Dixon contemplates distribution, a rational contribution to the professionalism debate, and punching clients in the face.

Something that annoys the bejeezus out of me is when I hear anyone from a financial institution talking about “distribution”. That one word, “distribution”, tells you everything you need to know about how they regard you, as a financial planner. It says that they regard you as a mechanism for getting their products to market. It says that they don’t think of you as representing the client, providing professional, impartial and unbiased advice and solutions to the client’s financial needs and aspirations; it says that they believe you’re there to distribute their products.

In today’s environment, the term should be an anachronism. Unfortunately, it’s not. The Sydney Morning Herald on October 26 ran a headline: “Financial advisers mostly a sales force, report says.” Newspapers love to quote a report. This one came from Roy Morgan Research. It said that something like 82 per cent of business that goes through AMP Financial Planning goes into AMP products; a similar proportion of business placed by AXA “planners” goes into AXA products. AMP and AXA weren’t alone. The report also named Westpac/BT and Commonwealth/Colonial. Hats off to ING/ANZ, who, the report said, were “least likely” among the Big Six planning groups to “direct clients to their own products”. “Least likely” maybe; at 38 per cent, it’s a fair whack. To an outsider – that is to say, the vast majority of people – those numbers look suspiciously like planners are merely salespeople for the institutions who own them.

Perhaps in this context, the term “distribution” is apt. But it’s not appropriate for those who aren’t owned by an institution. Time it changed? Speaking of time, I’ve decided I’m not a fan of hourly fees. I’ve had too many billing surprises from law firms – the only profession in the world that has, I believe, turned photocopying into a profit centre – to think they represent a transparent method of charging. Reminded me of a story I heard recently, in which a lawyer dies (I’ll just wait for the applause to subside) and – incredibly – he goes to heaven. He meets St Peter and complains that he’s too young to be there – he’s only 55. “That’s not right,” says St Peter. “According to our calculations, you’re 82.” “Eighty-two?!” screams the lawyer. “Eightytwo?! How did you get that figure?” St Peter says: “We added up your time sheets.” But whether it’s hourly fees, asset-based fees or flat (or scheduled) fees, it seems that product commission is on the way out for us all.

That hasn’t pleased everyone, but really, fighting against it now is pointless. So is trying to apportion blame for why the change has occurred. It’s changed because it had to, and because it’s for the good of clients and, ultimately, the industry. I thoroughly recommend you go to the Professional Planner website and have a look at one comment left there (random capital letters, typos, punctuation and all):

“The way you bang on about this NON problem says Very loudly that YOU have a problem. It may be jealousy, of Financial Planners, Or it may be You, just trying to big note yourself, This could be equally likely. Tell me, have you ever had any substantial self esteem issues or feelings of self loathing ? Where you bullied at school ?. Either way we’re not really interested.Before you condemn Mum & Dad Australia to the financial wasteland, Just sit down and shut up.”

What a rational and valuable addition to the debate. Not. In fact, I’m surprised the website posted his comment at all. Free speech, or something, I suppose. But anyway, it makes me wonder when I hear claims that clients prefer to pay commissions than to actually pay a planner for his or her services. Well, they would, wouldn’t they? And there’s nothing surprising in planners making that claim. A client base is a self-selecting sample, after all.

If I open a business, and my service is to punch people in the face, then I shouldn’t be surprised when the clients I attract are the kind of people who pay to be punched in the face. And it’s a meaningless statement for me to say “clients enjoy being punched in the face” – they wouldn’t be clients if they didn’t. I don’t know any other sort of clients, and so I naturally conclude that all clients of all planners enjoy being punched in the face. If all your clients prefer to pay commissions it means you’ve attracted clients who would rather pay according to how much they invest than pay you a fair price for your advice. That’s an odd relationship to have, I reckon.

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