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The Boutique Financial Planning Principals Group (BFPPG) has hit back at industry dismissals of the independence of advice as a question of perception rather than reality.
Claude Santucci, president of the BFPPG, slammed suggestions made by ING spokesperson Peter Hansen (‘Instos put spotlight on boutique independence’, Money Management, March 29, 2010) that independence of advice is less important than brand reputation or a comprehensive Approved Product List by reinforcing the differences between large and small companies.
He said: “Smaller, independently owned financial planners often have family assets supporting their businesses, work longer hours, take a lower level of income to build their businesses and have closer and more personal relationships with their clients. Reputation is everything because of the personal nature of the reputation and because of the positive impact of referrals from clients. The negative impact of one mistake could put them out of business.”
Santucci also questioned Hansen’s use of the collapse of Storm Financial to support his argument that the higher level of capital held by institutions provides better protection for clients as well as the implication that smaller independently-owned financial planning practices do not care about their reputation. A matter contrary to the reality of the industry, he said.
Citing points made in BFPPG’s submission to the Parliamentary Joint Committee Inquiry, Santucci stressed his position by illustrating the fact that despite access to greater capital, AMP had to give an enforceable undertaking that related to many of their financial planners providing clients with an inadequate basis of advice; that the Commonwealth Bank had finally moved to address the problems it caused as a result of loan practices to Storm clients and that Suncorp was required to provide additional education to its financial planners. He added that more recently, Suncorp’s planners had complained that the internal pressure to sell Suncorp products was having a negative impact on its ability to give clients good advice.
“Being big does not automatically mean better advice and Storm Financial makes that very point. Storm was a large company which was financially backed/supported by Commonwealth Bank to the tune of $27 million and when it acted in concert with other large institutions the damage done to clients was significant and widespread,” Santucci said.
Although Santucci welcomed AMP’s view that the question of independence was a non-issue for institutions, he argued it was an important consideration for BFPPG clients. He said: “Over the years, financial planning in Australia has developed into two distinct camps: those who provide advice and those who sell product … Either camp will put forward arguments in their favour and there will always be clients who prefer one camp over the other.
“The Australian public has the right to know who benefits from the advice they are receiving and this is why there are clear rules of disclosure and why [the Australian Securities and Investments Commission] is moving to strengthen the enforcement of those rules. It is simply not enough to say that the independence of advice is a non-issue or that a large product approved list is proof of independence,” he concluded.
