ASIC national exam proposal lacks evidence: CMCRC

I believe Dr June Smith had already done the research on ethics and qualifications.

Her research showed the higher the qualifications the more ethical the adviser was.

This makes sense as unethical advisers can't be bothered as they're looking for shortcuts

Does passing a drivers licence test mean that all drivers stay under the speed limit? Of course not.

Any exam sat with the hope that this would stop people speeding would be a waste of time and money.

Being a CFP (and the ongoing education obligations we have to maintain that certification) should be enough to give clients confidence with whom they deal. If not, then the FPA needs to do something to change this and support the professionals in our industry.

Long overdue.

At last! Someone who actually understands there is no evidence that that the financial planning industry is any different to the real world, where there is ZERO correlation between criminal behaviour and knowldege.

ASIC and FPA keep banging on about "education" - totally missing the mark.

BTW, Mr Medcraft, if the "financial planning industry breaks your heart", perhaps you and your cohorts should get off your glutinous maximi and pursue the heads of the organisations (ie, banks) that nurture and promote the crooks within their ranks.

Instead of naively believing educated people don't cheat...

Hallelujah!

A voice of rational insight finally getting heard above the clamour of the "more is better" approach of the regulator.

Our industry has not deserved the odium heaped upon it recently - the US had to bail out AIG, the UK had to nationalise Northern Rock and Australia, had to (wait for it...) endure a North Qld financial planning business fail. An increased education standard would not have effected the problems from Storm, CBA Financial Planning or the various Macquarie entities.

Those problems were all caused by deliberate choices made by management that were made with complete disregard for the consequences of the actions not in ignorance of the possible outcomes from their choices.

I do think increased educational standards are required for financial advisers - but to achieve that a "root and branch" reform of the current regulatory methods are required, not the layering of more and more requirements on existing ones.

Another case of Greg Medcraft and ASIC asleep at the wheel.

As the article states the exam would achieve nothing and add costs to investors.

A better idea would be to make accountable for their actions, ask questions of their so called investigators and punish the employees of ASIC for their mistakes - just like in the real world.

ASIC reports to no Minister so if you have an issue you go around in circles and there is no higher power.

Bottom line is that ASIC does not believe that financial planning has any shape or form of credibility. Advice according to ASIC, is the sole domain of accountants and lawyers and government departments. Note ASIC's complete silence when it is told that many financial planners are qualified lawyers or accountants or both. Any single exam will act as an impediment to entry to the financial planning profession rather than as a sign that the adviser is competent. Watch ASIC go into a foetal ball in a corner when an accounting firm goes under when it provides bad advice or the weight of complaints sees it close. Watch this space.

Mr Medcraft must resign and the Industry should demand it! He has lost touch with being able to show an objective point of view regarding Financial Planners! If the head of ASIC feels the way he does about financial planners, imagine what the staff of ASIC think!

Total shake up of ASIC is required with people from the industry governing our planners, not these biased dictators!

I have had a look through the 59 page report published in 2010 (using research from 2006 and 2007) published by Dr June Smith of Vic Uni/Argyle Lawyers.

Her conclusions are worth noting, and I quote:

"The empirical research has demonstrated that individual and contextual factors can have a significant influence on ethical decision making and ethical behaviour within financial services organization.

"These factors include the ethical reasoning ability of the individual decision maker, which in turn is influenced by the decision maker's age, experience and whether they hold a professional designation.

"The contextual factors are numerous and seem to have more influence on ethical conduct outcomes than individual factors. These contextual factors include remuneration structures, the role played by the individual decision maker, the ethical climate and culture of the organization and the presence of ethical leadership."

Yep: CONTEXTUAL FACTORS HAVE MORE INFLUENCE - what I've said for ages - the "contextual factors" (ie, mainly management who create - by design or default) the organisational cultures that harbour the hoods.

I suggest you read the report Daniel, Ace and Ross.

The report also states the larger the institution, the less ethical. Which makes sense, when its not your own skin in the game, you care less. Larger organisations are also more likely to have diluted the culture into a free for all and simply getting numbers on the board for the sake of profit.

Having had first hand experience of the type of examination system being proposed by Medcraft (ie modelled on CASA) and the exceptional work done by Smith, I can say that Aitken has no idea what he is talking about. I have seen first hand the complete rorting of PS (Now RG) 146 competency assessments when it was introduced in the 90's, I have very little confidence in the technical abilities of many, many (but not all) "old school" advisers.

There was no way a major advice group was ever going to "fail" an adviser who was a top producer. A one off, externally invigilated examination [formally administered and independently assessed] will be a highly effective way of clearing out the dead wood. I for one would then have some confidence that a fellow adviser (post exam) has absolutely and irrefutably met minimum competencies.

Of course the Aitken argument extended might also mean that Doctors shouldn't be tested and that we should trust a flight school to assess all aspects of Commercial Pilots - no thanks. I'll have a regulator externally asses that before I hop onto my next flight anywhere.

The Majors will scream about this: it has the potential to severely damage the advice based distribution model.

The point is still largely being missed: education is not the magic bullet. The ripping off of clients (the actions that "appall poor Mr Medcraft and his cronies) is NOT going to be solved by FURTHER education.

An external examination - and not by people like FPA who just see it as a revenue exercise - is an idea that has merit, but this crazy standpoint that kindness and fairness can be trained is plain ridiculous. You shape those behaviours through rewards/punishments. At the moment the "majors" are rewarding crooked behaviour so guess what?

Nick, you're closer to the mark with your comments about "old school" and the impact on the majors - as in the major causes of most of the ripping off. Jail some of the senior management who nurture the "sales" cultures that promote the skullduggery.