There are approximately 18,000 licensed and qualified financial planners in Australia, but it has been estimated there may be up to 40,000 individuals calling themselves financial planners.
This situation has resulted because currently there are no regulations in place to prevent individuals calling themselves financial planners; even if they aren’t licensed, trained or qualified.
Only one in five Australians seek financial advice and one of the reasons this number is so low is that consumers don’t know who to trust. Unlicensed and unqualified individuals masquerading as financial planners may therefore go some way to validating this statistic.
The Financial Planning Association (FPA), the peak body representing financial planners, has been lobbying the Government for introduction of ‘true to label’ measures for some time, and they have responded.
Draft legislation has been released that will enshrine the terms ‘financial planner’ and ‘financial adviser’ in law. Specifically, the legislation states that individuals must be licensed and authorised to provide financial advice under an Australian Financial Services License (AFSL) in order to use either term.
While this is a step in the right direction, the FPA want the Government to lift the criteria further by also requiring individuals to be members of an approved professional body. The FPA argues this will provide further consumer protection and assist with developing the advisory community into a universally respected profession (as well as increasing revenues).
The draft legislation is open to submissions until 21 December 2012 and it is expected the Government will introduce the final legislation to parliament in early 2013.
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