Financial planners who find themselves in trouble with clients and the law typically can’t write properly and don’t have a formal client engagement process, which inevitably means they’re unclear about the services they provide and how much they charge, according to Claire Wivell Plater, managing director of The Fold.
She said many advisers spent too much time agonising about the conflicted remuneration rules, which would be automatically met if they fully understood their professional obligations and could clearly articulate their client-value proposition.
“Advisers must be clear on, and able to articulate, what they do, what they don’t do and how much they charge,” she said.
“If advisers did that, all this conflicted remuneration stuff would just go away.”
Wivell Plater said the main underlying reason financial planners get in trouble is because they have a tendency to overpromise and are often vague on details around fees and charges.
She added that running a self-licensed financial advice business is simple – provided principals understand the basics of legal contracts.
“Advisers aren’t lawyers and don’t need to be, but every self-licensed adviser should do a short course in contract law and get a solid grounding in legal contracts,” she said.
“Advisers must also learn how to write properly so they can express themselves accurately; we see many examples of advice documents which aren’t clear. Generic templates supplied by dealer groups won’t be enough in the brave new world of advice, where every individual client must be treated differently.”
Wivell Plater said advisers who were in the process of gaining their own Australian Financial Services Licence or starting their own business could minimise risk by establishing formal protocols for engaging clients and providing ongoing advice from the outset. This should be supported by documentation for each stage in the advice process, she said.
The Fold, which specialises in helping financial services firms manage legal, regulatory and commercial challenges, offers a fee disclosure tool kit for $350 and regularly publishes articles on its blog.
Wivell Plater latest blog entry is on how licensees can continue being paid volume bonuses by platform providers. “Provided licensees structure themselves appropriately, volume bonuses are still allowed and can be passed onto their corporate authorised representatives, although they can’t be passed onto individual advisers,” she writes.
