Like many planners who run their own small businesses, Brad Lonergan is optimistic about what changes the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry will usher in.
He welcomes, in particular, any bad apples leaving the industry and an improvement in the culture of banks’ wealth divisions, which he concedes have been hobbled by a ‘sell, sell, sell’ ethos.
But Lonergan is also concerned about the impact the changes will have on consumers.
Ostensibly, the royal commission’s recommendations – such as abolishing grandfathered commissions and giving clients control over the renewal of service agreements – are designed to give consumers the upper hand but Lonergan is concerned some will have the opposite effect.
“My number-one issue is with the impact the recommendations will have on competition,” he says. “The client always does better when there is a healthy amount of competition.”
Lonergan notes that industry superannuation funds, for example, are likely to benefit from the super recommendations if implemented.
“I think people may be left with basic, generic super products that rely heavily on index funds, and I don’t think that is a great way to build wealth,” he says. “Everyone’s financial needs are different and if retail funds leave and you’re left with these generic funds run by people who don’t believe in the value of wealth managers – and I don’t believe the big industry players do – then consumers will have fewer choices.
“Because the more competition there is in the market – a mixture of retail and industry – the more strategic I can be in helping clients achieve their goals.”
Many advisers who offer mortgage-broking services, including Lonergan, may be hit hard by the recommendations, which outlined the abolishment of trailing commissions for upfront mortgage-broking fees.
“Very few people have a couple thousand dollars in their bank account to pay upfront fees to brokers,” he says. “I think it will mean more people just end up going to their bank for a loan and competition reduces.”
Lonergan is a big proponent of tailored advice.
He regards the ability of the best advisers to break down complex financial products and explain them to clients as fundamental to the notion of advice.
“You can service someone’s account for 20 years, doing annual reviews, and not make much difference to their financial position,” he says. “Or you can provide them with advice. To do that, you need to be an excellent communicator and able to transfer your knowledge.
“That is why, in many respects, I think the industry is perfect for creative types.”
Lonergan, who is based in Newcastle, has recently established the Lake Macquarie Business HUB, which is central office space that he shares with a mortgage broker, a lawyer specialising in estate planning, and an accountant.
“The idea is for us to be a one-stop shop for people to get advice across a range of financial areas,” he says.
A persistent thorn in Lonergan’s side is the amount of compliance and paperwork that he says needs to be done these days.
“You should be spending 80 per cent of your time with clients and 20 per cent on paperwork, but at the moment it is the other way around,” he says. “That’s the reason I got into this business in the first place: to spend time with people and make a difference to their lives. You can literally save someone from losing their house and that is an incredible feeling.”
Name of firm: BMK Financial Services
Name of licensee (if not self-licensed): Charter Financial Planning
Years in the industry (previous jobs?): 20 years (including time at Suncorp and NAB)
Academic qualifications: associated diploma of business (computer programming); diploma of financial planning; advanced diploma of financial planning; Certificate IV in finance and mortgage broking; Graduate diploma in financial planning; and master’s degree in financial planning
Accreditations: Specialist accreditations include SMSF, direct equities, gearing and margin lending
Professional association memberships: Lake Macquarie Business Chamber and Hunter Business Chamber
Other memberships: Your Business Connections; Lake Macquarie Business HUB