The importance of financial advice to consumers is being lost in the headlines according Investors Mutual Limited’s Anton Tagliaferro.
Consternation over remuneration methods, in particular, is overshadowing the role advice plays. Major changes are coursing through the industry, he explains, and will completely alter the way we’ve looked at advice in the past.
“Everybody in the advice market is now trying to work out the appropriate way to remunerate planners and charge clients,” he says. “It’s going to be a complete change to what has been in the last ten to fifteen years.”
Tagliaferro, who founded IML in 1998, reckons that the importance of advice has been collateral damage during this change. “That’s the sad thing,” he says.
Take the example, he ventures, of someone coming up to retirement with “half a million or $700,000 in superannuation that they’ve never paid much attention to”. There is tremendous value for that person in seeing an adviser to help them with tax effective contributions and risk appropriate investing.
“Underneath all this turmoil there has to be a financial advice sector that survives because there are a lot of people that really need that advice,” he says.
The two biggest advice networks in the country, AMP and IOOF, are front and centre of the remuneration maelstrom, Tagliaferro says, and will need to sort fees out before they can move forward.
“The major issues for IOOF is partly what’s impacting AMP; how are they going to remunerate planners, how are planners going to charge clients… is it going to be fee for service?”
Part of the misdirection in the industry is self-directed, he notes, with the scandals erupting from the Hayne royal commissions further obscuring the advice value proposition.
“Unfortunately the malpractices, the amount of fees charged, all that stuff is losing to the importance of having professionals around that are accessible to the majority of the population,” he says. “It’s being lost amid all the noise.”
Regardless of the way people pay for advice, he argues, the need for it “won’t go away”.
“It’s like saying doctors can’t practice anymore because the fees they’ve been charging are too high. Sorry, you’ve still got to have doctors. Same with financial advisers; you’ve still got to have well-qualified people for the vast majority of the Australian population with this growing amount of superannuation.”