A roundtable event hosted by Professional Planner addressed some of the key issues facing the industry in winning back and maintaining consumer trust and confidence. This is an edited transcript of the discussion.
RIPOLL: Firstly can I thank everybody. I really do appreciate this opportunity. It’s an opportunity for me as well and I think it’s an opportunity for you guys to share some information, but to hear from me in terms of where we’re going.
The area that really interests me is the area of education. This whole idea of education is when all else fails you just blame the other party and say, well if you were better educated you wouldn’t have a problem. But what becomes clearly and very quickly obvious in this whole sector is when things go bad, you look at the people, the scope of the people – Storm is an example. 14,500 clients, from the whole spectrum.
From absolutely the most unsophisticated, uneducated investor who had no clue, the least possible idea of what they were doing, right across to the other side of that spectrum of the most educated, licensed financial planner who invested. All lost their money. All bitten by the same bug. All in the same boat, yet they were at either end of the spectrum. So that’s got to be telling in terms of what will education actually protect you from.
I know Jo-Anne, your organisation does a lot of work in that area, as do others in their areas. And I’m assuming that every adviser in some way provides some educational platform to their client as well. But I don’t see that as a great solution. That is just my view at this stage. That educating consumers won’t get us very far. Help, yes. Important, yes. Part of the solution, yes. All of those things. But how much will it change? I don’t think a lot.
ELKINS: I wholeheartedly agree with the comments you made regarding education. But then [we] start talking about the possible good role disclosure could play. Both those conditions can’t be true. If there’s a fundamental issue where education’s not the solution, there’s a fundamental problem with disclosure.
RIPOLL: No, it’s not that education’s not the solution. Education on its own does not solve the problems. Education is important.
ELIKINS: Absolutely. Education’s critical. But if we look at what level of financial literacy can you ever really achieve in the whole community, and then take a concept like superannuation which is compulsory and covers every working Australian regardless of their financial literacy capability. If you take the example of Storm where you have had Joe Blogg with no education and somebody else with a stellar education still able to be swayed by greed and other emotive issues in the way they dealt with disclosure and made financial decisions, that’s a realism.
That’s the environment that we’re working in. And for me superannuation has to stand alone in the way those considerations are made because of its compulsory nature. While you might not have choice within it, you don’t have a choice not to be in it.
At the end of the day when you find these areas where disclosure cannot be the cornerstone of consumer protection, we have to act with policy. Disclosure cannot be the cornerstone of consumer protection. So we can’t keep bringing back resolution to these ideas to improve disclosure. I’m a passionate believer in education and the need to educate as much as we can.
But unfortunately realistic about how far that’s going to get us in terms of every working Australian being able to adequately navigate a superannuation product. And so at that point we have to start looking at where is policy going to come in to assist that.
FREEMAN: One of the things that we’re seeing at the moment is we have a very large number of people who contact us regularly about their experiences in all sorts of markets and financial services in particular. And one of the comments that we’re hearing regularly at the moment is this question about financial advisers and financial planners. Are they really working for me?
And to me it comes back to this issue of the conflicts that exist within the industry. The conflicts in the remuneration model and the wider conflicts in the structure of the industry.
But I’m also interested in having a debate about what’s driving the profession. What’s driving advisers? And my concern is that in the Storm financial model we saw commissions driving advice. And it’s all related to this question, are they really working for me? And as far as I’m concerned this question – are they really working for me – is the one that the industry needs to address.
I have seen a spike, a small spike, a spike in people who aren’t taking up the advice they’ve received from their financial advisers as a consequence of that question. And I’m seeing people who are perhaps being a bit more open than they have in the past about adverse experiences with financial advisers. I think word of mouth is extremely powerful in this industry.
And until that question is addressed comprehensively and people can say, yes, they’re working for me, and that’s it, that level of advice is going to be dropping.
HOYLE: Have you any thoughts on how a planner might demonstrate, through some explicit statement or in the way they work, that would show the consumer without any equivocation at all that yes, they are working for them?
