True independence is the road less travelled in financial planning. Ben Smythe explains why he decided to take that route anyway.

When I hear people, in all walks of life, describing themselves as “independent”, I immediately assume that person’s opinion is going to be objective. I am not so naïve as to believe it will always be the case; but the term does, to my mind at least, immediately suggest a person whose opinion I should be able to trust.

For that reason, when I started my financial advice business, I saw a significant advantage in setting it up as a truly independent offering. I thought that if I could position myself in the eyes of prospective clients as someone whose advice was not influenced by any factors other than the client’s best interests, and they could sit in front of me and not have to think, “Now, why is he recommending I do that?” then it would be a great head start
for both me and the client.

A great job

I think as a whole the industry has not done a great job in helping clients, and a significant level of distrust has unfortunately built up between the community and the financial planning industry.

Consumers are starting to get a better understanding of what an independent financial adviser looks like, and I believe more and more consumers in Australia will start to seek out truly independent advice – and not just in the financial planning industry.

The other main attraction in setting up as a truly independent financial adviser was the freedom that would come when advising clients. I didn’t want unnecessary restrictions in terms of what I could recommend, and I wanted to be able to help clients with whatever was required to put them in the best possible position to achieve what’s important to them.

Having said that, I don’t pretend to clients that I am an expert in everything, and I think professional advisers actually do their clients a disservice where they act as “generalists”.

My specialist areas of advice are taxation and superannuation. I position myself as a client’s “central point of control” when it comes to their personal finances, and I bring subject matter experts to the table, when I need to, to assist me in making sure clients are in the best possible financial position.

Obvious challenge

The obvious challenge for me in my business is the current lack of scalability and infrastructure. While I might be able to provide clients with completely independent and bespoke advice, the delivery of that advice is not easily automated, is time-consuming and, as such, puts a limit on the number of clients I can advise.

I have, however, been impressed by the growing recognition of the independent advice space and the tailored services that are beginning to hit the market in relation to investment management, insurance and financial planning software, for example.

In my opinion, the “cookie-cutter” approach to the delivery of advice in Australia has been driven in part by a sales culture, which has infiltrated the financial planning industry. The delivery of valuable, bespoke advice needs to find a place alongside the delivery of product-only advice, so both can be equally supported with innovation that helps in the delivery of advice to clients.

The other challenge for me is “professional loneliness”. I know that on my own I will struggle to make much of a difference, but as part of a group or collective of like-minded and completely independent financial advisers, there is a great opportunity to present an alternative, new breed of financial advice to the public.

2 comments on “The professional loneliness of the genuinely independent financial planner”
  1. Avatar

    I’m based in NZ and share your views on independence in the financial advice space. Specializing in business insurance (share protection, key-person cover, debt protection), I take no commissions, incentives, or any other forms of compensation from insurers to which I recommend risk transfer. It’s bloody hard and lonely work as you say, but I remain convinced that developing a truly independent position must pay dividends. The NZ Code of Practice prohibits the use of the term independent unless you derive your income as an adviser directly and exclusively from your clients, so I fit the bill in that regard. With life insurance commissions at their highest here of anywhere in the OECD, it’s pretty tough getting through to Accountants, Laywers, and SME’s that there’s a more cost-effective business model that works to their advantage. Appreciate any hints, tips, or advice you may care to share

    David Whyte
    [email protected]

    1. Avatar

      Hi David – thanks for your comment. I have found some success with clients by “demystifying” the way insurance works in terms of commission structures and their impact on the premiums they will pay. What I do is show how they will actually save $$ in the long run (eg 4/5 years + – using a graph) if they pay me a fee upfront fee (rather than a commission) as the annual premiums will be at least 30% cheaper for them each year (ie if they keep the policy for more than on average 4 years the cheaper premiums more than compensate them for the upfront fee they pay me). I am not sure how it works in NZ but happy to share ideas with you –
      Thanks Ben

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