Definition of Financial Planning - What if?

If (and I underline that if) financial planning gets defined as meaning something very narrow - and can therefore be triggered by actions such as:

1. Performing a needs analysis (even if it is only for category 2 products)
2. Offering a range of companies products (even if they are only category 2)
3. Linking coveer amounts of category 2 products to amounts required for future goals (i.e. the amount required to pay off a loan, provide an income, and put children through school).

If this is what happens, then we have a very, very, different regime from the one that many product providers thought they were supporting. With such narrow definitions you may even capture every general insurance broker in the market that offers a selection of companies, and does a thorough job of developing the right sums insured.

If this is the outcome we have a situation where QFEs don't work - so much for the amendment Bill. No-one in a SovNet, AMP Adviser Business, One Network, or AXA Aligned Advisers, for example would be able to avoid being an AFA - so the whole QFE structure and the point of clarifying term life insurance as category 2 would have been a complete waste of time. We would also have one where these products get placed into a regime where commission may be banned.

Is this the intention? It would have the sad effect of removing a very great deal of consumer protection from the market - usually it's only a big company that has the resources to pay for large advice-based problems. You can say what you like about what happened over ING, for example, but a settlement was there. Other cases have more recently shown what it is like if only the adviser is the target of action - an usually, there is no money to be had. 

Is this market practice? I think Simon Hassan said "we know what financial planning is, and this is not it" and that sums up what the market thinks financial planning is. Put another way - if anyone tries charging you a plan fee for the process of selecting covers and products offered through popular life risk systems such as X-Plan they'd be laughed at. It's good practice, but it's not financial planning. That requires a view of budgeting, investment decisions, and broader recommendations and options for achieiving them.

However, we do not yet have a definition of financial planning, and there is still a chance to avoid overreach and ensure that we are capturing the generally accepted definition of financial planning, and not these sub-segments of it. That would preserve efficiency. It would also provide quality financial advisers with the opportunity to differentiate - allowing those that wish to adopt higher standards to do so on a voluntary basis. Those that do not can shrink behind the corporate skirt and consumers can at least enjoy the protection of the deeper pockets that stand behind the product and advice package they are sold.

Some people say this is too complicated to fix, but really is it? On a risk based approach if it's only a category 2 product that eventuates, then the process can't be financial planning. Because that must include category 1 products.