FREEMAN: I think in the first instance it’s about a remuneration model. In the first instance that conflict-free remuneration model. I agree with a lot of Linda’s comments, in particular, about how disclosure has extreme limitations and is not a replacement for consumer protection.
In the past there’s been these perverse outcomes as a result of disclosure. You’ve seen people who are being more confident in advisers that are very open and honest and who explain where they’re coming from. And until you have these Storms, you know, perhaps people are happy to accept that. I don’t think people would be happy to keep accepting disclosures of conflicts. I think they want to see up front that there is no conflict.
CORNEIL: There is this fundamental connection today that exists where financial planning organisations generally aren’t clear about whether they’re distribution businesses or advice businesses.
And you have heads-up dealers proudly talking about their distribution power. And that’s a really admirable thing. And I’m not necessarily saying that’s a bad thing. But that’s a different mindset and a different business model than it being an advice business.
You have distribution businesses that at that point [are] necessarily linked to product, because what you’re saying is, I’m distributing something. And in this case it’s a mutual fund, it’s a super fund. It’s something. But their goal is to distribute. And so inherently then a distribution business that’s attached to a product manufacturer has a certain raison d’être if you will.
A certain motivation which is going to in all likelihood be completely different than a pure advice business, where the advisers wake up in the morning talking about how to improve the quality of their advice, and be paid for that. But it’s a different motivation than being in the distribution business. And in my mind the connection between distribution and advice, that’s where it’s blurring
TUCKER: Can they co-exist?
CORNEIL: I would put to you that the commissions and fee for service and all that discussion would go away if there was a very clear line that said no, they can’t exist. That you’re either a manufacturer, and therefore you might be a distributor as well, in which case you’re an agent. Right, you’re an agent, like back in the old days.
Or you’re in the advice business and you’re agnostic. I mean, more often than not what people that I hear want to know about is should they pay off their mortgage or contribute more to super? At that point they don’t care about buying a product, they just want some basic advice.
KLIPIN: This continual focus on price does detract from the issue. AFA members…when they get up in the morning, what they’re interested in doing is helping take their clients on a journey from wherever they are today to wherever they state they want to be tomorrow. And that’s a strategic conversation. It’s not about the product. It’s not about the product sale. It’s about where you and your family want to be in the future, and what are your goals and aspirations. Let’s start it at that point.
Then once we have that conversation, I want to pay for my debt and I want my kids to get married, and I want a good school education. These are real lifestyle and life issues. The plan then gets put together and then we start the journey. People either accept the Statement of Advice and they proceed and they go ahead, and they fill out paperwork, and the journey of the advice relationship starts. And there’s tremendous experiences with AFA members and FPA members and advisers around this table who have got fantastic connections in that regard.
When these guys have to go and write Statements of Advice, it’s capturing the advice. It’s not capturing the product sell, it’s capturing the advice part.
But every time there’s some sort of disaster, there’s always these loopholes that malicious people or dishonest people or bad people will do that and we’re not going to be able to plug that. So look, the AFA’s position is pretty clear. The more we talk about price…the less we talk about value, and the majority of the advisers in the marketplace deliver tremendous value for their clients.
So let’s have a conversation about the value.
And all of the conversation we’ve had today and have had today is all about the bad stuff that’s happening rather than the good stuff that’s happening.
TUCKER: So let’s remove the distraction. This is the point. At the end of the day there is a method of charging a client where they can see what they’re paying. They can agree what they’re paying – and they can stop paying it – which is exactly the same revenue to the financial planner tomorrow as it is today. So why don’t we just get on with removing the distraction? I agree with you, but get on with the real debate and this is partly what this inquiry will allow us to do, which is to put on the record what financial advisers do, and how valuable it is to our community. But we have to accept that the perception around this issue is not going to change. So why don’t we just pull the thorn out of the paw?
