I think moving to a more fee-based service delivery will mean advisers will get more revenue (“Financial Investments valued at 4.4% of investments”, Professional Planner Online, July 19). If my average client has $500,000 FUM, then 0.9% fees per annum will be $4,500. However, a successful adviser could charge more than that in providing ongoing advice. Perhaps up to $8,000 pa ($2,000 per quarter). It does require that the financial adviser be proactive, of course. The upside is that the adviser would not be penalised if the FUM decreases.
George Manka, Greenhills Wealth Management in Sydney, NSW
Advisers don’t make money for their clients – they do that themselves by spending less than they earn and saving the surplus over decades of their working lives (“Financial Investments valued at 4.4% of investments”, Professional Planner Online, July 19). What we can do is help them NOT LOSE any of what they’ve worked so hard to accumulate and to better understand that wealth equals contentment more than riches and that happiness equals expectations met, rather than missed.
I’ve been strictly fee-for-service for almost 30 years and self-licensed for almost 13 years and I always put my clients’ interests ahead of my own – not just managing conflicts of interest but eliminating them completely.
I meet with all clients at least annually, most 2-4 times a year and with some every month or two. I invoice them annually, and most pay me quarterly, so they can fire me at any time if I don’t meet their expectations. It’s not hard, but it’s complicated and requires dedication, a generosity of spirit and a warmth of heart from both sides. I go first. That’s only fair.
Philip Carmen, Personal Asset Services in Perth, WA
The graphic showing Adviser movement by licensee type is particularly intriguing. (“2825 advisers gone as migration patterns emerge”, Professional Planner Online, July 25)
Personally, I think this will be short-medium term pain followed by a very healthy re-building phase that will transform the advice industry for the better. At Moneysoft we still see big turn-outs for cash flow coaching webinars and a lot of positive activity in terms of advisers embracing change and tackling it head on. While I understand that the change the industry is facing can be uncertain, stressful and upsetting for some, I believe there’s interesting and exciting times ahead.
Jon Shaw, Moneysoft in Sydney, NSW
Well done for shining a light on the fantastic work done by Adele Martin for her client (“In their own words: There were tears”, Professional Planner Online, July 26). There are millions of stories like this across Australia carried out by tens of thousands of advisers every year. You are finally providing some balance to a very negative and lopsided debate that has run for too long by journalists with an agenda elsewhere in the media.
Darryl Labrooy, Hillross in Melbourne, VIC
You may however have missed the most annoying of all this new language -“learnings”. (“Dixon Bainbridge – Bamboozling Buzzwords”, Professional Planner Online, July 30). How that ever became mainstream, a part of our lexicon, I’ll never know.
Can we please circle back to “what I have learned” in order to get our true synergies in motion?
Kym Bailey, JB Were in Sydney, NSW
I agree with Peter Singer (“Ethicist highlights where FASEA falls short”, Professional Planner Online, July 31).
FASEA is probably hamstrung and has to contradict itself because the Royal Commission report explicitly allowed this conflict to continue and FASEA may simply not have the power to follow Peter Singer’s recommendation: “The ethicist suggested FASEA should have either banned financial advisers from working for institutions that offered products or, if that wasn’t feasible, putting up barriers that stopped advisers from advising people to invest in those products.”
I wonder if this conflict will have us back with a new royal commission in 5-10 years’ time.
Christophe Schnelle, In Your Interest in Goonelabah, NSW
Some very good and important points for Advisers/Licensees to consider, Tom (“Get the two biggest business decisions right”, Professional Planner Online, August 8). In my experience an alignment of Investment philosophy between the key stakeholders in the business and the asset consultant is very important.
Paul Carrington, InvestSense in Sydney, NSW
It’s an innovative idea but it raises some questions (“The advice Sherpa: A new career pathway emerges”, Professional Planner Online, August 12).
This post-Royal Commission and post-FASEA world is experiencing an increase in advisers wanting to become unlicensed ‘money coaches’, which will no doubt come to the attention of the regulator. The breadth of services that a money coach can offer without stepping over the line is restricted to cash-flow management, budgeting and potentially debt management.
For what a money coach can charge and depending on scalability, does it possibly force these practitioners into the world of financial counselling to be broad enough to build a business?
It also adds another level of cost in the advice process which is already becoming prohibitive for the people that need advice the most.
Craig Meldrum, Infocus in Maroochydore, QLD
I just do not believe that Melinda can be in a position to help the client without giving advice herself. (“The advice Sherpa: A new career pathway emerges”, Professional Planner Online, August 12). Craig made a very valid point on the fact that advice has become so expensive without this service, let alone adding another layer.
So you are an adviser who advises on whether your adviser is advising appropriately, without advising?
Not sure that is going to take off but good luck with it.
Mark Pel, Hillcrest Financial in Nowra, NSW
Great article, David (“Where advisers really add value”, Professional Planner Online, July 9). Your comments are so relevant today given all the upheaval in our industry.
Chintan Engineer, Diligent Financial Planning in Blackburn, VIC
Great article, David (“Where advisers really add value”, Professional Planner Online, July 9). Technical knowledge and strategies are naturally important, but they are also a given. We do our best work when we can help our clients make meaningful change and be there to truly support and guide them when they are going through a transition or tough times.
Julia Schortinghuis, Lighthouse Capitol in Perth, WA
We have come across general insurance brokers sending their clients applications for new personal insurance products such as life cover, TPD, trauma and income protection which if implemented will replace the clients’ old policy (“Shipton signals focus on general advice”, Professional Planner Online, July 3).
The sum’s insured are as per the clients’ current policy but it is a new insurance policy with a new insurance company. The communication comes with a general advice warning and outlines that the broker is not taking into consideration the clients’ personal circumstances etc. and a statement along the lines of ‘we have found this insurance policy which will save you $xxx per month which you may like to consider’. If you would like to implement this policy please complete the attached application and return to us. There is no Statement of Advice provided.
My understanding is the above is personal advice and product advice, but I am open to being corrected if it is not. Does a general advice warning make that general advice?
Adam Wade, TNR Wealth in Lismore, NSW
Excellent practical and informed advice as always, Tom (“Self-licensing in three phone calls”, Professional Planner Online, July 2).
