In what was a memorable year for financial advice and the world at large, Professional Planner received a record amount of feedback from industry stakeholders.
We value these contributions immensely; they help feed into our own knowledge base and give the editorial team an ear-to-the-ground conduit into how advisers and their peers are reacting to the vicissitudes of the industry.
We’ve hand selected ten of the best letters from our readers in 2020 below.
1 – David Smith, Frost Financial Planning in Darwin, NT
Aah – where to start! (“Regulatory reform but not as you know it“, September 22).
The principles based FASEA code has only just come into play, and needs to be given some time to work. It is at obvious odds with the prescriptive micro-management that ASIC employs in regulating the industry and that needs to be resolved in the immediate future. Is a three year+ ALRC review the best solution? As a professional planner at the coal-face drowning in futile, puerile, misguided regulation – I don’t think so. But it looks like we are going to have one, so I would suggest the following. Undertake a meaningful, informed, cost-benefit analysis for every change being proposed and make it available for scrutiny, and Engage with professionals at the coal-face to understand the likely outcomes before legislating or regulating. These two steps seem absent in ASIC’s regulation of the industry.
Professional planners are not holograms – we are a resource that ASIC has ignored for years with adverse consequences. And if we ever wanted a brilliant example of conflicted remuneration – here it is. Lawyers charging fees for years on something that needs urgent resolution.
2. Daniel Budreika, Planning for Prosperity in Fullarton, SA
I’m sick of upper-management industry boffins, who have never set foot in an adviser’s office or would know what a regular mum and dad client looks or smells like, commentating on how to fix the advice industry (“Advice industry may have jumped the gun on reform”, July 29).
Advisers are the last people to be included in these expert panels, boards and focus groups. What would we know? I wanted to stick my fingers down my throat when Jeremy Cooper mentioned the increased size of SOAs – as if somehow advisers responded to the royal commission and decided to add more pages and dealer group templated paragraphs because of the fun of it.
Unfortunately the industry is run by people who probably mean well but don’t have anything more than a cursory understanding of the patchwork layering of ham-fisted rules and red tape that when frankensteined all together somehow = acting in the client’s best interest (at a much greater cost than before).
I’m not sure what ‘regulatory hiatus’ these peanuts are referring to. ASIC are having wet dreams about shutting down as many advisers as possible with the threat of ‘fee for no service’ if an advice doc is not provided by 31 Dec. Read that as “It’s better to get a sh***y advice doc to your clients before Xmas than no doc”.
You can’t make this stuff up.
3. Michael Gershkov, Lifespan financial Planning in Carnegie, VIC
Dear Kate, Danielle and the team at ASIC – thank you for your interest and concern because it is appreciated (‘ASIC wants to know what’s holding up bite-sized advice”, October 14).
The two big issues are that the cost to deliver scaled or “bite sized” advice is not that different to delivering holistic advice. To address one issue for a client still requires an investment of 10 to 20 hours to consider all the options and variables which may be an hour or two less than to address four or five issues. Yes, the Statement of Advice will be 50 pages in length rather than 60, but we have created a system with many processes which come with costs and we need to cover these costs and make some money because we do run a business. It is true to say that all licensees add to the cost and complexity of advice delivery but they exist to service, support and supervise advisers.
The simple reason why advisers need ongoing fee for service and holistic advice clients is because we are happy to earn less on the initial engagement with a client and then earn money to run our business over the long term as we help our clients achieve their goals and address their fears. This way, clients get their objectives and we do too.
The average cost per hour for an adviser to service a client is $300. If I know the client in front of me only wants a short term band-aide solution, the initial meeting cannot be free (as it is now) and the cost per hour is now $500. AND the liability attached to deliver this single or simple advice outcome for this transactional client is no less but the risk is actually higher because I cannot ensure this client stays on track and true to their desired solution.
4. Tom Redacliffe, Encore Advisory in Sydney, NSW
I think the FPA is on the money here (“Code monitoring to be superseded by a bigger plan”, June 3).
This is an essential move for financial planning to become a legally recognised profession under Professional Standards legislation. In turn this means a public liability scheme works alongside PI insurance. The hero in financial planning should be the individual financial planner and what they do for the client. Everyone else is the support crew, not the ticket to trade.
Top quality licensees (Advice Groups in my terms) will be better off from this change. Advisers will want support (particularly in transition) to their individual obligations. If you’re offering quality, scalable services to support their practice and offer to client why would they leave. Change should be about a clear long term purpose and vision and then working through all the roadblocks and challenges vs. starting with them and just tinkering with a broken status quo.
Who knows, maybe the case for tax deductibility improves with this change.
5. David Lunn, Lifestyle Wealth Partners in Dee Why, NSW
The most cogent and accurate summary of the god awful mess of legislation and regulation ever thrust upon the populace in the history of Australian legislation (“Dismantling reforms may be the only option,” April 30).
All the issues 100% accurate, especially the paucity of benefit for clients, the fact vertical integration is still legal and massive cost to advice businesses.
Unfortunately the conclusions are also accurate. Nothing will be done and it will get worse. Buckle up.
The one key point not directly referred to is the hypocrisy of the legislation being to ‘benefit consumers’ at the lower end of the wealth scales.
Well, we’ve sacked all but our wealthiest clients as we can’t afford to service the poorer ones. It was heart wrenching. These are lovely people who genuinely need help. We can bear the financial risk to some degree although we couldn’t subsidise any more but we really can’t take the regulatory risk.
This is the greatest travesty against regular Australians that have been perpetrated by a series of governments.
Who is going to help these people? By the sounds of it a decent review is at least 5 years away. This will be devastating for some as they’ll get advice too late.
