The findings of the Australian Consumers’ Association (ACA) report came as no great surprise to Money Management’s regular columnists.
Tom Collins
Tom Collins Consultancy
There are issues in the report for large dealers — one of the things I’ve been saying for some time now is the financial planning industry is still in what I call the ‘spoke phase’ where plans are handcrafted. It is hard for large dealer groups to make financial plans in this way.
The great disparity in the quality of plans written by different advisers from the same dealer group has occurred because financial plans are still handcrafted. But the fact that the plans are of inconsistent quality is a major problem for the large dealer groups because it impacts on their brand — if there’s one thing a brand implies, it’s consistency.
The language of the report is a bit colourful but I do hope the industry doesn’t take a ‘head in the sand’ attitude. If that’s the public’s perception of financial planning advice, then we have to address the problems — it’s no use saying the report is wrong. If financial planners don’t address the problems, they’ll go the way the life industry went 10-15 years ago.
Laura Menschik
Millennium Financial Planning
I think the survey raises more questions about its information gathering process and the results derived, than it does answers to the problems it may be trying to address. To the client, what makes a good planner can also be a very subjective issue.
The client’s interests should come first, so if [in light of the report] things become better for the public in terms of products and services, then I would support that.
But I’m not sure that the survey is broad enough. I’m not sure that it has encompassed all the levels of services and types of organizations within our industry.
Robert Keavney
Centrestone Wealth Management
There ought to be absolutely no surprise that there’s a huge variation in the quality of financial planners.
We’ve had an industry in which thousands of planners have been recruited rapidly and put out into the marketplace and the average number of years of experience among them has really come down — you can’t pull thousands of new people in every year and think they are all highly trained, skilled people.
Where the growth in numbers is taking place is in the institutions. Some do own high quality dealer groups but most also have lower-end dealer groups containing large numbers of planners. And how do you put this delicately? Is it a surprise to realise those planners haven’t always been trained with the highest degree of client focus?
There is also a sense in the report that there’s something wrong about the fact that little clients can’t get access to good advice.
It’s not a surprising outcome that if you can’t afford to pay for good advice, you generally can’t get it – it is very unfortunate in the same way that it is very unfortunate that many poor people can’t get good medical advice. I’m not being heartless about it. Actually a lot of dealer groups have some pro bono clients.
But you can’t criticise commercial entities for behaving commercially.
Dominic McCormick
Select Asset Management
The report’s results are not a great surprise, although there will always be a big subjective element in such surveys.
The financial planning industry is one that grew dramatically in the 1990s in an environment where real investment returns were high. Like any industry that grows quickly, it attracts both good and opportunistic participants. Perhaps a key issue is that most planners’ earnings are almost totally related to the amount of investments they place and not on the results of their strategy and investment advice.
There are definitely some good planners out there, although they become harder, not easier, to find as the industry gets larger. Many of the best are not actively looking for new clients and it is simple mathematics that when many new planners come into the industry, the average experience must fall, although years of experience is not necessarily related to quality.
There seems little doubt that the planning industry on average has not done a great job of investing clients’ money in recent years. You only have to look at when the money flowed into (and out of) particular asset classes and fund managers to see that.
One can always pick out flaws in the methodology used in reports such as these. However, if the planning industry goes into denial by simply seeking out these flaws, I doubt whether this will assist its credibility.
Robert Kiddell
Delburn Consultants
The report throws up some interesting points, but is unnecessarily damning of the industry.
When you look at the educational standards, and the sheer numbers of people making a career in financial services compared to seven years ago, it’s a slap in the face to say that nothing has been done.
But it does add further weight to the fact that we, as an industry, need to move more towards fee for service.
The ACA could also possibly have a political agenda, in that they’re trying to delay investor choice for super.
It’s like a big brother or paternalistic approach where they try to tell us they know what’s best for us, but I’m yet to come across any client or any person who isn’t in favour of super choice.
John Hewison
Hewison & Associates
I believe that [as an industry] we need to continue to lift our standards, but to undermine client confidence to this extent, I don’t think it’s appropriate.
They [the ACA] say there’s been no improvement, but I think the benchmark has been raised substantially over the last 10 years.
The emphasis here is on the worst case, not the best case. As long as there’s going to be incentives to put people into certain products, then there is the chance that planners will put themselves before clients. I personally think that if we had a fee-based profession we’d be a lot better off.
Also, to include stockbrokers in a financial planning survey muddies the water a bit — stockbrokers are not financial planners, and they don’t perform in the same way.