KLIPIN: Steve, look. If people want to run a fee-for-service model as a business model, fantastic. If people want to run a commission model, that’s fantastic. Ultimately, when an adviser meets their client and they do that whole process I spoke about and they go, so here’s how you’re going to pay for it, you can either write me a cheque or I can take it out through the product, or I can roll it into a product service fee, or whatever. The AFA is not pro-com- missions. The AFA is pro-choice.
NAOUMIDIS: What they’re doing now [in the UK] I find quite interesting because…it’s precisely the same argument the world over. And regardless of what you say, there is a perception of conflict: He who pays me is my boss. So if the person who pays me is the fund manager, then I am working for the fund manager and not the client. However, if I work for the client and the client pays me and there’s commission paid, that’s fine. The commission gets credited against the fee and that’s fine.
But the thing that I found interesting in the UK [is that they’re having] exactly the same arguments as here. And there should be choice. I can decide to run my business this way. I can decide to run it that way.
But the interesting thing about this advice thing [is] there’s a very simple solution: Just say fee-based advisers can call themselves “independent financial planners”. Non-fee-based advisers can just call themselves “financial planners”. It’s that word. I’m independent of the product.
TUCKER: I’m a bank. I have a big financial network through our bank –
NAOUMIDIS: They’re not independent.
TUCKER: They are-fee-for service.
NAOUMIDIS: No, no. That planner personally-
TUCKER: I don’t have a problem with the model. What I’m saying is our bank’s financial plan- ner is a fee-for-service business. But you can’t call them independent financial planners because –
NAOUMIDIS: You’d probably call them financial bankers or something else. But the independent financial planner is independent of the product. He’s independent of the institution. My client is the investor.
RIPOLL: Some thoughts have been running around inside my head in terms of what is at fault, what fails people? There’s issues of greed. Some people have got a view that it’s greed that drives people when the markets are doing really well. There’s a whole range of issues. My experience so far on the greed issues has been that the people I’ve met, in terms of Storm, weren’t greedy people. They weren’t actually trying to make lots and lots of money. While it may appear at first – it was my first impression – this is just a bunch of greedy people trying to make a massive return. Well, they wouldn’t have known what a massive return was because they weren’t financially literate.
What appears on the surface to be greed is actually what they’ve been sold. They never decided on the greed. The greed was decided on their behalf by the adviser. We’re going to have a real difficulty in terms of separating these things out.
We’re never going to really fix that. Regulation is not ‘the’ solution; nothing is ‘the’ solution.
ELKINS: We’re having a debate about remuneration when the issue is actually the distribution issue – in my opinion. We were all moving towards a model where the product was irrelevant and the member came first. Then how could we have a world where probably more than 70 per cent of SG contributions go into industry or corporate funds, yet the absolute opposite is [true] once they hit the advice triggers in their lifecycle and receive advice and move into pension accumulation or other personal super products?
It’s not possible [for] all of the people that started out in AustralianSuper, that subsequently that product became the wrong product for them as soon as they hit an advice trigger. It’s absolutely correct that for some of them that was true.
COYLE: Let me make a few points about the compulsory system. To have commissions on a compulsory income stream or revenue stream, going into someone’s retirement savings, is just to me patently, morally wrong to have any sort of commission on SG. If we’re talking about restoring faith in the system, again, abolish commissions. I cannot see how you can talk to a member or how we can talk to a member and for them to have confidence in any shape or form in advisers that are commission-driven. So to me, abolish commissions. And I know there’s legacy issues. I know there’s a range of issues with the particular remuneration structure of particular planners. And I agree that this is actually a distribution issue. But I don’t think you can separate distribution from the remuneration that is fundamental to that distribution. That’s the first thing that you’ve got to do, and that’s why I said I applaud what the FPA said, but it does need to go further.
The second key issue. When we were talking about some of the shonks in the industry. Something that the industry funds have pushed for some time is that it should actually be legislated in law that financial planners act in the best interest of their clients. That is law. That’s not a code of practice. It is law. It works for superannuation. Section 52 of the SIS Act. It is law that we as trustees must act in the best interest of our members. And maybe a few of these shonks should start to get picked up. They’re breaking the law. They’re not behaving badly. They’re not unprofessional. They’re breaking the law.