Prospective licensees have confirmed to us that these issues are top of mind, and they are also thinking about outsourcing non-core business functions – who to choose and what to look for in a provider. A good example is revenue management which can distract them from servicing their clients.
Jeff Deakin, Cirrus Technologies in Sydney, NSW
Conversely, I still wonder why I must pay two TPB levies when I’m not an accountant and any time I mention tax in my SOAs it then must go on to recommend my client seeks advice from a tax agent. Methinks the government regulators are the new kings of fees for no service (“Accountants’ request for adviser levy discount rejected by ASIC”, Professional Planner Online, July 1, 2019).
Peter Heading, Heading Forward Financial in Adelaide, SA
Best Interest Duty would put advisers under each of your examples in a position that they would need to justify (“FASEA’s code of ethics should kill percentage-based fees”, Professional Planner Online, June 26).
I am happy to listen to arguments like this but our industry has got into trouble when the view becomes the reason behind another shift in policy. Too many decisions are being made taking a one dimensional view and the consequences not appreciated until after the fact (e.g. this auto cancellation of ‘inactive’ insurance policies – just informed by a super fund that they could not confirm if or how a member had been notified about this matter). The layers of rules we are governed by have become too much and the layering continues. Best Interest Duty was supposed to be like Part IVA in the accounting world.
Graham Taylor, Touchpoint Financial in Sydney, NSW
Mr Brown’s comments show a distinct lack of regard for facts (“FASEA’s code of ethics should kill percentage-based fees”, Professional Planner Online, June 26).
Percentage based remuneration on any investment made with borrowed funds was banned following the Storm Financial enquiry in 2008/9? That is why it is not dealt with by the Hayne Royal Commission or FASEA!
I have been in this industry since 1996 – just after Financial Services Reform (FSR) was introduced. Full disclosure of fees and remuneration were the key take-out from FSR and for me it has just been the way we do business. Advice documents to back up what we say and a PI scheme whereby we are personally responsible for the excess has ensured I try to adhere to the intent if not the letter of the law. Crooked advisers, accountants, lawyers and real estate agents will still be there no matter what legislation is introduced but the numbers are certainly a lot less
than they were when I first started.
The crux of AUM is that our interests and the client’s interest are aligned perfectly – the more wealth we create for our clients, the more we get paid. If we lose client funds we lose revenue – is there a better alignment of fees/ outcome? To state that this is a conflicted arrangement is ignorant. It is a fee agreed upon between the client and the adviser; if the client does not like it, they do not have to be a client or can invest directly if they wish to save money and take on the risk.
And that’s the point – clients are happy to pay a professional to take on that risk of research, recommendation and advice backed up by written documentation as to why it is good for them and backed up by a professional indemnity policy and AFSL subject to regulatory review.
The real sad thing here that seems to be forgotten by everyone. Commissions allowed those that could not afford the true cost of advice to have access to an adviser because there were payments being made that the client did not have to bear directly.
Fees will have to increase as commissions are removed. Some businesses will close, staff will lose their jobs and most importantly, clients will no longer have an adviser. Who will look after them then?
Martin Watson, Bellwether Financial Group in Perth, WA
It seems the financial services industry is starting to work out exactly what the mandatory Code of Ethics, issued in the form of a legislative instrument by FASEA, means (“Code of ethics ‘impossible to manage’: AFA”, Professional Planner Online, June 5).
Clearly, some people don’t like what they see. At a recent AFA roadshow, particular reference was made to alleged inadequacies of at least four of the twelve standards, starting with Standard 3 which states that advisers “must not advise, refer or act in any other manner where you have a conflict of interest or duty”.
Professional Planner reported AFA’s head of policy and professionalism, Phil Anderson, commenting: “We need greater clarity on this. Anyone who provides life insurance advice or receives a commission — that has to be seen as a conflict of interest.”
It’s clear to me that if the FASEA Code is to mean much at all, the end of life insurance commissions should be a given. No amount of conflict management by disclosure – or claims that insurance is a grudge purchase and Australians are chronically under-insured and won’t pay fees – will fix the problem.
Of course, mounting an argument that life insurance commissions should receive special treatment under Standard 3 immediately leads to a discussion about the conflicted nature of other forms of remuneration. The key point here is that if we are serious about creating a trusted profession, then any form of remuneration that creates a conflict of interest should be eliminated, not just disclosed (aka ‘managed’).
Robert M.C. Brown, ADF Financial Services Council in Sydney, NSW
It is impossible to legislate for someone’s state of mind (“Code of ethics ‘impossible to manage’: AFA”, Professional Planner Online, June 5). Ethics and integrity cannot be put into words. A person either has it or they don’t have it. If they have it there is no need for rules or legislation. If they don’t have it, no amount of rules or legislation will be adequate.
George Lawrence, George Lawrence Chartered Accountant in Bowral, NSW
Ongoing advice goes way beyond a client’s review (“ASIC Commissioner values advice, but not ‘ratbags’”, Professional Planner Online, June 20).
Whilst the review is super important, the absolute key is for clients to be comfortable having an ongoing dialogue with their adviser as things develop and change for them.
Just having someone on the end of the phone who knows them, their family, their financial situation and their dreams and fears and will help them to make better decisions, results in massive peace of mind and very importantly, avoidance of costly financial mistakes. From the time tracking work that we have done, 41% of the cost of ongoing service is in responding to client-initiated calls and requests.
Phillip Volk, Horizons Wealth in Melbourne, VIC
It is interesting that Ms Bird is able to state “there is no need for ongoing advice if the product works properly” and “personal advice for middle income earners at key points in their life” but seemingly at no other points (“ASIC Commissioner values advice, but not ‘ratbags’”, Professional Planner Online, June 20).
This is a very different model of advice from the one that is currently being practised.
Christoph Schnelle, In Your Interest Financial Planning in Goonellabah, NSW
A very thoughtful balanced perspective that is worth a read; Dominic continues to demonstrate intelligent thought-provoking views which we should welcome (“Evans Dixon case shows it matters who else is investing in your LIC”, Professional Planner Online, June 19)
Ian Knox, Paragem in Sydney, NSW
No commission is bad if the outcome is value for the consumer (“’Not all commissions are bad’: insurance advisers find a single voice, Professional Planner Online, June 11).
