Planner super competence questioned

The competence of financial planners to provide appropriate advice around superannuation has been identified as an area of concern by two offshore academics providing a submission to the Productivity Commission (PC) inquiry into the competitive and efficiency of the superannuation system.

Discussing the backdrop against which the PC is considering the superannuation industry, the two academics – Nicholas Barr and Peter Diamond from the London School of Economics and the Massachusetts Institute of Technology pointed to the finance advice as being a problem area alongside fund fees that do not reflect performance.

The pair said problems arose with respect to financial advice in superannuation, “even where providers generally try to do a good job”.

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“For example, it is not clear how to choose a good financial adviser,” the submission said before adding that some might be of limited competence meaning the complexity of the superannuation system meant they might not do a good job on some issues.

The submission also pointed to the risk of “biased advice” where advisers might suggest the wrong product or the wrong price and the risk of deception where there was a lack of consumer information and missing or ineffective regulation – something which led to the risk of misleading advertising and mis-selling.

The submission suggested that these problems also applied to the draw-down phase and was “compounded by annuity markets that are frequently thin and often offer poor value”.

The two academics then used their submission to recommend a single, government-organised default life-cycle structure, claiming that both the default and the pension system as a whole would benefit from a single contribution collector and record-keeper. 

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Interesting.. the trouble is some people do not trust the government. We seem to swap government parties every 3 years, so every 3 years, someone would be sure the government is not looking after them. It's a sad statement on our political system, that we seem unable to have a stable government that has the interests of everyone ....

If financial advisors have difficulties in being on top of the myriad and continuous changes to superannuation rules, then it shows how difficult it must be for many many supernatants. All goes to show the necessity of having professional, competent and independent financial advisors and planners, and accountants.

the only ones you can trust are the industry super funds !!

How do you draw that conclusion? The story was focussed on financial advisors and planners having competent understanding of superannuation and super funds to assist their clients professionally. Some planners and advisors may be working within superannuation and pension funds and they also should be also competent in their understanding of the ins and outs of superannuation.

I am sure the Labor Party, Unions and the Greens would all agree with the Barr and Diamond submission. It's reads like it is straight out of the socialist handbook. Total government control of your superannuation savings. I can see it now, don't worry i am from the government and here to help you with your super. haha... no thanks.

Barr and Diamond are from London School of Economics and the Massachusetts Institute of Technology respectively. Both organisations are not based in Australia just in case you didn't know that. There is a Labour (sic) Party in the UK but not in the US; there are unions in both countries (so you got that correct) although hardly socialist in the US; there is a Green Party in the UK but not in the US. LSE and MIT are not known to write socialist handbooks.

The whole superannuation thing is a government thing. In that respect you could say that all the funds and fund managers and the rest of them in the financial services industry have benefited considerably via this 'socialist' creation by governments.

Hedware…. One. I know that Barr and Diamond are from the London School of Economics and Massachusetts Institute of Technology respectively and that they are not based in Australia. Two. What difference does that make? They have made a submission to the PC inquiry here in Australia. Three. The fact that the US doesn't have a Labor Party or Greens party and the UK does is irrelevant to my comment. I merely said that our Labor party and Greens party would be happy with the submission. Given that the PC inquiry is here in Australia any normal person would realise that I was talking about Australia. Four. If you think that US unions are not socialist then maybe you need to expand your education. Five. I never said that the LSE and MIT wrote socialist handbooks. I was just generalizing that the Barr and Diamond submission is socialist in nature, I am sure the majority of people who read my comment understood that. The real communist handbook is Das Kapital by Karl Marx, but I am sure you have read it several times.

Six. Superannuation is not a 100% government thing. Yes, the Australian government legislated to create superannuation, however, the money that is contributed is from the wages of individuals and at present individuals (members) have control over how they spend their money in retirement (Although, I am sure you want that changed to be a system that evenly distributes the money). At present most of the money is managed by the free market. So, like the economy in general, you have a mix between the free market and the control of the state. Socialists, want the state to take total control and I am sure you fall into that camp as do Barr and Diamond based on their submission. However, I can guarantee most people with superannuation saving do not want 100% control of their superannuation to fall into the hands of government.

Hedware, In the end most people understand what socialists like you are trying to do. Your strategy is to demonize participants in the free market, in this case Financial Advisers, in an attempt to de-legitimize Financial Advisers (you have attempted to do this to me in your comment by suggesting that I am stupid). From this you hope to create public anxiety so that Financial Advisers lose the social contract thus driving the case for further political intervention when your Labor mates next win government. However, the public interest is not at heart because the ISA and the Unions have captured the Labor party and therefore capture the political process whenever they are in government. At the end of the day your tactics and self-interest is obvious to everyone.

Perhaps linking to the submission would be helpful..

