{"id":1132,"date":"2012-03-14T14:02:36","date_gmt":"2012-03-14T04:02:36","guid":{"rendered":"http:\/\/blogs.unsw.edu.au\/knowledgetoday\/?p=1132"},"modified":"2012-03-20T15:39:09","modified_gmt":"2012-03-20T05:39:09","slug":"can-financial-planning-provide-social-value","status":"publish","type":"post","link":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/blog\/2012\/03\/can-financial-planning-provide-social-value\/","title":{"rendered":"Can Financial Planning Provide Social Value?"},"content":{"rendered":"

\"\"<\/a><\/p>\n

Professor Peter Shergold<\/strong> | CSI blog<\/a><\/p>\n

Let me begin with an extended apologia.\u00a0 Actually it has two elements.<\/p>\n

First, I plead tardiness \u2013 back in October 2011 I wrote a blog<\/a> on the residential property developer, Stockland as a \u2018shared value\u2019 company creating social good (building communities) even as it seeks financial return.\u00a0 I promised I would soon provide a second Australian example.\u00a0 So here it is, I hope better late than never.\u00a0 It\u2019s AMP.<\/p>\n

Second, I acknowledge conflict of interest.\u00a0 I sit on the Board of AMP Ltd, its subsidiary AMP Life and a member of the Audit Committees of both organisations.\u00a0\u00a0 That means I understand AMP from the inside.\u00a0 It also means that I can scarcely pretend to objectivity.\u00a0 What follows are my personal reflections which, I should emphasise, don\u2019t necessarily reflect the view of AMP.<\/p>\n

Financial planners get a bad rap.\u00a0 Last year\u2019s Roy Morgan \u2018Image of Professions\u2019 survey<\/a> suggested that only 28% of respondents awarded financial planners a high or very high rating for honesty and ethical standards (up from 25% in 2009 and 2010).\u00a0 To put that score in perspective, car salesmen rated 3%, real estate agents 7%, journalists 11% and Federal politicians 14%.\u00a0 At the other end of the scale, nurses scored 90%, school teachers 76% and police 69%.<\/p>\n

The portrayal of financial planners in the media is often hostile.\u00a0 The most egregious characterisations present the profession as little more than glorified loan sharks, squeezing from their hapless clients outrageous high fees for self-serving advice.<\/p>\n

The inadequacy of the government and the opacity of their financial dealings have fuelled the anger and resentment of Wall Street Movements world-wide.\u00a0 Financial planners, nearly all whom operate as small and medium community-based enterprises, have become associated with the dubious ethical standards that were displayed by some of the grants of international banking.<\/p>\n

I suspect that many blog readers will think it purposeful provocation when I suggest that financial planning might have a positive social value.\u00a0 Yet I\u2019m not being a political contrarian.\u00a0 Rather I\u2019m returning to my academic roots as an economic historian.<\/p>\n

It\u2019s too rarely remembered now, only a generation after the great wave of demutualisation, that the AMP was born in the Australasian colonies of the mid-nineteenth century as the Australian Mutual Provident Society.\u00a0 Geoffrey Blainey wrote a fine business history of the company, setting its growth within the fiercely competitive world of friendly societies, mutual benefit associations and cooperatives that were the foundation stone of much nineteenth-century enterprise.<\/p>\n

In those days providence (the exercise of foresight in the management of one\u2019s own affairs) was seen as a positive social value.\u00a0 It was based on the unwavering belief that working people had both the responsibility and capacity to look after themselves.\u00a0 By lives of exertion, punctuality and thrift the \u2018deserving poor\u2019 could become self-reliant.\u00a0 Through frugality, without government assistance or charity, they could provide for the future needs of their families.<\/p>\n

The means to achieve that was through mutualisation.\u00a0 AMP \u2013 and other great institutions like National Mutual Life Assurance and Temperance and General (now both part of AMP\u2019s corporate genetics) \u2013 were run on the view that ordinary working people possessed collectively the power to control their lives and care for themselves.\u00a0 Those who paid subscriptions for protection were members of the businesses they ran.\u00a0 Surpluses were reinvested for their mutual benefit.<\/p>\n

