Equity markets are firing, clients are safe in the knowledge that the financial services industry is now governed by one of the world’s most rigorous consumer protection regimes, and Challenger’s deep pocket play for Associated Planners has given many in the industry a renewed bout of Sealcorp-itis and hope that one day a big cheque will also come their way. Life couldn’t get much better, surely? But it does get better.
Fund choice, with its passage through Federal Parliament about as exciting as watching grass grow for eight years, will finally become a reality, whether it be under Prime Minister Howard, Costello or Latham, handing a massive opportunity to the financial planning and funds management industries.
If this is as good as it gets, why all the back-room rumblings and discontent?
Could it be the realisation that Australia, with its multi-layered and complex financial advice and investment management industry, is subject to the same constraints seen globally? In other words, fee compression, rising technology spends, and the big one — a tide of consumerism that may lift or swamp industry players depending on their ability to respond to the many challenges ahead.
Delegates to the recent Investment and Financial Services Association annual conference should have been cheering the age of enlightenment and good times.
Instead, most were crying in their beer, worrying about their poor standing in the eyes of consumer polls and complaining of unfair savagery at the hands of the media. They sounded more like politicians than fund managers.
The media loves a bad news story, and our local press has likewise seized upon the managed funds industry and is ready to pounce on unscrupulous practices and poor performance.
Industry super funds, with a few well-placed barbs and powerful political allies, have engaged in their own brand of trench warfare, and are happy to point the media towards some convenient targets. Like opaque fee structures and financial planners, whose characterisation by the press as a pack of wilfully rogue product floggers is proving difficult to shake.
Such simplistic notions are hard to rebut on some levels (there are still too many bad eggs giving good planners a bad name). But the headlines only tell part of the story and selectively ignore the tremendous gains made by financial planning in the aftermath of the now infamous “structural corruption” claims made in a rush of blood by the Australian Consumers’ Association some two years ago.
Will the media ever let up? The answer is a definite ‘no’.
The arrival of fund investment choice in 2005 will only intensify media and regulator scrutiny. The media’s use of the ‘f’ word (fees) will only be surpassed by the two ‘c’ words — commissions and consumers.
We all know too well that recent media attacks on financial planning follow a world record round of structural change — including tighter legislative reform courtesy of the March implementation of the Financial Services Reform Act — that has shaken down local players.
But don’t take this as a sign the scrutiny will let up. Take it as a sign that this is just the beginning of a long campaign.
Of course, often the best form of defence is attack. It’s the fight for the hearts and minds of those who ultimately matter — the investing public.
This is a fight best fought at the grass roots. In the industry’s case, this means delivering unfailing service and product delivery as the single most tangible touch point for clients. In this new game, under these new rules, your professional reputation will be judged almost entirely by the quality of your service delivery and relationships.
Other elements also come into play: how you treat the people around you (staff and colleagues), how you manage your business in a financially responsible manner, and whether your leadership and vision is first rate.
Get these elements right, including how you communicate and precisely what it is you do for clients, then the issues that seem insurmountable today will invariably fade.
After reporting on the financial planning and funds management worlds for around a decade, I am reminded of that famous sporting quote: “this is déjà vu all over again”. Disclosure, fees versus commissions, and big dealer versus small versus institutional ownership, these are not new issues.
But there are simple solutions, and those who understand this premise run very successful businesses, offering high level advice and quality service to some very happy customers who see through the media onslaught as irrelevant to their circumstances.
Bruce Madden is a former editor of Money Management and launch editor of Asset magazine. He is now a director of BlueChip Communication Group, a Sydney-based communication and industry analysis provider to the financial services industry.
Madden returns to Money Management on October 21 with the first of his regular exclusive columns.
Write to Bruce at bruce.madden@bluechip communication.com.au
