At first glance, the idea of forcing financial planners to obtain a university degree and act ethically might sound like a no-brainer.

Given their unique access to peoples' life savings, and the string of scandals going back decades, the prospect of stricter regulation was warmly embraced by a nervous general public.

It seems blindingly obvious that more education be considered a good thing. Yet the industry itself was deeply divided on the merits of the reforms introduced by the then-Turnbull government in 2017. Some, particularly CBD-dwelling planners with finance degrees or professional designations already under their belts, had long felt the undemanding TAFE diploma required to start providing financial advice was far too low a bar.

Many more, especially older planners or those serving regional and outer suburban communities, felt that decades in the school of life trumped anything you could learn from books. Others simply bristled at the heavy state intervention or the inference they were not already ethical actors.

But there was broad consensus among the financial planning industry's warring factions that the policy was never really about consumer protection.

Instead, it was about doing the bidding of the big banks and (ultimately unsuccessfully) attempting to stave off a royal commission.

Government sources naturally push back strongly against this. They say they were just trying to meet public expectations and fix the widely acknowledged problem that it was too easy to qualify as a planner.

With politics, it's always tricky to ascertain motive. But while it might be a tad conspiratorial, it's a theory with roots in some undeniable facts.

The establishment of the Financial Adviser Standards and Ethics Authority (FASEA) – the agency that was tasked with implementing the education reforms and will now be shut down, the Morrison government announced this week – came amid escalating calls for a serious probe with prosecutorial power, following multibillion-dollar consumer losses.

Previous reviews and inquiries had failed to weed out misconduct and voters, buoyed by Labor and consumer advocates, were baying for blood. The Coalition, which famously voted 26 times against a banking royal commission, needed to do something.

The theory is assisted by the fact that the presiding minister, Assistant Treasurer Kelly O'Dwyer, was previously an executive at the National Australia Bank.

She appointed fellow NAB alumnus and Melbourne establishment figure Catherine Walter to chair FASEA at its inception.

Multiple sources have described the relationship between the two women as one of mentor and protege.

FASEA's initial operating budget of $15.6 million over four years, was – somewhat bizarrely for a government agency – almost entirely funded by eight commercial enterprises: NAB, ANZ, Westpac, Commonwealth Bank, AMP, Macquarie, Suncorp and Bendigo Bank. Of those, only AMP could be reasonably described as a provider of financial advice first and foremost.

Plus, the whole policy was a banker's idea in the first place.

It was former Commonwealth Bank chief executive David Murray who, following his 2014 financial system inquiry, recommended that higher education should be mandated for planners.

He did not recommend any changes to the business model of "vertical integration", which viewed planners as a sales force for investment and insurance products and of which he, as CBA CEO, was a chief proponent.

Former High Court judge Kenneth Hayne would later find the model was at the heart of industry conflicts when his royal commission finally got off the ground. He did not, in contrast with Murray, conclude lack of education was a major cause of misconduct.

Whether conspiracy or coincidence, FASEA's foundational myths undermined its efficacy from the start.

But that was just where the problems started.

Not enough rope

"From the outset, it wasn't given enough rope to set up properly," Dr Adrian Raftery, a former associate professor of financial planning at Deakin University and vocal FASEA critic, tells AFR Weekend. "There is no doubt it would be hard for anyone to take on that role."

FASEA's budget allowed for just four full-time employees and a few relatively meagre external service providers.

When Stephen Glenfield, a career public servant and former prudential regulator, took over as FASEA chief executive in June 2018, he knew forcing change on an industry that had been historically resistant would not be easy.

But he told The Australian Financial Review in November last year he had totally underestimated how "confronting" the push-back from industry would be.

As the public face of the new regime (with chairman Walter preferring a perch above the fray and out of sight), Glenfield faced a torrent of personal abuse and even threats of violence on social media and in the fiery comments sections of trade media websites.

FASEA's code of ethics was seen as an existential threat, with the industry claiming its hardline approach to conflict mitigation could put as much as 57 per cent of its income in jeopardy.

His predecessor Deen Sanders, a respected financial planning academic, Worimi elder and now Deloitte partner, had lasted just eight months in the role. He has declined requests to discuss his abrupt departure since, but it is understood it was at least in part triggered by the personal toll.

Glenfield and Walter both declined to comment. A statement from FASEA pointed to its achievements, including the development of seven professional standards and facilitation of nine exam sittings.

Rare FASEA supporters within the industry like Jim Stackpool of Certainty Advice Group, a network of independent planning firms, say the agency was up against "vested interests" who wanted to ensure advisers remained a distribution vehicle. He believes FASEA has been unfairly blamed for the regulatory burden.

"All FASEA did was publish guidelines – needed guidelines," Stackpool says. "It was the circling of the wagons by the industry's compliance officers that created the mountains of paperwork."

Meanwhile, FASEA was copping it from the other side, with consumer groups strongly warning against any watering down of the regime or willingness to grant concessions to the myriad industry lobbyists.

A revolving door of board members, with vastly differing views on the issues at stake, complicated things further. CountPlus CEO and former Financial Planning Association chairman Matthew Rowe and consumer advocate and lawyer Catriona Lowe both resigned, while former National Seniors lobbyist Michael O'Neill and academic Steve Somogyi were not reappointed after serving their first term.

The board's composition was another thorn in FASEA's side, with Raftery and other critics alleging serious conflicts of interest by way of board members working for tertiary education institutions that stood to benefit commercially from its decisions. The charge continued to undermine its work and relationship with industry.

And to add salt to the wounds, backbench MPs like Tim Wilson and Amanda Stoker – members of a party and government that introduced the reforms – also publicly criticised FASEA for its perceived lack of consultation and adding to the layers of red tape engulfing planners and making advice unaffordable for regular people.

It was this latter issue that O'Dwyer's successor, Assistant Financial Services Minister Jane Hume, said on Wednesday was the primary reason for abolishing FASEA. "This will create one aligned and coherent regulatory body instead of lots of different ones," Senator Hume said.

'Unintended consequences'

Certainly, planners had become subject to an almost ludicrous array of often competing rules and regulations and this has helped push up the price and force an exodus of talent. They are separately governed by ASIC, the Australian Financial Complaints Authority, the Tax Practitioners Board, professional associations and the whims of the financial services licence holders liable for their advice.

There were just 21,630 licensed advisers in Australia as at June, down from more than 28,000 in January 2018 shortly after FASEA's establishment. The number has likely plummeted since.

And certainly there were problems of FASEA's own making: not consulting as widely or deeply as all stakeholders might have liked, shying away from engagement with the media or responding to critics, initially under-valuing the role of professional experience and degrees more than 10 years out.

 Article first published here in the Australian Financial Review on 11 December 2020.