One of the reasons why financial planners have found themselves in trouble is that for too of they found themselves under pressure to generate revenue rather than focusing on their clients, according to academic Dr Shantha Yahanpath.
In a recently-published article, Yahanpath has argued that in a post-Royal Commission world, planners should see the purpose as starting with their clients, not with products, bonuses or performance indicators.
At the same time, Yahanpath has argued that a number of senior executives have not been held accountable for the significant reputational damage in general and brand damage in particular that has occurred.
“While some executives have taken accountability seriously others have avoided accountability where possible,” he said.
“It is the clients and their well-being that should define the financial planners’ purpose,” he said and argued that much could be achieved by planners adopting Enterprise Risk Management methodology within which they could consider and mitigate risks.
Yahanpath said planners needed to understand the risk context acceptable to a client and that a “win-at-all-costs” approach demonstrated a poor understanding of risk context.
He said that one of the significant revelations of the Royal Commission had been the failure and/or delay in risk ownership which had served to aggravate problems with the result that remediation costs and penalties had increased.
“Risks taken in revenue at all costs strategies appear to have exacerbated the problems,” Yahanpath said.
Comments
This academic is completely clueless as the revenue “at all costs” is NOT driven by planners! Look no further than the sociopathic executives and the ridiculous targets that they force upon planners. Dr Shanghai Yahanpath please do yourself a favour and don’t write reports about financial planners until you have some credibility.
The way I interpret the story, I think he is targeting execs and saying that the executives are putting undo pressure on advisers.
Its great to have achedemics and public servants commenting on our profession. I understand that they are paid by government and dont have to produce anything or hit targets to get paid.
In the real world you have to produce something to be paid. Big businesses are in business to make a profit for their share holders. THATS ALL THEY ARE IN BUSINESS FOR. Samaller businesses may have other resons for operating but profit is still the main driver of activity. Otherwise they would be not for profit organisations. If a sales staff member is not profitable (no matter how friendly they are ) then they will be fired.
Financial products need to be sold. The people selling them need to be incentivised to sell them.
The only way to fix this is to have all financial products distributed by a government funded and owbed company. Then we can all just sit about doing nothing and waiting for the clock to go past 4.30 so we can get some time in lieu and take every monday off.
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