BLOCH: Let’s be very clear, by the way, that even though you’re required to provide the client with appropriate advice, when it is tested in the law financial planners are held to a fiduciary standard, like it or not, irrespective of what Corporations Law says. And there are cases to indicate that. But the FPA came out, and this is a global thing for all of us, with the client first obligation which isn’t a fiduciary obligation but it is measurable and achiev- able, although unfortunately it only applies to FPA members, and therein lies the issue. What do you regulate and who do you regulate? And can you regulate by behaviour? Whatever legislation you have, however big, high, tough it is, you’re still going to have behaviour that you can’t control. Behaviour that you need to somehow understand which is where ethics, professionalism, integrity, peer review, client knowledge [and] awareness [come in]. Regulation sets a minimum standard, and you can judge it. You can tick boxes. You can look at it, you can read it. But it’s behaviour that’s the piece that we’ve got to work on. It’s behaviour that lets us down all the time. I mean it’s not more regulation or better regulation or disclosure documents or anything like that. It’s how do we get the right behaviour all the time. We’re in the money industry. There’s going to be people who are going to chase money.
STEWART: The onus comes back to the licensee. The onus comes back to them in that they should be ensuring that the best possible advice is given to their client. And at the end of the day they must be held responsible. They must have their due diligence committee. They must look out for the likes of what we saw in Storm.
Education is absolutely vital, but not just education, but re-education. Stupidity prevention. And that is as vital as part of what the fiduciary responsibilities that advisers should be giving. They should be educated in how they ought to be dealing with clients.
ALAFACI: The propensity to rip people off is assisted by commissions. Think about that. I’ve been doing this for 30 years as a retail person. Big companies, small companies. And if you…X-rayed all of the consumer losses, you would find two piles. Those consumers who lost money because of dodgy product manufacturers, and it would be this high, ten feet tall. And a smaller pile of consumers who have been ripped off by financial advisers.
HOYLE: Dominic, is this based on your experi- ence thought FICS?
ALAFACI: Absolutely. Through FICS, through every catastrophe. I’m going back to 1981, I think, when I first started in the industry. So you’ve got everything from Estate Mortgage right through to Westpoint with its dodgy product. I would call them corrupt business people. And if you were to quantify the losses, the product manufacturers are ten times bigger than the financial planners.
The propensity for that pile to increase is assisted by commission.
RIPOLL: When there’s a catastrophe, people go,“hang on a second, this is not what I bought”. You’ll never know until the product fails.When the product fails, people then go and look for the culprit. Who sold me this product that I believed did thing A, but it actually does thing B? So then it goes back to, well what’s wrong in the sector? How is this thing marketed, sold, manufactured, distributed? The whole lot. Education, disclosure, the whole lot.
I don’t think people necessarily complain when they lose money. They’ll whinge, but they don’t whinge in the same way. They don’t complain. They don’t get really, really angry and take people to court and all the rest of it. It’s when they’ve been robbed. It’s when people go,“This is not what I signed up for. I was misled.” Use whatever words you like: Misled, misrepresented, falsehoods, corruption. All the rest of it. That’s when people say to us there’s something wrong in the system because the system allowed this to happen, and it happened to thou- sands of us. Whether we knew something or knew nothing. And this is the real problem.
NAOUMIDIS: The UK have got a regulation called“ Treat your customer fairly” [TCF]. Sounds pretty simple and innocuous; we all should be treating our customer fairly. And it has some very, very major ramifications. Basically it ensures that financial planning firms have an industrial, repeatable business process that results in the fact that two investors come in, into two different parts of the business, to two different financial planners, and they go through a risk process. They go through an asset allocation process. They have a professional involved in every bit. And they end up with a similar outcome.
You’ve got a problem in the business process if two individuals come in and they get two totally different outcomes depending on who they speak to, the time of day and that. So that’s one thing.
