Thursday, March 11, 2010
   
Text Size

Advertisement

Latest Comments

Locking in a real long-term return

In addition to managed fund products, TIBs can be purchased directly from the RBA. http://www.rba.gov.au/fin-services/bond-facility/index.html Specialist fixed interest b...

Where the best offshore opportunities are

I am struggling to include or add to any global share exposure in client portfolios, largely based on 10 year returns in international equities being close to NIL. What m...

Investment Management

Where the best offshore opportunities are

The global and local sharemarkets may have retreated recently, but the global economic recovery continues to gather pace. So much so that the International Monetary Fund (IMF) recently raised its forecast for world economic growth.

Read more: Where the best offshore opportunities are

 

Dollar higher? How right can you be?

We have taken the view that attempting to predict the near-term direction of currencies, particularly for long-term investors, is extremely difficult.

Read more: Dollar higher? How right can you be?

 

Managing risk and enhancing return

The global financial crisis and the impact on investment markets are still very fresh in people’s minds. This has been the most serious crisis for decades and in response, many investment managers have been questioning whether there are aspects of their investment approach that could be refined to provide their investors with better downside protection.

Read more: Managing risk and enhancing return

   

Inflation tug of war

We are probably at the tail-end of the Great Recession that followed the GFC, but the environment is far from ‘normal’. The outlook remains highly uncertain and inflation prospects are perhaps the area in which opinion is the most divided.

Read more: Inflation tug of war

 

Solving the puzzle of emerging markets

There was never any doubt that emerging markets would become a hot topic once China was assigned the responsibility of bringing the world out of the depths of the global financial crisis. But even the proponents of this belief would be awed at the rising fund flows into this asset class. Globally, flows into emerging market funds have reached record highs, whilst the developed world continues to suffer outflows.

Read more: Solving the puzzle of emerging markets

   

Page 1 of 3


Special Reports

LICs get boost from ETF popularity
An overlooked investment vehicle is getting another look-in, as planners begin to reassess the benefits of listedinvestments. Simon Hoyle reports.
It’s all about the company you keep
Planners whose thinking on fixed income extends no further than managed funds and government bonds might be doing clients a disservice as other opportunities present themselves. Simon Hoyle reports
ETFs on the up-and-up (and up)
After a slow start, the issuers of exchange-traded funds in Australia are convinced they’re on the cusp of rapid growth and widespread acceptance by financial planners and their clients. Simon Hoyle reports.

Stocks

Local Weather

68°
20°
°F | °C
Mostly Cloudy
Humidity: 52%
Fri
Mostly Cloudy
65 | 70
18 | 21
Sat
Partly Cloudy
65 | 71
18 | 21
Sun
Mostly Cloudy
64 | 73
17 | 22
Mon
Cloudy
62 | 76
16 | 24

Activity Stream

1 month ago
Phil Elliott uploaded a new avatar. Feb 10
Susan Rochester uploaded a new avatar. Feb 07
Jon Glenn added Groups application Jan 21
Jon Glenn added My Contacts application Jan 21
Jon Glenn added Friend's Location application Jan 21
2 months ago
Jordan Vaka created a blog entry Question the Critics...

Late last year, there was some criticism in both the mainstream press and financial planning circles, regarding the merits of commissions and fees (I know, criticism of financial planning - surprise, surprise). 

 

Many of the points make reference to a report by Roy Morgan research - Superannuation and Wealth Management - which revealed that in the four years between 2005 and 2009, financial planners from the six largest financial institutions - the big banks, AMP and AXA - directed more than 70% of sales into their own products.

 

This figure, expressed in isolation, does suggest that something is amiss and many of the commentators criticising this percentage express some doubts as to the ‘fairness’ of such a system. But how does this criticism stack up against other information?

 

How Terrible.

Let’s look at the reality of what institutional planners face:

  • legally, they're only allowed to recommend products on their employers Approved Product List (APL). Why would a bank have another banks products on its APL? That's effectively saying they don't have the best product. They’re not, generally, in the business of recommending other companies products.
  • if I go into an ANZ branch, I expect to deal with ANZ people telling me about ANZ products. I don't know if I'm unusual in this expectation, but it seems there're a lot of people that expect something else.
  • there are, or at least there were whilst I was there, targets for planners to achieve that normally relate to the volume of business they write. But before we persecute these bank planners, let's remember that most other financial planning businesses have similar structures in place. (If you ever get the chance, be sure to ask the most vocal critics of the banks for their remuneration and incentive structures for their staff.)

That's Just How It Is...

I'm the last person to defend the status quo. Logic dictates that it’s impossible for each bank to have the ‘best’ product for 70% of the clients they see - so I’ll accept that this part of financial planning could be improved. But I have an immediate suspicion of critics that adopt the slightest holier-than-thou tone in their remarks. 

 

Always question the criticism.

 

Dig deeper, and you’ll find that many of the people harping on about the evil of commissions and planners concentrating their product recommendations see nothing wrong with charging their clients percentage-based fees - something I have serious issues with.

 

The bigger issues, in my mind, are

  • the value that clients get for the fees they pay, and
  • making sure that the strategic advice (not the product) is at the forefront of the planners  mind.

Hypocrite, or Hypo-Critic?

As for this critic of the system, I've said it before - we do not charge new percentage fees or accept commissions on superannuation or investments. We do accept insurance commissions, for the reasons outlined in our Operating Principles.

 

I'm happily upfront about this situation with my clients and openly criticise those that charge percentage-based fees, because I can demonstrate to my clients the value we bring to their financial situation, and all of our advice is based upon the strategies they need, not the products we're selling.

 

Be sure to question the critics.


Jan 11
Ken Hoyle uploaded a new avatar. Dec 19
John Hall uploaded a new avatar. Dec 18
Jordan Vaka uploaded a new avatar. Dec 15
 

Advertisement




Online Users

0 users and 55 guests online

Login