Self-Regulation Can Prevent Government Intervention

By Lyn Goodear May 24, 2016
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It hasn’t taken Australia’s assistant federal treasurer Kelly O’Dwyer long to hit the ground running in the year following the country’s latest Financial Systems Inquiry, which aimed to establish a direction for the future of Australia’s financial system. 

In the wake of the inquiry findings, O’Dwyer, one of Prime Minister Malcolm Turnbull’s new ministers, has left no doubt in anyone’s mind that the government expects financial planning advisers to substantially lift their game. She recently announced that they will be required by law to hold a degree, to undertake a professional year, to pass an exam, to commit to continuous professional development (CPD) and to subscribe to a code of ethics. 

One might wonder what previous standards financial advisers were required to satisfy if these fairly general qualifications must now be mandated under legislation. Aren’t all professional practitioners required to meet standards as fundamental as these?

The dismaying fact is that financial planners can gain a basic qualification to practice in little more than seven days, although the advice they provide touches a great many lives and also affects the corporate culture of financial institutions. In fact, advisers might be bringing to their practice nothing more than a self-serving desire to make commissions on sales. To say that all financial planners operate in that way would be unfair, but, to date, the public has no way of distinguishing between honest and untrustworthy financial planners. The former suffer at the hands of the latter, whose incompetence or unsavory practices bring the occupation into disrepute.

Regrettably, almost everything that could be said about the standing of financial planners can be said about Australia’s human resource practitioners, whose requirements are even fewer. They are not required to hold a university degree, to have done a professional year, to pass an exam, to maintain currency with CPD or to sign on to a code of ethics.

It might be said, in defense of HR practitioners, that they are not entrusted with significant quantities of citizens’ money. While that is true, there is ample evidence that the difference between good and bad HR is reflected in the difference between healthy and toxic work cultures, competitive and unsustainable businesses, and happy and miserable employees.

Although many HR practitioners have taken it upon themselves to gain an appropriate university degree to inform their professional practice, they are not required to do so. A great many Australian practitioners—around 20,000—are members of the Australian Human Resources Institute (AHRI), but that is not a legal requirement, and many practitioners are not AHRI members.

Professional practicing members of AHRI are required to undertake CPD, and they subscribe to a code of ethics and professional conduct supported by complaints and disciplinary procedures. But as the HR practice environment is becoming more complex and litigious in a more competitive global business world, AHRI has seen the writing on the wall. And so, from January 2017, all practicing professional members will be required to undertake a rigorous HR certification credential that sets a high bar for practice.

HR certification requires: 1) a minimum professional practicing period; 2) the equivalent of a university degree, in addition to specific professional knowledge; and 3) evidence via a mandatory capstone unit that demonstrates candidates seeking certification can actually do what they say they can do.

An independent National Certification Council (NCC) has been set up by AHRI to oversee the administration of standards under the new certification regime and to have the final say on the suitability of candidates who have qualified for admission to certification. The first candidates have completed their training and were admitted, at the discretion of the NCC, as certified practitioners in March of this year.

In taking this action, AHRI has signaled that, like its counterpart in the United Kingdom, it is heading down the path of self-regulation in the hope that will forestall any moves toward involuntary government regulation.

The human failings within the corporate world that led to Enron, Lehman Brothers and the global financial crisis have increasingly prompted questions about the role of HR. Inevitably, people want to know what HR was doing in the midst of the recent Volkswagen emissions fraud fiasco, for example. HR needs to come from a better place to answer those awkward questions—or, better still, to play a greater role in their prevention.    

Lyn Goodear is the Chief Executive of the Australian Human Resources Institute. Republished by permission from the World Federation of People Management Associations.

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