By John Hewison, Managing Director – Hewison Private Wealth:
Recent media coverage shone light on the level of training inadequacy for the financial advice industry in Australia and highlighted the low level of trust Australian consumers have in the industry as a whole. The Financial Planning Association of Australia (FPA) has a degree-based standard in place and a clear definition of what it considers to be the appropriate criteria defining an Independent Financial Adviser. However, anyone can become a licensed financial adviser following completion of four subjects of a diploma standard – not even a full diploma.
The completion of an eight-day training diploma, also known as the RG146 is the only compulsory qualification required to work as a financial planner in Australia. The media has made the point that hairdressers, tyre fitters and mechanics require more education and work experience than a financial planner – those responsible for looking after individuals’ life savings.
With more than 80 per cent of the financial planning community employed by “product development” institutions, the integrity of advice has also been questioned in the media. A financial product salesperson working for a product developer or financial institution will never be able to truly fulfil the best interest duty as they are undeniably conflicted through commercial interests.
Currently it is difficult for consumers to distinguish the difference between an Independent Financial Adviser and a Financial Product Salesperson, largely as a result of different brand names used by financial institutions. For example, recent research by Roy Morgan showed that while the majority (86 per cent) of consumers understand financial planners in bank branches are tied to the bank, 55 per cent of clients of Financial Wisdom, a subsidiary of Commonwealth Bank of Australia (CBA), believed it was independent of CBA.
Hence, by legislating the difference of an Independent Financial Adviser and a Financial Product Salesperson through Australian Securities and Investments Commission (ASIC) we can take a significant step forward in improving consumers understanding of the difference between professional advice and product sales. By providing clarity, individuals can make their own decision about where they seek financial advice, whether it is through a bank or independent adviser. It will also go a long way to improving the reputation of the industry as a whole, increasing the level of consumer trust in independent advisers that are working to help clients achieve financial security, not to get commissions from product sales.
If consumers want quality financial advice, free from commercial conflict and from somebody prepared to act in their best interests, they must be able to identify the characteristics of an IFA. We would encourage all consumers to do their homework on their potential adviser.
Financial advisers are in the business of advising and assisting individuals manage their financial situations. It is a massive responsibility and one that requires the highest level of expertise and strict procedures in place to make sure integrity prevails.
All Hewison advisers hold university degrees and the Certified Financial Planner (CFP) designation. The CFP is the highest level of certification that a financial planner can receive, it is globally recognised and we abide by the standards laid out in the Financial Planning Association of Australia’s (FPA) Code of Professional Practice.
We have over 80 years combined experience looking after our clients’ best interests and we are able to do this through truly independent advice tailored to the individual’s circumstances.