For the benefit of consumers… Pah
6. Brett Schatto, Pride Advice in Sydney, NSW
Paul, a very timely article and I agree with you (‘Time to rethink the ongoing fee model”, March 7, 2020).
Is it in a client’s best interest to allocate them into one of 3 or 4 pre-designed service packages on offer by a practice? Or is it in the practice’s best interest to provide what could be seen as a cookie cutter piece of ongoing servicing, back ended to justify ongoing fees charged?
The old “we’re here to help you with Centrelink if the need arises” where a retiree couple has over $2m in assets is simply a bad look. Or how about the “we will assist with any insurance claim that may arise” but the clients are in their 70’s with no cover for at least 5 years? Even worse is if they have been a client of yours during that time and you know they don’t have insurance. I see examples of this time and time again where the services offered to a client for a particular subscription don’t reflect their personal goals, objectives or needs. I understand the need for an ongoing relationship and to meet at least annually.
Continuity of advice is an important and efficient piece of any ongoing relationship. This allows the planner and client to map out and design goals and strategies over periods of time but other than a potential rebalance (getting lesser with SMA’s etc), top-up of cash and a chat why does a client need to pay a large fixed fee to include ongoing services not reasonably expected to be needed?
For me it comes down to hours spent on each client for services used over the year. The only fixed cost should be the annual review and all other services agreed to in advance and delivered throughout the year. As a clients circumstances change, even their desire to take back some of the work you have typically provided to save them money (to do it themselves) our engagement with clients needs to be adaptable.
Through this article you are starting a discussion which is great. Time will tell whether the “one size fits all” ongoing service packages survive or the modularised “as the need arises” will be the new norm. My belief it will be the latter.
7. Kym Bailey, JB Were in Sydney, NSW
Thanks Colin – using thought leadership to ignite debate, this is an important matter (“Superannuation: The end of indifference?“, March 26).
SG needs a massive overhaul to bring it into the 21st century. It is dogged by its industrial relations origins that are a mess by themselves without trying to add super to them. “Only 30-years old” seem old for legislation that is such an important component of remuneration. It has failed to move with the times and, if anything, has increased its complexity. (It is however the cornerstone of the compulsory super system so we need to be careful that the baby is out of the tub when the water is thrown out.)
We are only just on the verge of the baby boomer retirement impact and, even though they were the 1st generation to have any super coverage en masse, they are able to provide us with data on the impact of private retirement funding on the public purse. It is a few generations down from the boomers that will enjoy a full working life of at least 9.5 per cent pa super (remember SG started at 2 per cent and crept up), so it will only be then that the beauty of this system will be fully realised.
So, let’s stop expanding the purpose of super, get FHSS out, consider the appropriateness of the compassionate grounds early release for unemployed individuals (it may remain relevant for terminally ill and the like but allowing super to be used for financial hardship before retirement just moves the financial burden to retirement). Why it was extended to CV-19 I’ll never understand. There is certainly enough alternatives sources available?
Most under 30 year olds would prefer the 9.5 per cent in cash (less tax) however, the compulsory nature of the system ensures this isn’t an option and even 30 year olds eventually reach 67.
8. William Pintainho, Aware Financial Services in Carlton, NSW
As an adviser and owner in one of these timeshares, it surprises me that this sector has been able to carve out such a favourable set of rules for themselves which clearly is not “in the clients best interests” (“ASIC moves to separate time-shares from advice“, March 2).
This was always going to be a ticking time bomb, for a sector which is so far away from community expectations, that as more people were foolishly coerced into joining, the number of complaints would naturally increase until someone with enough understanding of all issues – from both the corporate and consumer sides find the right balance to make this “sustainable”.
In it’s current form, it will fail but the shareholders will “milk it” as long as they can until that day because that’s all they really care about.
9. Jeremy Wright, Business Funding and Planning, Sydney, NSW
Jane Hume succinctly points out, “Because the way FASEA has been constituted, it hasn’t been allowed to keep up because it needs a change to the Corporations Act, to adapt”.
This is a fundamental flaw with what occurs continually in Australia today.
We have two institutions that work at a snails pace (government and the legal industry) and who use complex, legal wording to enact laws and regulations, then use the excuse that the laws and regulations do not allow changes quickly or efficiently to remedy faulty or inefficient government processes.
In the meantime, entire sections of the Business world and economy are collapsing under the weight of inertia, brought on by uncertainty around legal obligations.
Best interests duty should apply to everyone that works in the public service and in the legal world, though they would recoil in horror at the thought.
The government, the regulators and it seems every man and his dog has had a crack at interpreting what is a simple concept and should have a simple set of rules. Yet what we have is a legal minefield, set up by lawyers, that is like a cancer slowly destroying our economic ability to progress.
I have said this many times, if you want clear, concise laws and regulations, the last group that should be called on to do this are lawyers. While our economic position worsens, we continue on like Groundhog Day.
The wasted time, effort and cost, just trying to enact a simple change to give advisers breathing space, clearly shows the current system does not work efficiently, in a world that moves much quicker than Government can keep up.
10. Jeremy Wright, Business Funding and Planning, Sydney, NSW
What is the definition of a healthier, more robust Industry?
Is it much fewer advisers, providing advice to only 10 percent of the Australian population? If so, then those 10 percent will get great advice and pay much higher fees.
A very small, elite Industry can be very profitable, though I thought all the pain and absolute chaos that the Industry has been through, was supposed to end with, as the Government continually told everyone,
more affordable advice for more Australians.
What we have today is the exact opposite and where we are heading, is towards a much smaller, elitist Industry that will exclude the remaining 90 percent of Australians who desperately need advice.
I can only hope, that in a few years, the Government, all the self-interest lobbyists and Regulators who have pushed too far, will have the decency to reflect on what they have done.