The issue presently is there is no value decision that consumers can make. I have advocated for some time that we need a corresponding nil commission product for every commission product with costings over a period of say 5 years that allows the consumer to decide which payment method best suits them. By adopting this method there would be other advantages, TV direct sales would be one area that may struggle.
Ian Bailey, Bailey Roberts Group in Wollongong, NSW
Great article, as it is so true (“Advisers sticking around will pay up for services”, Professional Planner Online, June 6). Yes, my revenue is half grandfathered commission, which helped to pay for the register I bought. If this is gone, I will be working for less than $25k P/A after 25 years in the industry and yes, I already have a degree.
I would like to know what is being done about this. Is the government happy to destroy these small businesses and [the] livelihoods of honest and hardworking financial planners, whilst terminating staff and increasing the unemployment rate?
We need a forum to resolve this crisis immediately.
Cigdem Kadayifci, IRIS in Castle Hill, NSW
This research from Frontier sounds very sensible (https://www.professionalplanner.com.au/2019/05/frontier-underlines-problems-with-best-in-show-list/). There are additional ways to game the system. One example is launching five different funds – all with the same risk metrics but different assets, for example choosing between different countries or assets with the same risk assessment (property/shares) or large/small or growth/value etc and you will get markedly different outcomes with your top performing fund having a good chance of making it into the Productivity Commission’s top ten.
Fundamentally the problem is, as Frontier found, top performance does not repeat any more than randomly (with a very few, famous exceptions you can identify after the fact), only bottom performance does. That has been found to be true across all funds over decades.
Strange that the Productivity Commission would be this naïve.
Christophe Schnelle, In Your Interest in Goonellabah, NSW
Before you pontificate about getting rid of commissions how about you check in with the advisers whose business has a large section of commission income that built up over years or who borrowed money to buy a business from a retiring adviser to set themselves up for their future (https://www.professionalplanner.com.au/2019/04/majority-support-grandfathered-commissions-ban-poll/). Check in with their mental health right about now in case you feel sorry for the advisers who acted in good faith based on both Labor in 2011 and the Liberal Party who implemented FOFA in 2013. So how about the politicians stop electioneering based on their own decisions because it is politically expedient?
The AIOFP are setting up a High Court challenge to the government because the grandfathered income was carved out by Bill Shorten as Assistant Treasurer in 2011. Income is proprietary under the law – check the legislation yourself. The government has to compensate advisers for the loss of that asset.
Phillippa Hunt, Seachange Strategic Investments on the Gold Coast, QLD
Once upon a time, everyone went to a tailor to buy a tailored suit. Then technology and global trade kicked in. Now, a handful of tailors still exist for those that want an ‘experience’ at the highest level. So too the same fate awaits 1 to 1 advising offers as we know it today (https://www.professionalplanner.com.au/2019/04/the-future-of-advice/).
Panel members agree tech will play an ever-expanding role – and for good reason – pushed along by the Hayne royal commission. Sadly, advice offers are virtually all the same in all respects. They are not economic or fair for the bulk of the population, including most that use them today. Some industry quarters try to fight it via issues like ‘Grandfathering’, but this is typical behaviour from an industry facing strategic decline if it doesn’t RADICALLY embrace change. To date, not one association or group has seriously made this a central priority. Consumer access to making the right calls with money will increase, just not with how this high-cost, stuck in its ways, ‘advice tailoring industry’ wants it to remain.
A few thousand will survive focused on a right-sized segment of consumers than today. The rest of us will still wear suits, but how they are produced, priced and accessed will change.
Grant Pearson, Longitude68 in Sydney, NSW
Well done to Professional Planner for running such a good news story (https://www.professionalplanner.com.au/2019/04/in-their-own-words-hes-my-best-kept-secret/). This is what the politicians need to see before they make some pretty poor decisions to run all the bad apples in the profession out of town but unfortunately make it much harder for the few that remain to operate in a cost-effective manner.
Daryl La Brooy, HillRoss in Melbourne, VIC
OSAs for most advice practices were being renewed via cancel and replace every one-to-two years anyway, so most never got anywhere close to the two-year opt-in mark (https://www.professionalplanner.com.au/2019/05/opt-in-osas-drag-on-practice-values/). Basically, if you engaged with a client and the OSA opt-in was coming up in the next 12 months you took the opportunity to do a cancel and replace and effectively extend it another two years. Therefore, moving to annual advice service arrangements is not a great difference. It is just moving from an average of eighteen months to a twelve-month arrangement and hardly going to change valuations.
The real differences lay somewhere else. In the past the renewal of the fee arrangement was likely to be incorporated into another matter of engagement anytime in year two. Because this engagement is often client initiated, getting the renewal dealt with at the same has a high level of success and is also efficient.
For annual advice service arrangements you don’t really have the same opportunity to do cancel and replace as it only lasts 12 months. Advisers will have to engage the client on the anniversary renewal date or close to it, for what will be in many cases the sole purpose of renewing the fee arrangement. Or alternatively, bundled with a scheduled annual client review. As it’s not a client-initiated engagement and may be for the sole purpose of fees, I believe clients will be more focused on the fee vs value. Advisers will most certainly have to have delivered on what they charged for in the last twelve months. If advisers can’t do this successfully then it will affect the business value. We moved to an AASA model on 1 January 2019 and client feedback so far has been positive.
Ashleigh Swayn. Absolute Advice in Sydney, NSW
Really? (https://www.professionalplanner.com.au/2019/05/67472/) Look at the way the mortgage industry has stood up for its members. No comparison, sorry.
Bob Bell, NSW Complete Financial Services in Tuncurry, NSW
You cannot tell me the FPA care about their members (https://www.professionalplanner.com.au/2019/05/67472/) when it took 5 months to even advise me that a client had made a complaint, then delay after delay until the matter was finalised. No thought to the member’s well-being at all!
Di Bainbridge, Gold Financial Services in Albury, NSW
Oh, what a tangled web we weave (https://www.professionalplanner.com.au/2019/03/advisers-using-managed-accounts-to-squeeze-managers/). Why not just go fee for service and forget this complicated structure?
