In what is probably anFPAconvention first, former Macquarie heavyweight Tim Farrelly will host a panel session to debate where the industry has gone right — and wrong — and will call on conference delegates attending the session to participate.
“This is a panel discussion which aims to create an open forum for delegates on some of the major issues confronting the industry today,” Farrelly says. “This is the session where delegates have an opportunity to help shape some of the key debates.”
Farrelly believes open forum sessions like this one have the potential to become one of the convention’s main attractions and urges all delegates to attend.
Up for discussion are topics like the recognition of financial planning as a profession — is it a must for the industry or will it create a millstone of unrealistic expectations?
The role of the Financial Planning Association (FPA) will be discussed — has it lost relevance for members or is it the unsung hero of the industry?
Also on the agenda is the debate surrounding the outsourcing of investment decisions — will it allow planners to concentrate on the main game or is it giving up?
Members of the panel include FPA director Nick Bruining, newly-appointed head of manager research and alliances atChallenger, Caroline Saunders, industry stalwart John Godfrey, andCountadviser Colin Bishop.
Bruining feels the industry has failed consumers by “not ensuring the delivery mechanisms prevent unscrupulous operators being able to participate and silly mistakes, through inappropriate investment selections, being made”.
But on the plus side, Bruining believes the industry has done well in educating investors about the need to diversify beyond bank accounts and real estate and should be applauded for providing capital, via institutions, for Australia’s economic expansion.
He believes the industry faces an ongoing challenge to “lift the bar”, to enforce standards and to continue the education of consumers at all ages and levels of sophistication.
Colin Bishop, an adviser and accountant with Count, believes the industry has actually failed the practitioner.
“Where the industry has failed is that the consumer doesn’t understand what we have to do from a compliance perspective,” he says. “The industry has heightened awareness to seek advice, but it has left it there.”
He places much of the blame for that on the FPA and dealer groups.
“The FPA and the dealer group networks have got it wrong — they don’t know what it’s like at the coalface. They haven’t been able to get across to the consumer what is required of us to comply with the requirements of theAustralian Securities and Investments Commission(ASIC).”
Bishop also says that the FPA has little interest in advisers servicing the lower end of the market — those clients with less than $200,000.
“The FPA and its members tend to hit the high rollers. No one is interested in serving the lower end client — probably because they think there’s no money in it. So the industry doesn’t cater for every one and when you think about how many investors there are out there with less than $200,000 to invest, you have to ask how many people does it really cater for?”
Farrelly himself believes that one of the issues in the industry that hasn’t received the attention it deserves is the fundamental mistakes that continue to be made in the investment decision-making process.
“I believe the argument that equities will always outperform in the long-term is fundamentally flawed,” he says. “The industry in Australia always appears to be on the last bandwagon and gets many big calls wrong. This is the issue I worry about more than anything else.”
Farrelly is also concerned that the industry is not setting its own agenda.
“The shadow shopping exercise is one example of that,” he says.
On a more positive note, Farrelly believes that the industry has moved ahead in ‘leaps and bounds’ in terms of professionalism over the past three to five years.
“It’s a pity the fees versus commission debate is coming up now because I think the industry has largely moved beyond that — although it’s still an issue for some. The master trusts push will make it even less of an issue because most products will come under one fee and/or commission that will be agreed with clients.”
Farrelly also believes that advisers should congratulate themselves for the very good work they have been able to do with clients.
“It’s taken as a given these days, but I think what many people forget is that many advisers have put their clients way ahead of where they were beforehand. After seeing their advisers, clients generally are a whole lot better off than they were in the first place.”