The submission makes unsubstantiated claims about a planners lack of knowledge and then talks about conflicts and mis-Selling in the USA. Fofa effectively banned these problems years ago. It would be great if we could get through a single review of anything to do with financial services without finding some way to make it all the advisers fault. Bugger all people actually seek advice yet we exist as the financial services punching bag.. kind of over it.

Unfortunately you will just have to settle in and suck it up Michael. The financial planning industry made itself a very dirty bed over the years, which it will likely have to lay in for many more to come (the same can be said for financial services in general, a stigma the banks are feeling right now). Despite various investigations and legislative changes, the reality on the ground remains little changed from years ago, "financial advice" is still the wild wild west and that will never change until the average practitioner in the industry does, again, many many years before that occurs.

The industry is still a joke, so for those of us within it, you will have to tolerate being the butt of those jokes or move on.

Regrettably BB what you say is correct. But there are good and trustworthy advisors and planners in the industry and so there is some hope. Recent regulatory changes are a good thing - maybe they dont go far enough - and are having and will have some effect.

More worrying is that the practioneers' professional bodies have been the failures in maintaining professional standards and quality and have been negligent in weeding out the wild west types.

Hedware, please enlighten us on what your standard is for a good and trustworthy financial adviser? I am sure that everyone would like to know given that you are constantly critical.

Well Tony you can start by looking up what entry and ongoing requirements are necessary to belong to one of the professional associations, their standards of conduct to which they expect their members to abide, and the severity of the consequences of unprofessional behaviours.

The associations that claim to represent financial planners have done as BB suggests - overlooked the dirty dealings of some advisors and the subservience of in-house advisors.

I believe that financial planning and advice is essential these days and pleased to say that there are many good, independent, worthy planners and advisors, who unfortunately have their reputations eroded by the bad apples.

One strength to be appreciated is that good advisors understand domestic and global economies and business/trade marketplaces, and are not narrow minded in their political thinking. Just suggesting some lines for your improvement.

Well Hedware, from your comment I can only conclude that you are not a Financial Adviser but rather a paid troll, most likely from ISA. You could have put forward a constructive comment, however, you reverted into your normal venomous criticism which is the typical personality centre of a unionist thug.

As for your last comment, it made me laugh. Given the way that you conduct yourself on here I am quite certain that we all know your background. As such I am quite certain that I have significantly more political and business experience than you. You are the one who needs improvement.

I have to go back to work now. I am not an internet troll paid by the unions to drive a false narrative about financial adviser.

Dear Tony. Just to help you provide more enlightened discourse, I hereby disclose that I have no personal, fiduciary, professional or otherwise relationships with industry superannuation funds, with the ISA or with unions. In fact quite the opposite.
I like industry super funds because they bring more competition into the Australian superannuation and pension ecosystem and hopefully drive the retail side to deliver better returns and services at less ripoff costs.
For similar reasons I like having more than one political party.
There you go - can't get less socialist than that.
That leaves me concerned about you. You seem to favour less competition than a good capitalist would want, and to favour a one-party state that no citizen would want.

Hedware… Yes, I am a conservative and a believer in individual freedom (there is nothing wrong with having this opinion). Therefore, I prefer capitalism and competition over socialism, however, I am well aware that a political balance is required. Although empirical evidence proves that economies that embrace too much socialism always fail due to the profit sapping, incentive destroying regulations implemented by the state to give special interest groups power and privilege in society.

While you like Industry Super Funds because you perceive that they provide competition, I at present do not like Industry Super Funds. Why? because they have not embraced competition. Rather they have created a barrier of entry to other market participants with the agenda to become a monopoly in the superannuation market. How have they created the barrier of entry? They captured the legislation process when the Gillard government was in power and coerced the Gillard government to introduce draconian legislation against their competitors (financial advisers) while receiving a carve out for themselves. It’s called capture theory if you want to look it up. Ultimately a government is supposed to represent the public’s interest, not special interest groups.

There needs to be a rebalance in the financial services market. You push the narrative that the financial advice profession remains somehow untrustworthy and in need of further regulations. I however, can see that significant change has occurred and that positive change is ongoing due to the enhanced education requirements. Therefore, we do not need additional regulations, in fact as the higher education requirements come into effect a case can be made for a reduction in the regulation approach in favour of greater reliance on a free market approach. Increased regulations against financial advisers from this point will only benefit Industry Super Funds further to the detriment of Australian society.

Industry Super Funds on the other hand need to have an increase in regulations before I would be interested in them. At present, there is no Independent Director requirement for the Boards of Industry Super Funds. I assume you have heard of agency costs. Corporations must abide by the Corporate Governance regulations in the Corporations Act. They must have a majority of non-executive Independent Directors on the Board and the Chair also must be an Independent Director. This Corporate Governance requirement came about because of the many corporate collapses (eg Enron) where directors where acting in their own self-interest rather than in the best interest of their stakeholders. I would be interested to hear if you believe that the Boards of Industry Super Funds would not act in a self-interested way? They always talk as though they have the high moral ground but the field of economics has shown through empirical evidence that all individuals and groups are primarily motivated by self-interest. The only way to ensure transparency in Industry Super Funds is to install independent directs, yet the ISA is vehemently opposing this. Why? Their, position is indefensible??? So, if you are recommending Industry Super Funds to your clients, then good luck to you. You better hope that they are unique selfless humans and that a scandal doesn’t materialise. Maybe it’s only those capitalists in the corporate sector who act in their own self-interest???

