My former colleagues at the Commonwealth Treasury can generally be relied upon to defend the free market, but occasionally they fail to do so, as appears to be the case with new legislation relating to financial planners reported on by the Financial Review earlier today:
Financial planners have lambasted Treasury proposals that would force advisers to obtain tax and commercial law qualifications, arguing the rules would force many professionals out of the industry.
On Friday, Treasury released a discussion paper detailing the qualifications financial advisers will need to obtain as part of the proposed legislation to bring planners under the Tax Services Agent Act (TASA).
Treasury recommends that financial advisers be required to take courses in commercial and tax law, which it estimates would amount to between 200 and 260 hours of study. In addition, planners would need to have at least 18 months of experience and be a member of a professional organisation.
This seems like an unnecessary barrier to entry that may ultimately constrain competition in the sector and result in higher costs to people seeking financial advice. If Treasury officers are struggling to figure out logical arguments against silly ideas like this one, they should read Milton Friedman’s classic, elegant defence of the free market in either Capitalism and Freedom or Free to Choose. A good place to start would be Chapter IX of Capitalism and Freedom on Occupational Licensure, in which Professor Friedman observed:
…the great argument for the market is its tolerance of diversity; its ability to utilize a wide range of special knowledge and capacity. It renders special groups impotent to prevent experimentation and permits the customers and not the producers to decide what will serve the customers best.
Treasury should trust the market and not force people to obtain qualifications that may be unnecessary for them to do their jobs and meet the needs of their clients.