George Lawrence, Larwob Management in Bowral, NSW
Getting our valued research analysts to agree would be like trying to herd cats. Too many ego’s at stake (https://www.professionalplanner.com.au/2019/03/industry-fund-comes-clean-on-comparability/)
Alec Woodgate, RM Capital in Perth, WA
Really Dominic? (https://www.professionalplanner.com.au/2019/04/inside-the-liberal-partys-bare-economic-policy/). Taxation reform is not simply about increasing taxation and increasing the burden of tax revenue on an ever-decreasing number of Australians.
Increasing CGT tax is not reform. Reducing tax deductions on gearing is not reform. Removal of franking credits is not reform. Reform would be broadening the GST tax base and introducing a flat tax system over a limit. Reform would be the removal of payroll tax and onerous regulation for small business, not simply increasing or decreasing existing taxes. Reform would be reviewing FSR from the ground up and separating product from advice entirely.
How you suddenly decided to describe reductions in trail commissions for mortgage brokers as reform speaks to how narrow you and so many of your colleagues’ viewpoints are.
SMSF loans were introduced by the Labor party and the Tax office. They shouldn’t have been allowed and still shouldn’t but removing them is not reform – it is just reversing a bad decision.
The Labor party has matched every tax cut that the Liberal party put forward – I can agree that they won’t achieve a lot other than stimulation of a weakening economy, but the 23.9% cap that the coalition has put in place makes very real sense. The Labor alternative of an irresponsible government that grows the public servant base with no noticeable improvement in the core services of transport, education and health is something you probably don’t see in NSW with a responsible Liberal Govt but here in Queensland we can show you how good a Labor government can be at wasting tax payer funds.
Paul Forbes, RFS Advice in Robina, Queensland
Went through their 2 day ‘training’ course, which goes into great detail on how they ‘do it differently’ (https://www.professionalplanner.com.au/2019/04/fund-manager-flips-the-script-on-advisers/). One can only assume that the ‘doing it differently’ is to gain greater returns and maybe greater stability. Sadly, their returns are absolutely average. Don’t waste your time, just use other fund managers. They go to great pains to foster an almost club-like atmosphere, but that doesn’t do anything for returns.
Peter Kinross, Lake Edge Financial Services in Patterson Lakes, VIC
I wish Tahn had dug a little deeper into the numbers behind the growth of SAN (https://www.professionalplanner.com.au/2019/04/smsf-advisers-network-anticipated-asic-scrutiny2/). As he alerts us to, the growth is most likely from accountants bolting on a limited financial service offering after the removal of the accountant’s exemption that allow them to provide advice on SMSF’s. So, let’s not include them as ‘advisers’ just because they offer a limited service under an AFSL.
Duncan Essery, ARA Consultants in Kew, VIC
Perhaps the editor of Professional Planner should invite the Deputy Chair to explain how CIPR’s would actually work (“APRA deputy chair sounds warning to trustees”, Professional Planner Online, March 21), apart from vague unsubstantiated platitudes such as ‘income for life’. This is not a luxury enjoyed by responsible advisers acting in the best interest of clients.
Do CIPR’s involve or not involve the “pooling“, and as a corollary to that, the forfeiture of assets – particularly in the event of premature death? For example, if one was to elect a deferred life annuity to commence at age 80, what happens to that person’s money if they die at age 79?
Surely a complete understanding of the what the product contemplates is the ‘sine qua non’ before telling trustees that they should not be ‘waiting around’.
Max Lewis, Lewis Financial Group in Springwood, NSW
I absolutely commend the notion of specialisation (https://www.professionalplanner.com.au/2019/03/advice-specialisation-inevitable-fpa/), but make sure it is an appropriate level of accreditation that can’t be manipulated or copied.
I agree with Dante and hope areas like risk, retirement, aged care and SMSFs become dedicated specialties, and that people playing in these spaces have appropriate education and endorsement. I have seen some terrible cases of poor advice in the aged care space by people trying to dabble but not accredited to do so. Let’s use FASEA to tidy up our professionalism and specialisation.
Peter Donovan, Goldsworthy Investments in Upper Mount Gravatt, QLD
A well written article that articulates the investment and tax profession’s understanding of likely market reaction to the devaluation of franking returns on Australian shares (https://www.professionalplanner.com.au/2019/03/the-product-implications-of-labors-franking-credit-policy/)
A follow-up article on the likely impact of a high volume move from franking-oriented shares to unfranked and international portfolios would be helpful. If the policy will see a substantial movement of capital out of Australia it would be very damaging for our economy and likewise if it sees investor movement to real property – it could have ramifications for housing affordability.
Chris Higham, Abbotts Wealth Management in Perth, WA
I’ve read a few of these articles (https://www.professionalplanner.com.au/2019/03/in-their-own-words-understanding-the-why/) and I think they give a great insight into a client-adviser relationship. Just goes to show that both sides are human and at the core of each successful relationship is a genuine desire to give, share and support.
Looking forward to the next one.
Chintan Engineer, Diligent Financial Planning in Blackburn, VIC
JANUARY / FEBRUARY
Finally, what a great article (https://www.professionalplanner.com.au/2019/01/accountants-carve-out-request-reveals-professions-wounds/). To hear this uttered from an accountant is truly heartening but very long overdue. As a practising planner for 11 years, I have often come across the poor ethics of accountants, especially in the SMSF space, with the implementation of SMSF with no investment strategies and questionable advice supporting investments and especially property advice. Many of the ‘failings’ of advisers have in fact been accountants and they should have their own royal commission. When an accountant can give significant advice to a client verbally without any written or follow up information there is a problem in the industry.
Les Hayward, Prosperity Wealth Management in Applecross, WA
This (https://www.professionalplanner.com.au/2019/01/asics-adviser-levy-to-be-invoiced-this-week/) is why I have no option but to charge my clients an ongoing retainer fee; to help pay for the ongoing charges & raft of regulatory expenses being imposed on us by the Federal Government. FoFA has been a major cost impost on consumers, with the only result being an actual fall in the level of advice being provided. And if you have ever seen a fee being charged for doing nothing (which advisers are continually accused of), this latest annual fee from ASIC is an excellent example.
