As I explored for the first time the gritty streets of my father’s birthplace a few years back, I was struck by the number of streets with Caribbean names. Greenock, Scotland, just downstream on the Clyde from Glasgow, is about as far away from the Caribbean as you can get in miles, topography, climate, and culture. Then it struck me: this was a sign of globalization, 18th-century style. With its fine harbor, ship-building Greenock was part of one of the great economic stories of the century, a tale that played a rather large part in the American Revolution and the growth of England into the world’s greatest economic power.
Our country has always had a love/hate relationship with countries and peoples beyond our borders. We’ve enjoyed our independence, but we’re also pragmatists who are really good at taking institutions and schools of thought and forms of government that originated elsewhere and making them uniquely American.
So as our President and Congress and SEC and industry associations wrangle over how to reform regulation of financial services and regulation of you, the independent advisor who stands between the financial services industry and your clients, may I suggest that we consider Australia. Think of it as globalization for the 21st century.
In Australia, if you want to provide financial advice to an individual, you need to pass a federal test and be licensed by the government. In Australia, all clients are given a piece of paper from their advisor that lists in detail the fees that the advisor is charging, and for which services. In Australia, there are more financial planners per capita than in any other country. In Australia, employers are required to place moneys equal to 9% of an employee’s salary into a personal retirement savings account. It’s important to point out that this system has been developed over a period of time when the country has been led by both the left and the right, what we would call Republicans and Democrats.
Managing Editor Bob Keane explores the Australian financial planning model in this issue’s cover story on page 40, which we believe is particularly timely. As I write this on June 17, President Obama and Treasury Secretary Geithner are presenting their overview of how financial services regulation will be reformed to Congress and the American people. The debate in and out of Congress will take place through this year and perhaps longer, and knowing how another country’s model works could be instructive.
After all, there is much that the United States has in common with Australia: founded as an English colony, Australia enjoys a healthy democracy that benefits from the rule of law and an independent spirit among the people. Australia has abundant natural resources, craved in particular by China, an increasingly diverse population that includes a native population, folks of European descent, and immigrants from all over, along with a free-market environment that fosters entrepreneurship. Sound familiar?
If that common language included transparency of fees, a fiduciary duty to clients, and clearly disclosed conflicts of interests, perhaps we could translate the Australian model into an American golden age of advice. I invite you to read the story and consider the possibility.