We have a sort of solution in Australia, called model portfolios, in wraps. The problem with model portfolios is that it doesn’t account for time. And what I mean by that is you come in today, I go through the risk process and you come up with this model portfolio of funds or equities or ETFs or whatever. And here it is. You come in, in three months’ time, you go through the same risk process, [and] in those three months the asset allocation has changed. Your fund selection has changed, or the investment selection has changed. If it’s good enough for the person in three months’ time, why doesn’t a financial planner go through every other person in that risk process? This is where that current structure fails.
I noticed about two weeks ago, actually TCF came into the Australian press. And in Australia we’re ruled-based. Regulation is rule-based. The UK has moved to principle-based regulation.
BLOCH: You’re right. I’ve known and worked in the FSA [the UK’s Financial Services Authority] for many years, and worked with them very closely when they introduced [TCF], and it was a horrendous project.
The problems we share with the FSA and with ASIC is we do have principle-based regulation. So CEOs want principles-based, and compliance officers want black-and-white. And so as a result of not understanding or interpreting principle-based regulations, the FSA in the UK introduced [TCF], which was about the spirit of the law as well as the intent and the black-and-white of the law. It’s not working and unfortunately it’s going to be pulled.
It goes back to behaviour, which Nigel was talking about before. So the UK said we can’t make principle-based regulation work because everyone wants someone different. It’s on the way out because it’s causing all sorts of other issues.
The SEC announced that they want to push fee-based advice, but they’re going down an SRO, a self-regulated perspective. So everyone’s doing different things. I guess it goes back to behaviour. Whatever regulation you have and whether principles are black and white, it’s when it’s implemented, how it hits the ground, and who raises the alarm bells, which is why you can’t prevent failures. It’s minimising the risk. And this is what we all need to search for.
CORNEIL: One of the things that we must be careful of is that we don’t try and regulate or legislate investment strategy. I mean, to your point Bernie, a moment ago, about people losing money. I bet you, everyone around this table has lost money in the last 12 or 18 months. It would be a strong hypothesis to imagine that most of the people around this table lost money in the last 12 months. But that’s maybe the point. But you can’t regulate the strategy. As you opened with, you had people who had no understanding and you had people with a lot of understanding. The question is not did they lose money, but did this person have a lot of understanding. How do they feel about that today? Is this just, that’s just part of investing, right? I accepted I was going to take a loss. The ones you want to defend are the people who had no idea.
RIPOLL: They’re all equally upset.
CORNEIL: I’m upset. I’m not happy that my account’s gone down. But if I’ve invested in high growth investments over the last 12 or 18 months, it’s likely that my investment…I’m upset but I’m not surprised. That’s the difference.
STEWART: You can regulate against stupidity. You can use education.
CORNEIL: And I agree, and Linda’s already made that point. But this is multi-faceted. There is no silver bullet and it will be a combination, and education will surely be part of it. And there’s no question that today consumers are better educated than they were ten years ago. And in ten years’ time we can imagine with some luck they will be more educated again.
RIPOLL: Can I just throw something up which highlights where this conversation is going? We’re talking about regulating people and behaviour, rather than regulating products. You can’t regulate all products. There’s a new one every day. So you have to try and sort of manage [that]. Every product stands on its own merits, whether it’s good or bad. But it’s not that simple. We talk about literacy, financial literacy. But it’s so complicated. I can’t find anyone who’s a professional who can explain it all to me.
What do you do about the complexities of products when, for example…someone will be sold something which seems on the surface simple? They assess the risk and they say, yeah I’m prepared to take that risk, and then realise later that it was really nothing at all that they had bought into.
For example, they’ve taken out an equity type facility through their house, linked to a margin loan, obviously linked to the market. The market falls. There’s no margin call because unbeknown to them the market calls are made automatically through EFTPOS transactions out of their home. Their home is chopped away each time there’s a margin call. These do exist. And by the time they actually do get the call they don’t have a house left. And they’re now told, you’re now $200,000 in. They go, well fine. We’ll just do a – no, no, your house is already gone; that was part of the agreement. The agreement is we can [do that]. It’s automatically done, EFT, bang, bang, bang – it’s all gone. This happened to a whole range of people and they go, hang on a second, that’s not what I signed up for.