Steve Blizard, Roxburgh Securities in Guildford, WA
This article (“Accountants’ carve-out request reveals profession’s wounds”, Professional Planner Online, January 24) is a thoughtful and succinct expose of the state of play for accountants in their intersection with the provision of financial services.
I started out life as an accountant and saw very clearly how the profession/designation of Financial Planner was complementary and, in my specialisation, essential for end to end advisory services. It was this dynamic that forced my hand. I made the move to skill up in the financial advice profession and will never forget the parting words of “why are you going across to the dark side?” I idealistically imagined my return to accounting as someone that could provide end to end services; a qualified tax and accounting professional that could also provide financial service advisory. Sadly, the accounting profession didn’t embrace this concept and never found that perfectly blended role. I am however valuable in financial services as I can bring my tax and accounting experience to the role and provide a complete understanding of client advice needs. Parts of the professions are ‘hand and glove’ or, more aptly described, two sides of the same coin.
I only wish the accounting profession had been more pro-active in building out operating models to incorporate this service offering into their practices. Perhaps it wouldn’t have taken the banking royal commission to finally identify that some things need fixing as the accounting profession could have brought its significant experience (and longevity as a profession) to the table and added meaningful value to the financial planning professional journey. Instead, as Mr Brown pointed out, it suffered from being up the top of the high and mighty mountain peak and now is feeling the impact from the inevitable fall.
Kym Bailey, JBWere in Sydney, NSW
Indeed, it is not a lack of self-confidence in women, nor do women need to be fixed (“Stop trying to fix the women”, Professional Planner Online, December 3). It is more the case from my observation that many men are uncomfortable around strong intelligent attractive women who seem to distract them from the task at hand. Hence, why many women in position of leadership end up emulating men in the way they dress and conduct themselves. These women become rather masculine to fit in. Femininity and authenticity among female leaders are seemingly discouraged in the board room or in management positions in predominantly male dominated industries.
Angelique McInnes, Central Queensland University
The sooner industry funds have to disclose their true costs and all superannuation funds – including SMSF’s – are treated with the same reporting requirements, the better (https://www.professionalplanner.com.au/2019/01/super-transparency-rules-to-impact-advisers/). Saying a fund can be run for $1.50 per week is a joke when there is advertising run on every TV station in every city, every day to promote industry funds. Last time I saw, TV stations did not do this stuff for free as a community service. There needs to be a ‘one rule for all’ mentality and not what we currently have. However, does anyone with a vested interest really want a level playing field?
The industry fund lobbyists have very deep pockets and significant political clout, particularly if we have the expected change of government this year. I encourage you to look at the annual accounts of any industry fund and determine the true cost to the members. I did this a few years ago with CBUS and the cost was around 6 per cent of AUM. A far cry from just $1.50 per week but industry funds were carved out of FoFA legislation and they hide these as ‘costs’, not fees – at the end of the day it is coming from the retirement assets of the members and whatever name you call it, it does impact the bottom line for a member.
Have the confidence to investigate how these funds work and how they charge – you will be surprised how quickly you are contacted by IFS or a similar body to ask you to remove any article!
Martin Watson, Bellwether Financial in Perth, WA
Regarding the poll, (“65% say advisers not obligated to help clients’ parents”, Professional Planner Online, January 22) the client and their parents may well have conflicting interests. Unless the parents are also clients the adviser to their children may well (probably does) have a moral duty of care to discuss the situation, [and] any advice must be given in the context of “who is my client?”, with all the potential conflicts of interest set out.
A better idea is to bring the parents in as clients and address their issues separately, but with reference to their adult children’s situations (and even wishes) in an open discussion. Advisers should be very careful NOT to deal with parents of their adult children clients.
Philip Carman, Personal Asset Services in Perth, WA
Yes, I do also agree with Richard Dahl (https://www.professionalplanner.com.au/2018/08/heaps-of-education-may-not-be-enough/)that education is very important to help raise the standards of advisers and the quality of advice given. I am not as ‘qualified’ because all I have is the new Advanced Diploma in Financial Planning and yes I have a few other accreditations and a Diploma in Mortgage Broking and with a fair bit of experience, but all that still puts me directly in the path of doing a full degree before January 2024.
This is a very complex and worrying time for me, because I have been giving personal advice since 1981 and when Jan 2024 comes around (yes, 43 years at the age of 63) I am looking at 4 years before I plan to retire. I see no point in spending Time and Money on a degree that will not help improve the quality of advice for my clients in a 4-year period. I am also in the firing line of spending thousands of dollars with the prospects of never paying the “HELP” debt back to the government because my taxable income and the time frame I have left to work will not be enough pay the debt off. Plus the hundreds of hours I am not putting into my business to increase my income to help towards my retirement. I also know I do not have the time to devote three years full time to a degree or possibly 5 years part-time . I have one employee, so all of the pressure is on me to see the clients and keep the business running.
I see this course of action will more than impact my business it will damage my business value, my clients, my family life and my retirement.
Roland Knight, Infocus Financial Advice in Caboolture
Your article on older planners leaving the industry is almost absurd (https://www.professionalplanner.com.au/2018/11/faseas-impact-coming-into-view/) I am one of those older planners who is likely to leave the industry as the changes take place. I was planning on retiring in the next 5 years anyway, as would be a large number of planners in my age group. Your article implies that our retirements are due to the changing educational requirements.
I fully support the changes and will probably act to meet them purely because I enjoy building my knowledge, but I am still intending to retire about then. And I accept that others in my age group may bring forward their retirement because they do not wish to invest a lot of time to extend their careers by 1 or 2 more years.
Steve Trevisiol, Western Financial in Perth, WA
Regarding your article https://www.professionalplanner.com.au/2018/11/time-to-stop-the-diversionary-tactics/ The Royal Commission highlighted that there are people who lack ethics and integrity. However, if you look closely, you will find that the foot soldiers of the organisations raised the issues whilst middle and senior management and executives over ruled them. Those people have degrees. As a financial planner seeing clients every day, our ability to provide advice is becoming more difficult and more expensive. On average I estimate that compliance-related issues now account for at least 1 working day per week. Clear systems and processes are the answer and a compliance department should assist rather than hinder them. Senior planners are exiting the industry because they do not want to shuffle documents. Their aim has been to help people with investing and financial planning. A career in financial planning is no longer attractive or rewarding.