One key to this remarkable ambition was what today we would call financial planning.\u00a0 The \u2018mutuals\u2019 provided life assurance, income protection and deferred annuities.\u00a0 They issued endowments for children and made loans available on the security of the policies held.\u00a0\u00a0 Friendly societies offered reimbursement of medical expenses or, failing that, the cost of a funeral.\u00a0\u00a0 The broad sweep of wealth management (to use contemporary jargon) was perceived to have social purpose.\u00a0 Those who provided it were driven by a sense of social mission.<\/p>\n

Today AMP<\/a> is one of Australia\u2019s top investing publicly-listed companies, with 980,000 shareholders, around 6,000 employees, 2,900 self-employed and employed financial planners and relationships with a further 6,000 independent financial advisers.\u00a0 It provides planning advice, superannuation, income protection, life assurance, banking products and investment (including shared, fixed interest, property and infrastructure). It\u2019s a large, modern corporation.\u00a0 Yet what it offers, in its essence, is not so very different from 150 years ago.<\/p>\n

That\u2019s why I am so delighted that the current CEO of AMP, Craig Dunn, in addressing employees and financial planners, has restored that sense of societal value in espousing the \u2018noble purpose\u2019 of what they do.<\/p>\n

It captures the sense that AMP has the capacity to make a positive social impact even as it seeks to maximise the long-term value to its policy-holders and shareholders.<\/p>\n

I see at least four ways in which AMP (as an institution) and financial planners (as a profession) have the capacity to deliver societal value.<\/p>\n

First, by helping Australians and New Zealanders take personal responsibility for the financial security of their families.\u00a0 AMP is not a business that accepts that the challenge of solving social problems \u2013 of creating social impact \u2013 resides solely with government.<\/p>\n

Second, by making the opportunities for building financial security as accessible as possible, catering to those with modest incomes not just those who have accumulated high net worth.\u00a0\u00a0 AMP needs to provide low-cost entry to superannuation.<\/p>\n

Third, by recognising that AMP contributes directly to the public good and civil society. \u00a0It does so, for example, by reducing pressure on publicly-funded retirement savings and by investing capital assets in building Australia\u2019s productive infrastructure.<\/p>\n

Fourth, by emphasising the integrity of its corporate behaviours and transparency of actions, AMP can help to restore faith in the market economy (generally) and the responsibility of our financial institutions (particularly).<\/p>\n

In the nineteenth century AMP\u2019s mission was \u2018to be a sure friend in uncertain times\u2019.\u00a0 Today, in more contemporary language, it is committed to \u2018helping people own their own tomorrow\u2019.\u00a0 Both statements, appropriately pursued, have the potential to create societal value in pursuit of investor returns, underlying profits and shareholder dividends.<\/p>\n

This, at least, is the message that I\u2019ve now twice had the opportunity to deliver to senior executives at AMP.\u00a0 If you would like to read the longer version <\/a>of my address to them it\u2019s now available.<\/p>\n

I\u2019d welcome your comments.<\/p>\n

Peter Shergold<\/a> is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW. This blog post first appeared on the CSI blog<\/a>. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Professor Peter Shergold | CSI blog Let me begin with an extended apologia.\u00a0 Actually it has two elements. First, I plead tardiness \u2013 back in October 2011 I wrote a blog on the residential property developer, Stockland as a \u2018shared value\u2019 company creating social good (building communities) even as it seeks financial return.\u00a0 I promised […]<\/p>\n","protected":false},"author":336,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1132","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/1132","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/users\/336"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/comments?post=1132"}],"version-history":[{"count":9,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/1132\/revisions"}],"predecessor-version":[{"id":1140,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/1132\/revisions\/1140"}],"wp:attachment":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/media?parent=1132"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/categories?post=1132"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/tags?post=1132"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}