TUCKER: I think the area you’ve raised which is of great interest is the role of a licensee, and mak- ing sure that the obligations of the licensee are clear, and that means the directors of the company.
At the end of the day there will always be interesting and complex products, and so on. But the licensee has directors and the directors have an appetite for risk. We have a certain process that says, if you’re going to do gearing, we as a company are comfortable with risk to a certain point. And we have to be aware that interest rates go up and markets go down and so on. Or we believe this product might be appropriate as an alternative investment, and we only think that would be appropriate for a maximum of 5 per cent of somebody’s portfolio. These rules and guidelines are set at the top. And for a small company as well. The obligations are on the directors and the licensee.
The licensee has become too much about being a gatekeeper for access to products, and not enough about what are our obligations in terms of our investors or our clients. That’s my first point. And I’ll just put that on the table. I think we’ll be submitting certainly some views on that. And the second thing is, just to question…is something we haven’t talked about. Are the barriers to entry high enough for the profession? Because whilst I’m not suggesting tomorrow or something like that…if we want to be a profession I think we need to think through our access and who and what is required to get access.
HOYLE: James, in AustralianSuper’s case, how do you deliver financial planning services to AustralianSuper members, and how do you ensure that they are delivered in such a way that members can deal with the advisers with confidence, and trust the adviser? What safeguards, mechanisms, controls do you have over the advisers that are dealing with AustralianSuper clients?
COYLE: We deal with it in a couple of areas. And for us advice covers a whole spectrum. Many of the advice situations that our members need are pretty simple. What investment should I be in? So one of the challenges for many industry funds is how you can deal with some fairly simple situations that don’t necessarily warrant the two-hour interview, the ten hours of planner time, to answer fairly simple questions. That’s one of the challenges that we have.
And generally that’s done through the call centre and people with qualifications in the call centre that can talk people through simple situations.
At the higher end, that’s where it becomes a challenge because we’re not in a position where we could recommend that our members globally go to the broad financial planning community and get advice. And the reason is they’re not going to stay in AustralianSuper. Most planners that they would go to, and most planners are driven on a commission model…
ALAFACI: I can tell you, even if not on commission, they still don’t stay in AustralianSuper. It’s got nothing to do with it. I’m telling you now, it’s nothing to do with it.
COYLE: If that’s the right decision for that member, that’s fine. But our view is, with the majority of the industry being commission-driven, they’re not going to get a cent if they’ve recommended that [a member] stay in AustralianSuper. In your case, you’ll still get paid if the right decision is to go elsewhere. Great, that’s good advice for the client.
But for many they won’t get paid a cent. So our issue is how can we actually work with planners that are pure fee?
TUCKER: It’s a difficult issue. But if we can remove the issue and keep everybody in a reasonable shape in terms of revenue outcomes and so on, then we can get on to the…heart of the conversation, [which] is, well there are still things going on, like we aren’t using AustralianSuper. What is going on, on that part of the debate, rather than this con- tinual discussion around conflicts of interest.
COYLE: I didn’t fully answer the question. We do have different planning groups that we’re happy that our members go to. And they can be planning groups that might be on an ACTU-approved list, or Industry Funds Financial Planning. So we also have channels that we can send our members to.
BLOCH: I think the question is…what is IFFP’s approved product list? And I’m not making any comments here, but a lot of our members [do]. I think the issue is a level playing field across the board. So we want IFFP, for example, to adopt full choice in superannuation recommendations. What we find with IFFP is that they will only recommend industry products because they’ve convinced themselves that they are the best products. And that’s great.
But I think to genuinely open the market… we’ve all got to work together. So the services that industry funds provide to financial planners have to change as well because they aren’t geared to all the services that financial planners have got from other areas where there’s been long-held relationships. So there’s a lot of different issues that we all have to work on.