Gail Gadd, Lifespan Financial Planning in Cherrybrook, NSW
Good pickup, Tahn https://www.professionalplanner.com.au/2018/11/cost-of-youth-sport-blindsiding-parents/ As a parent and adviser there is no doubt this is an area of expenses that catches most parents out. If your children’s interests are more in the arts (dance, music, etc.) then it gets a lot more expensive. Ask a parent with a child into dance and you’ll find the costs are 3-4 times more than in your article. Throw in private school education and the numbers go through the roof.
Even parents with really good incomes are often treading water or going backwards financially during their children’s teenage years.
Jason Smith, Think Independent in Melbourne, VIC
As an Adviser who has been practicing for over 20 years and achieved CFP in 2000, I find the FASEA recognition of prior learning and experience very disappointing https://www.professionalplanner.com.au/2018/11/fasea-deals-fpa-afa-members-a-rough-hand/
I would also question why we would now need to have membership to the FPA to maintain a CFP designation that no longer has any relevance. I will now need to spend between $16,000 and $32,000, depending on the institution, just to retain my career I have spent over 20 years building. The one area they have not addressed is character. Knowing rules and code of conduct means nothing if you don’t have the right character to do the right thing by the client.
Craig Ives, Crowe Horwath in Hamilton, VIC
It would appear that the more experienced you are as an advisor and therefore holding qualifications that were the best at the time, the more you are disadvantaged under the FASEA guidelines. https://www.professionalplanner.com.au/2018/11/fasea-deals-fpa-afa-members-a-rough-hand/
Being a 62 year old with a 30 year unblemished career and a CFP since 1992 makes no difference in FASEA’s thinking. It’s very clear they want older advisors gone, even if they are experienced and well trained.
Gerry Lenihan, Internexus Planners in Sydney, NSW
As an adviser who obtained my CFP designation prior to 2007, I wonder what the relevance of the designation will be moving forward. https://www.professionalplanner.com.au/2018/11/fpa-says-cfp-designation-up-for-review/. Also, why I would continue to pay a premium for my FPA membership when, although it is the gold standard designation in financial planning, I won’t have achieved the minimum standard required to do the role I have been doing for the past 20 years. I look forward to the FPA’s review of the CFP Designation over the next few months.
Todd Davis, Politis Investment Strategies in Wickham, NSW
How can they listen? https://www.professionalplanner.com.au/2018/11/fasea-open-minded-about-changing-proposals/ They dont even make their location or telephone number known. If they were serious about listening there would have been a proper and time considered consultative process, not just 8 days before the Legislative Instrument is passed. One of the most opaque and unsatisfactory processes, not taking into account the voice of the advisers. Based on the information obtained, not even listening to the members of Parliament who have expressed their concerns.
Paul Goethel, Let’s Make Money in Cheltenham, VIC
Robert, thank you for your thoughtful article –https://www.professionalplanner.com.au/2018/11/top-10-reasons-reform-is-unlikely/ Many of the points you raise are valid, and yet asset based fees have persisted in financial planning and it’s not just fear mongering. There is now a large body of study on ‘The principle/agent problem’ that explains why asset-based fees persist and are happily accepted by clients. That is, that the interests of client and the adviser are aligned with asset-based fees; if a client’s balance goes up, the adviser is paid more, if the clients balance goes down, the adviser is paid less. It’s the classic ‘skin in the game’. Before you counter with ‘too much risk is taken on’, remember that flat fees likely encourage the polar opposite result (and we see it with financial planning clients using accountants all the time) –the investments are too conservative in risk solely to protect the adviser being sued for negative results, and so underperformance is rife. Ultimately my take is that asset-based fees are appropriate where clients want returns maximised, and flat fees have a place where a client’s focus is on managing risk. In that way, the interests of the client and adviser are aligned in both scenarios.
Grant Simpson, Future Funds in Mona Vale, NSW
I am wondering what the 100 basis points refers to? – https://www.professionalplanner.com.au/2018/11/fix-your-fee-game/ I mean is this 100 basis points on top of: Trustee fee; Manager Fees; Wrap or platform fees; indirect costs? I for one would like to see total expense ratios where one can clearly decide what the cost and value proposition is.
Ian Bailey, Bailey Roberts Group in Wollongong, NSW
How refreshing to discover that I do not have to rely upon the missing “confidence” chromosome that I wasnt’t born with – https://www.professionalplanner.com.au/2018/12/stop-trying-to-fix-the-women/ Great read Leith. It is all about targets; what you want to achieve and the how to! Quotas are disruptive on all levels. My question for all: how do you become the best version of yourself and bring that to the table? Isn’t all of this really competition between the sexes? If you are good enough or competent enough you get the gig. If not, then simply find the way. Just do what it takes and eliminate excuses, Girls.
Kerry Mitchell, Live Smart Financial Group in Brighton, VIC
Perhaps all advisers should establish a return on investment (ROI) or business case for each dollar of fees one spends on them. If the client is better off by a certain percentage after paying fees, then it is worthwhile. This should be done on an annual basis for OSA fees. https://www.professionalplanner.com.au/2018/12/are-osas-in-the-clients-best-interests/
George Manka, CPS Private Wealth in St Leonards, NSW
This article is so ill informed, it’s another case of an ‘outsider’ from another profession is trying to influence her uneducated opinion on another profession https://www.professionalplanner.com.au/2018/12/are-osas-in-the-clients-best-interests/. She obviously has no understanding or has never been through the process of what ‘real financial advice’ encompasses, which is helping clients make smart decisions with their money, and this cannot be done on a transaction basis like the legal profession.
