Though few would admit it, many financial planners are uncertain about the value they bring to clients, according to the head of Perth-based practice Black Swan Event Financial Planning.
“The constant challenge for everybody, in every sort of business, is to give value for money. All the arguments about price and everything else [in the financial planning industry currently] are really arguments about value,” says John Cameron, principal of the boutique business and a 30-year veteran financial planner.
“If you’re providing value, then people will stick with you. A lot of the public are conditioned to decide based on price…but for advisers, if they can’t add value, then they shouldn’t be in the business,” he says.
Cameron founded Black Swan Event Financial Planning in 2008, the name referencing both the centuries old expression for an unanticipated occurrence and Nassim Taleb’s popular 2007 business book. “A black swan event is something totally unexpected. A lot of them happen in the world of finance,” Cameron says.
Prior to 2008, Cameron was a partner in successful financial planning business Cameron Walsh, which he ran alongside Bernie Walsh, for around 15 years, before it was sold to Royal Sun Alliance (now Asteron) in 2001.
After the sale, he stayed on to run the Perth operation, before leaving to establish Black Swan Event under the Australian Financial Services license of Paragem. Cameron has been the sole planner in the business since inception, though he has another one starting before the end of June.
Planners shouldn’t abandon investment advice
Cameron notes the trend among many financial planning practices to move away from providing specialised advice around investing. This is something close to his heart, having started in finance as an investment broker in the 1970s.
“I think it’s a huge shame that this industry, to such a large extent, has turned its back on investment advice. I know there are people out there who are quite good advisers, in a different sort of way, but they say to their clients ‘look, we don’t invest, we use this model…
“The thing that differentiates [financial planners] from everybody else is that we’re actually licensed to talk about investments, but people say ‘I don’t want to do that, I’m a specialist in estate planning’ or something like this.’ Well, anyone can be an estate planning specialist, not everyone can be an investment adviser,” Cameron says.
“And I think a lot of those that say they are giving investment advice…I think in some cases, the word advice is probably dubious…it’s really just repeating what they’ve heard from the latest fund manager presentation about what’s happening in the world, without any deep understanding at all.”
The value of education
Acquiring a high level of knowledge and understanding is important to Cameron, who holds an impressive range of qualifications and designations including a Bachelor of Economics, a Bachelor of Commerce, an MBA, a postgraduate economics diploma and Certified Financial Planner. He is also currently working towards a Masters of International Affairs.
While he sees increasing the education standards for financial planners as a significant positive, Cameron is skeptical about the effectiveness of regulation and legislation alone to fix the industry’s ills, having seen a huge amount of legislative development between the 1970s and now.
“There’s been this whole rolling process of legislative change…[but] they keep having the same problem, of dodgy advice, poor advice, whatever it is. They keep trying to cure it with the same tools and it never works.”
He believes developing fields such as behavioural finance and the application of psychological theory and practice to financial services needs to have greater emphasis.
“ASIC is now saying ‘We’ve got to change the culture.’ Well of course you do, but …I think they should stop making laws just based on what the bureaucrats and lawyers tell them, they’ve got to get some social psychologists, sociologists, macroeconomics people into the mix .
“They’re not being used in the government. And until they start doing that, it’s just going to be more of the same. Give it a couple of years, maybe five years, and the dodgies will be back,” Cameron says.
