Some financial planners are taking “a ridiculous risk” when constructing client portfolios, according to ProfessionalInvestmentServices (PIS) chief executive Robbie Bennetts.
He is concerned the current terminology used for categorising the risk profile of a client may not accurately represent the investment strategy used by their planner.
Bennetts is inviting dealer group principals and representatives of the Australian Securities and Investments Commission, Investment and Financial ServicesAssociation, Financial Industry Complaints Service, Financial Planning Association and the Association of FinancialAdvisers to attend a meeting at PIS’ North Sydney office on June 14 to discuss this and other industry issues.
“Anybody from a dealer group who would like to attend that session is more than welcome to contact myself at robbieb@profinvest.com.au,” he said.
“The real outcome will hopefully be a better understanding from all the different parties, whether that be the regulator through to the planner on the street, of what the issues are for the industry going forward and how we should all work together to better address them.”
In Bennetts’ opinion, a high-income driven investment strategy that sees an entire portfolio allocated to one asset class places a client with a conservative risk appetite in the high-risk category, even if the asset class is deemed to be conservative.
“The result I believe we need is to put some processes in place that will simplify the whole financial planning process in so far as dealing with the risk profile of a client and how the client is advised as to where they are investing.”
“That’s what I would like to achieve — for the adviser not to be taking a ridiculous risk in advising a client that an investment option that’s all in one asset class is conservative — because the two don’t go together,” he said.
Focusing on the average Australian with modest retirement savings, Bennetts believes the industry needs to determine whether it is delivering appropriate advice.
“Are we giving them the right advice or are we sometimes falling for a bit of a misunderstanding as to the definition of security versus conflicts of interest, versus asset allocation, versus high income?”