Duncan Essery, ARA Consultants in Kew, VIC
Ms Plater raises an interesting issue – https://www.professionalplanner.com.au/2018/12/are-osas-in-the-clients-best-interests/, however, it also raises the issue that if OSAs are removed it may result in planners becoming fund managers to preserve revenue streams from OSAs, which presents another set of risks for consumers. Careful consideration needs to be given to unintended consequences arising from any legislative change or recommendation and given the uncertainty surrounding the introduction of FASEA’s education standards and the as yet unknown recommendations from Hayne’s Royal Commission. Speculating about what will or won’t be recommended by Commissioner Haynes, or an individual’s personal views on the provision of advice does not add to the debate.
David Barber, Pario Financial Management in Kew, WA
You could also argue that people are better off by simply exercising and eating more healthy rather than utlising Personal Trainers & Dietitians and yet these fields are still big industries – https://www.professionalplanner.com.au/2018/12/are-osas-in-the-clients-best-interests/. Do not underestimate the importance of a guiding hand to encourage you and motivate you to do what is in your best interest and stick to your goals.
Jonathan van Omme, BOS Financial Strategies in Osborne Park, WA
The idea that Bowan will rubber stamp the Royal Commission’s recommendations is belligerent at best. None of the recommendations will come with economic costing as this has not been requested in the terms of reference. By saying this he could well do irreparable harm to the Australian Financial sector. That can’t be in anybody’s best interest.
Susie Erratt, Advanced Financial Planning Solutions in Darwin, NT
This is one of the better and more even-handed approach I have seen in the media- https://www.professionalplanner.com.au/2018/12/advisers-not-pre-empting-commissions-ban/. While it shuts up screeching media about advisers to have a ban on grandfathering I don’t believe that the media understands what grandfathering is for income and the client. I extend an open invitation to any journalist hack to work for a week in my office and do the compliance documentation, sit in the client interviews, do the study and run my business. The reality is that business older than 2010 will have legacy clients with some small amount left of training commissions. The clients will be in allocated pensions and annuities that are running down after 10 or 15 years. The elderly clients in receipt of the age pension cannot be moved to a new contract or product because of the changes to the age pension 1 January 2017 because they will lose their benefits and most of their pension income. Moving them will not be in their best interests and rebating trail send it back to the product manufacturer to line their pocket. Also, the clients are well aware of all fees as these are disclosed in their advice, reviews, fund manager statements. The media headlines look like the clients don’t have the intelligence or the wit to know what they are paying for nor the relationship with their adviser.
The other reality that is clearly promulgated in the article is that the industry built their business based on the current legislation and rules. Many single parents, many of whom are women, bought existing client bases to grow a business that has flexible working hours, can be run from a home office and go out to meet clients. Succession planning uses the older client bases to build a business or take over an existing family business.
Politicians that blithely state that the RC recommendations that grandfathering will be banned without consultation will send advisers to the wall and how will these advisers repay their loans? What will happen to their clients? Not in the clients best interests again.
Philippa Hunt, Seachange Strategic Investments on the Gold Coast, QLD
Regardless of what the employment contract says about “ownership” of a client (Who owns the client?, Professional Planner Online poll, October 11), the client is the one who determines whom they wish to deal with. An employment contract may build protection for the firm around who “owns” the right to contact clients and retain transactional or ongoing fee arrangements but these cannot defend against the client deciding to leave their business with the employer or move it away, either to a departing adviser’s new business or somewhere else. I believe the employment contract cannot overrule or disallow a client’s right to deal with whomever they wish. This is further evidenced by the new opt-in/opt-out rules, which give further weight to clients’ right to move their business. The employment contracts deal more with the conduct of the employer and of the adviser whilst employed or in the event of departure.
Rob Maroni, Patersons Securities in Albany, WA
The simple, fundamental fact regarding franking credits (“Assistant treasurer attacks Labor’s ‘retiree tax’ ”, Professional Planner Online, October 30) is that few people, and even fewer politicians, understand what they are, let alone how they work, nor their integral relationship with company tax. ‘Company tax’ is, in fact, a misnomer; tax that companies pay should rightly be called shareholder dividend tax. In principle, ‘company tax’ is no different to PAYG tax remitted on behalf of employees, with the accrued tax credit taken into consideration at the time of each individual’s income tax assessment. Just as the ‘paid in advance’ shareholder dividend tax is a credit (though we refer to it as a tax ‘offset’) against total assessable income tax liability. That’s why reducing or increasing so-called company tax ultimately remains tax neutral to companies, shareholders and, of course, to Treasury. Ask a politician to explain the relationship between company tax and imputation credits. Paul Keating, the architect of the imputation system, fully understood.
Jack Wellings, WellInvest in Hornsby, NSW
The FPA has been caught with its pants down (“CFPs wait nervously for FASEA ruling”, Professional Planner Online, September 14). The CFP is clearly not one of the highest qualifications advisers can attain or else FASEA would recognise it immediately. We who have completed the CFP at significant cost and time sacrifice will have nothing to show for it. At least a university qualification does not require an ongoing membership. I have no doubts that if the FPA get this wrong (and it looks like it is going wrong), there will be a class action waiting on the other side.
Geoffrey Swanepoel, Compound Wealth Management in the Gold Coast, QLD
Great article (“Fintechs, Koch clash over branding”, Professional Planner Online, October 23). We were at the launch but not on the panel. Your article highlights the main take-away we had. We actually agree with David Koch. We believe fintechs need to get validation and build trust and you can’t do this when you’re not a brand.
Ashleigh Swayn, Absolute Advice in Sydney, NSW
There is no doubt listed investment company issuance has increased dramatically over recent years (“LICs at the high water mark?”, Professional Planner, November issue). Whilst there are now more than 100 LICs on the stock exchange, this is small in comparison with the platform market, which can have up to 3000 investment strategies on a menu. A structural trend supporting the growth of this market is that SMSF investors feel more engaged to make their own investment decisions and use the exchange as a platform.
Whilst capital raising is cyclical, we believe building a sustainable LIC and LIT sector with reputable investment managers focused on shareholder outcomes is of great benefit. Furthermore, discounts to [net tangible assets] NTA currently present an opportunity for investors; however, access to insightful information about the manager is critical to understand if the discount is likely to persist. Investors should also ensure they understand how an LIC would fit into their portfolio, rather than basing an investment decision on past returns – especially at this point in the cycle.
