Banks should step away from the provision of wealth management services and independent, best interest financial advice because of the entrenched product-driven sales culture, according to the director of an advisory firm.
Certainty Advice Group director, Jim Stackpool said banks would essentially maintain a sales and product-based culture, which he said would be justified if banks returned to just producing and providing world class, robust, well-tested products.
“Don’t confuse the clients if you want to save your brand by continuing to push this line that ‘we’re acting in the clients’ best interests’ [when] the ads on TV have all these offerings,” he said.
“It’s fundamentally about ‘buy our products’.”
Stackpool likened it to hospitals in NSW being owned by pharmaceutical companies, and said that was the problem in financial services where all services offerings were owned by product providers.
Stackpool noted that while banks previously had a trusted bank manager 30 or 40 years ago that customers sought advice from, the 1980s and 1990s witnessed a change in banking culture that forced client-centric managers out, as banks looked to broaden their suite of offerings from just a loans market.
This included the likes of Westpac buying BT, National Australia Bank (NAB) buying MLC, and ANZ buying ING Australia and renaming it OnePath.
“It was about wallet share. There’s a pot of gold here for us to sell these guys more products,” he said, noting that ANZ was now seeking to sell its wealth division, while NAB has held similar discussions.
“The walls around the current institutions are so strong that anyone trying to get outside that to get through advice that’s not aligned to someone on a sales-based or a culture around remuneration based on products, they don’t know where to go.
“There’s still only 20 per cent of Australians that seek advice or think they can afford advice primarily because we’re populated by these organisations whose fundamental culture is built on selling products as compared to giving advice.”
Stackpool also added that the product-driven sales remuneration culture was so entrenched in banks that no reviews, reports, or even a Royal Commission would shift this culture.
Instead change would have to occur through the emergence of a completely different approach, where those in the industry were a true equivalent to a medical practitioner who was not remunerated by a product but simply provided best interest advice.
“And we haven’t got that profession out there yet,” Stackpool said.