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Guarding society: The call to regulate financial planners in Indonesia
By establishing clear boundaries between these two regulatory bodies, the P2PK can create specialized standards for licensing, certification and conduct for financial planners.
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ndonesia has witnessed a surge in the number of financial planners offering their services to the public. While these professionals play an important role in helping individuals achieve their financial goals, in some cases they have had detrimental effects to consumers.
This article aims to shed light on the urgency to regulate the financial planner industry in Indonesia, beginning with a closer examination of cases in which their practices have caused harm. Subsequently, we will explore the legal vacuum in this area and the necessity for a clear separation of duties and authorities between the Financial Services Authority (OJK) and the Finance Ministry’s Financial Professional Development Centre (P2PK), both of which are instrumental in safeguarding the financial sector.
Over the last few years there have been numerous cases of financial planners engaging in fraudulent and deceptive practices. These unscrupulous individuals often exploit unsuspecting clients, promising unrealistic returns on investments or selling unsuitable financial products to maximize their commissions. Such actions have led to significant financial losses for innocent individuals, jeopardizing their financial security and future.
One such case involved a public figure who acted as a financial planner and who operated a scheme that drew in investors with the allure of unrealistic profits through companies that acted as investment management. However, as the scheme eventually collapsed, it left victims in financial ruin and eroded public trust in financial planning services.
These cases underscore the pressing need to regulate financial planners and protect the people from further harm. However, since the aforementioned case in 2020, policymakers have barely made efforts to improve regulations related to this profession, leaving a legal vacuum.
The current legal landscape in Indonesia lacks sufficient regulations and oversight for financial planners. Unlike financial service institutions, the profession of financial planner does not fall under the direct purview of any specific regulatory body, leading to significant gaps in oversight and accountability. This lack of clear guidelines has allowed unqualified individuals to pose as financial planners, deceiving vulnerable clients.
To address the existing legal vacuum and curb detrimental practices, there is an urgent need for a clear separation of duties and authorities between the OJK and the P2PK in the Finance Ministry. The OJK, as the primary financial services regulator, should continue to focus on overseeing financial institutions and their products. The P2PK should take on the role of regulating the supporting professions within the financial sector, with a particular emphasis on financial planners.
By establishing clear boundaries between these two regulatory bodies, the P2PK can create specialized standards for licensing, certification and conduct for financial planners. This will ensure that only qualified and ethical professionals can provide financial planning services to the public. Furthermore, the P2PK should collaborate with relevant industry stakeholders to develop a comprehensive code of ethics that all financial planners must adhere to, promoting transparency and professionalism.
P2PK has accumulated sufficient knowledge and expertise in this area because it has acted in a supervisory role for other financial professions such as accountants, valuers and actuaries.
Indonesia can learn from international best practices to build a robust regulatory framework for financial planners. Countries like the United States, the United Kingdom and Australia have established comprehensive regulatory frameworks that require financial planners to meet specific educational and professional standards. These frameworks also emphasize ongoing professional development and a fiduciary duty to act in the best interest of clients.
Incorporating these principles into Indonesian regulations would elevate the standard of financial planning services and protect consumers from harmful practices. It is essential to conduct rigorous background checks and enforce strict penalties for those found engaging in fraudulent activities. This includes a harsh penalty to those who are not certified financial planners but provide financial planning services, as was the case mentioned above.
In addition to regulatory reforms, raising public awareness about the importance of seeking qualified and regulated financial planners is crucial. Encouraging individuals to conduct due diligence before engaging financial planning services will empower them to make informed decisions and safeguard their financial interests.
In summary, the urgency to regulate financial planners in Indonesia stems from several cases that have harmed the society, the existing legal vacuum and the need for a clear separation of duties and authorities between the OJK and the P2PK in the Finance Ministry. By establishing comprehensive regulations and holding financial planners to high professional standards, Indonesia can enhance consumer protection, foster public trust and promote a thriving financial sector that serves the interests of all citizens.
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The writer is deputy director at the Financial Professional Development Center (P2PK) at the Finance Ministry. The views in this article are personal.