Conor O’Daly, Pinnacle Investment Management in Sydney, NSW
I have been in the industry for 20 years. FASEA is a big concern. But right now, for me, the fallout from the royal commission (“Advice in the wake of Hayne”, Professional Planner, November issue) in relation to ongoing service arrangements has the ability to ruin my practice financially.
This has to do with the way dealer groups are auditing client files as requested by ASIC and, in some cases, refunding fees. Throughout the audit process – spanning a time when I’ve been licensed under my current and previous licensees for several years – I have had to correct the auditors’ interpretation that ASIC would perceive a client had not been serviced. For instance, in one case, when a client turned pension age, instead of an annual review, I did a new SoA. I did not charge the client, as this is part of the ongoing services provided. This was discounted by the auditor and the ongoing service fee and interest were refunded to the client. This is just one example of many. Further, the auditors directly contact the clients without my knowledge and issue the refunds without consultation with me.
How can it be legal for ASIC to clarify what they meant FoFA to be now, post-royal commission, and then make this retrospective? Planners have relied on their compliance managers to decipher and advise how to implement FoFA in their practices. Over that time, planners have paid their dealer fees, worn operating costs, been liable for advice in relation to strategy, portfolios, insurances etc, and paid tax on the income and business activity statement. So if advice businesses have to pay back fees covering a seven-year period, how do they get compensated for the over-payment in dealer fees and taxes? Being a small practice, I don’t have a cash reserve to do any refunds. Further, I have taken out a business loan based on the revenue to buy out a partner. I have to maintain a level of cash flow as part of the lending requirements. I feel alone in this process and have been told I have no legal standing. Where does an adviser turn to get support through this process? Where is the voice for the planners in the whole royal commission process?
Lisa Watzek, Compass Wealth Strategies in Cleveland, QLD
Couldn’t agree more – “FASEA, ASIC ‘ambivalent’ on investment oversight”, Professional Planner September 2018. A lot of the continuing education required now and in the future seems to be around ethics, which is fine, but what might be getting lost is the investment knowledge of advisers. ASIC has a role, but unfortunately it has spent a long time listening to the big end of town tell them what advising is about, and has not consulted with independent thinkers who actually have a licence to deal in securities.
Ian Bailey, Bailey Roberts Group in Wollongong, NSW
Forget about TMI “Super sector’s bad case of TMI”, Professional Planner September 2018”. They have deliberately misled the royal commission. The main issue is NOT the fee refund, it is the fact that they levied fees for not doing anything. In any civilised society this is theft. Put another way, the funds are holding the money for the members. Taking fees, without justification, is theft. The words “trustee of the fund” should be a real giveaway.
George Lawrence, George Lawrence Chartered Accountant in Bowral, NSW
It’s sad to hear the vitriolic of the likes of Ray Miles “Ray Miles fronts ASIC’s Macaulay on licensing”, PP Online August 9. There are always two ends to any spectrum. The world has changed and might I add that ASIC has significantly enhanced its process in approving AFS licenses. We just went through an AFSL approval and we had to demonstrate financial competence in presenting a balance sheet with forward projections and demonstrate all competencies to run an AFSL for the advice authorisations we are approved for. I dare say, this was not something that was prevalent in the past. There has been too much pressure applied on the regulator by the bigger end of town forcing the regulator to act as a gate keeper in my opinion and this more evidence of this stale type of thinking. Times have changed and it’s far more important that participants get on with it, than argue over the state of AFS Licensing. The irony is this is a result of the end of vertical integration and the small, the medium and the big all deserve the opportunity to practice and put their best foot forward, much to the chagrin, it would seem, of the established.
Robert Joseph, Freedom Wealth Advisers in North Sydney, NSW
Regarding your article “Death of the licensee as we know it, PP Online August 31 – approved product lists have long acted to preserve the status quo in product selection. In my time trying to establish the first managed accounts, it proved impossible to break into the product lists of large groups that were controlled by banks, undoubtedly because my efforts posed a threat to the bank owned unit trusts and expensive platforms. In the end, in recent years, the sheer appeal of managed accounts for clients has led to the growth of independent licensees who now use them in droves as HUB 24 alone is taking 10 per cent of new monies.
John Aldersley, Aldersley Capital in St Huberts Island, NSW
Mr Reddacliff’s idea to restructure the financial planning industry more along the lines of an accounting industry with a public practice certificate, is one of the most sensible proposals I have seen touted for a long time Death of the licensee as we know it,” PP Online August 31. Advisers definitely need support, but this should be without product conflict, as any profession would expect. The only way the client’s best interest can be truly served if all the temptations are removed from the Planners’ line of sight. A focus on adviser capability and compliance has not improved the system, so let’s look at whether it is possible to conduct this business without the current structural arrangements that have developed with Licensees.
Kym Bailey, JBWere in Sydney NSW
I disagree with your article Death of the licensee as we know it,” PP Online August 31. Licensees are not dead, they are transforming. You reference an unnamed industry expert, who doesn’t want their name to get out? I’m a 30 year veteran in our industry, and am half way through my post grad studies through Griffith Uni. Not all us older guys are the reason the industry is where it is. If you truly represent the professional planner, then my question to you is what does that look like?
Mick Sykes, EZI Protect in Sydney NSW
Good article David “Everything’s going to be ok” Professional Planner September 2018, exactly what clients are looking for, the “I can realistically achieve my goals factor”.
Mark DiPietro, Shadforth Financial Group in Sale, Victoria
Regarding the article “Facebook gives me an edge”, PP Online August 17. In the Facebook Help Centre they state “It’s against the Facebook Community Standards to maintain more than one personal account.” Find this by searching “multiple accounts”. That’s important to know before following the strategy this adviser uses if you’re also intending to be ethical.
Matthew Hern, AMP Advice Subiaco in Subiaco, WA
Regarding the article “Opt-in rules put premium on insurance strategies”, PP Online August 13. This will be very restrictive on choice of superannuation going forward. The key issue is that most group insurance can’t be taken over by another fund so if the member has health issues they can’t get new insurance and may well have to stay with the fund they start with even if it isn’t their choice.
Damian Ebzery, Lifestyle & Investment Planning Solutions in Graceville, QLD