used to provide evidential input into the development of Policy (especially in submission responses to Government and Regulatory consultation).

- Informal Feedback – members are encouraged to email any comments or client experiences relating to a specific issue to the FPA.

- Client Case Studies – the FPA may ask members to seek client permission to use their situation to provide relevant case studies as evidence of policy issues. Any case studies provided will protect the confidentiality of the client and may be used in submission, Ministerial briefing notes, media, as permitted by the client ad the FPA member.


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Appendix B

Current position for existing Policy initiatives As part of our longer-term professional mandate we will be seeking professional recognition, respect and equivalence with the other professions and professional bodies. The FPA agenda includes the following Policy positions and current status for delivering this to members, Government and the public.

Policy Raised with Government

Submission Produced

Current Status

Enshrining the term Financial Planner

This has been on the FPA agenda for about a decade but more recently since the PJC Inquiry. A further push was delivered on 13 April 2011 to the current Minister Bill Shorten to include as part of FoFA reforms.

Yes Note: Copies of submission have been issued to Minister, Opposition, the Greens and Treasury.

The Minister announced on the 28th April as part of the New Elements of the FoFA reforms that the Government will explore whether the term Financial Planner should be restricted.

Becoming a recognised Tax Agent Association

Yes this has been raised with the Tax Practitioner Board (TPB)

No submission required. We are currently liaising with the TPB regarding the registration process for the FPA, as a specialised recognised Tax Agent Association for Financial Planners.

There are a couple of criteria measures that the FPA needs to discuss with the TPB before registration can be finalised. Expectation that the FPA will be approved as a recognised Tax Agent Association by 30 June 2012.

Tax Deductibility of Advice Fees

This have been on the FPA agenda for over a decade and most recently as part of FoFA and the Federal Budget Submission

Yes (several) The Minister at the FPA luncheon on 13th April 2011 ruled this out. However, it should remain on the agenda and revamped as a post FoFA initiative.

Professional Privilege

No No Analysis of success from accounting profession


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Appendix C

Policy – Submission Statement (can be used by members and non-members) Policy Position (please identify if this is an amendment to existing FPA Policy)

Why the need for this Policy position? (please confirm if this is as a result of legislative /

regulatory or professional advancement)

Does your Policy position satisfy the Four Policy Pillars? If so explain how (note your submission must demonstrate how it satisfies the four Policy Pillars)

Public Interest (is this in the public’s best interest)

Professional Practitioner (is this in the practitioners best interest – will it promote professional respect)

Government & Regulatory (will this be effective and efficient)

The Code of Professional Practice (does this align with the Code)

Submission drafted and attached: yes no

Submitted by:

Date of submission:

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Documents

financial advisors

financial wellbeing

financial planning profession

qualified financial

financial product advice

term financial planner

financial services sector

development of policy