TATE: Your proposal, remuneration proposal, is thin on detail in terms of transition. Presumably it’s been costed? And…you presumably think it’s financially viable for the industry to move that way, and for financial planners and practices to have a financially viable business?
BLOCH: I should really qualify by saying that a huge number of financial planning businesses are already profitably working on a fee basis. This is not new.
STEWART: Out there in adviser land today the advisers who are changing on a fee basis, charging retainers, their businesses are growing between 10 per cent to 13 per cent per annum. I’ve just come back from a conference. Their business has never been stronger. They’re seeing so many new clients come in with the implosion of Wall Street, Lehman’s going, Bear Stearns going. Their business is fantastic. It’s never been better. So what you get is what Adam Smith, the friendly Scotsman [said] many years ago: you get the efficiency of markets. The markets are sorting out the good from the bad. The people who were ripping people off, charging commissions, they were not providing strategies and structures [and engaged in] stupidity prevention. They were not putting the client’s interest first. They were flogging products. These people will be moved out of the market – have already been moved out of the market. So maybe we’re kind of over-reacting a little bit. The market forces will act and are acting indeed. But perhaps the Government and other instrumental people within this sector need to enhance that change.
HOYLE: Elissa, you’ve been listening to everything that’s gone around the table. Given the comments you made earlier about what needs to be done in order for consumers to be able to interact with financial planners with trust and with confidence, do you think the issues that have been canvassed here are broadly on track, or do you think there is still a bit of a blind spot in the discussion that’s been going on this afternoon?
FREEMAN: I’m really pleased to hear the discussion about structure because I was con- cerned that that wasn’t foremost – I’ll tell you, I’m very pleased to hear that. And that gives me some comfort that really the core issues are being thought about by industry.
I think there’s two different issues, and I think it’s what Bernie was alluding to as well. There’s behaviour that is unacceptable and needs to be addressed, and [that] is now what the Government’s doing. They’re now looking at what can be addressed. But there’s also a broader issue about building confidence in the industry. And as Richard was saying, these sorts of debates in public…undermine consumer confidence in the financial advice industry as a whole.
And so I think the industry and the Government needs to be working on two levels. They need to be putting in place changes to make sure the various “bombs”…that could go off don’t go off. But at the same time they actually start to recreate some trust in the industry.
The reason we’re all sitting around this table is because we think that financial advice is of benefit to individuals and society and the economy. And we need to rebuild that trust.
NAOUMIDIS: The research that we’ve done says that nine out of ten times the trusted adviser is the accountant. I can tell you that the advice from accountants to the investor, is don’t trust that planner because the planner’s being paid by the product pusher. So if you want to get trust you’ve also got to build trust with the professions, the other professions, like the accountant profession in particular.
STEWART: The accountants were the same people selling Timbercorp, and all types of other junk, not the adviser.
RIPOLL: With one big difference, when the accountant goes bad it’s on the front page, “Accountant rips off …” and everyone goes, “Bad individual”. When a financial planner does it, they go “Bad sector and industry.”
TUCKER: It’s not so much the three out of 10 that get advice. In fact, generally they’re pretty satisfied. It’s the seven out of 10 who don’t. If you ask them why they don’t it’s because they have a crisis with confidence and trust. We can fix that.But we should get to what we really need which is 50 per cent or 60 per cent of Australians getting advice because they’ll benefit from it. It’s not so much the ones that are, it’s the ones that aren’t.
CORNEIL: When financial planning is done right it is a valuable and important service that we in the community at large should avail ourselves of. I mean, let’s face it, when done well it’s a bloody reliable service.
RIPOLL: Can I give you some confidence and tell you that that actually is the view of the committee? We’ve sat around and discussed this. Do we think that this service is valuable? And the answer is yes. But obviously we acknowledge, as you do, that there are issues that you have to work through. And the three out of 10 is the evidence maybe. It should be maybe eight out of 10.