@ Hedware etal,
Until God makes the perfect "Human Being", no amount of legislation will eliminate bad or poor behaviour. It happens in every profession. and yet you are all looking for the magic solution.
The starting point should have been to have all qualifications including the DFP program run via a University.
The rot set in when it was decided that any RTO could put someone through some mickey mouse qualification process after 4 days and qualify as an adviser with the minimum requirement under RG146.

Agree with your take on things and agree that no profession has an unblemished record, but the past doesn't mean the future can't be improved.

@ Hedware,
No, but it doesn't mean that you need a jackhammer to crack a walnut.
And that's the fundamental problem !

All this could have been resolved simply and easily but when you have self-interest (ISN, FSC, political parties) coupled with weak and incompetent governments that don't do their due diligence like you and I are expected to do, then you get this seriously over-regulated, inept system that began in 2000 with the introduction of FSR,.... that benefits no one, especially the consumer !
So if I'm to consider your comment that it doesn't mean the future can't be improved,... do you think they've finished with this yet after 17 years of continuing regulated change ?
It's a rhetorical question.

Again I agree with you. A combination of approaches is necessary with each approach being clever rather than heavy handed.
At the time of its introduction FSR was a knee-jerk response to the bad behaviour and bad treatment of clients by some advisors, but soon became another boilerplate form filling exercise. But that's not to say to give up. FSR did mean that advisors did have to meet with clients (something that was not happening) and that meant the good advisors did go beyond the template of FSR and provided useful and considered advice to their clients.
Two concerns:
People do need to make use of financial planners and advisors to be helped with increasingly complex investment, regulatory and legal environment of superannuation and pension schemes (just the same as seeing a doctor for medical matters).
People (particularly those young investors) who are familiar and comfortable with digital technology will start bypassing the human planners and advisors and to digital counterparts running on AI/machine learning. After all algorithmic trading is now mainstream. Just as it is better to ask for the robot for some medical procedures, digital advisors might be more honest, dedicated and dare we say it more professional, and so a better choice for financial advice.

I sort of agree with Hedware. The industry is a mess. I really wonder if the time has come to have a separate compliance monitoring organisation with a different approach. For example. it is empowered to ask for a list of super rollovers from the providers and based on that list selects 1% of transactions to contact the individual. Not the adviser, but the client. From the client obtain what was said and promised, and then go to the AFSL for confirmation. After all good informed advice is client centric so let's start with the client. Better still lets put this new ASIC monitoring fee to this purpose.

$2 Trillion in super, and these academics' advice is "trust the politicians". Because the politicians have done such a good job managing our Energy over the last 10 years (despite the fact we are the largest coal and gas exporter). Among other things of course.
And it certainly doesn't hurt if, as an academic, you part of a government-funded defined-benefit scheme (where do I sign up for that). But I'm guessing this is not what they're talking about here.

Yes the politicians have spent years stuffing up superannuation as well as energy. But then the private sector such as the banking and insurance industry are not cleanskins either. That's why good and independent financial advisors/planners are needed to steer folk through the mess.
But then the financial advice industry is not exactly full of cleanskins either. There's reasonably constant reminders of this in this august publication. People need good financial advisors but the industry needs to actively and fearlessly clean up the mess of its own making.


@ Hedware,
Sorry but I don't agree with you. Each change is not more clever than the next, it's a "finger in the dike" stuff trying to plug up holes, even if they don't exist.
Look at who's motivating governments, regulators, politicians for all these changes and it isn't too difficult to figure out what the agenda is and how that serves someone else's
self interest.
This is symptomatic of a left wing politically correct agenda to introduce "Corporate Socialism" and it does matter on which side of the political divide you stand on.
It's overkill.
It's a mess because the so called professional associations that have claimed to represent their rank and file have had no backbone to stand up for their members and prosecute the case on behalf of their members. They've capitulated to the ISN , acquiesced to politicians and Governments.
in fact while the ISN were denigrating financial planners in the media (press & television) the CEO of the FPA and a couple of the senior Board members were supporting those who were doing this by attending an ISN symposium (convention) . In other words sleeping with the enemy.
You want more regulation, more government intervention, more of the same and for what purpose ?
The fact that it had to be regulated that we all put the "client's best interest" in this process is a joke !
The client's best interest should be first, second and last ,........should be the mantra of every financial adviser !
You don't need ASIC, Government or anyone else looking over your shoulder if that's your starting premise.

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