Veteran financial planning consultant Jim Stackpool has launched a spirited campaign to educate the public about the benefits of seeking advice from non-conflicted, independent financial planners, and to introduce a new certification standard for financial planning firms that measure up to certain criteria. The following is an edited transcript of a speech given by Stackpool at the launch of his new book, Seeking Certainty.
I believe that too many Australians are needlessly enduring financial uncertainty and, worse, they are unaware of what it’s potentially costing them, today and longer-term.
A couple of years ago the Australian Securities and Investment Commission (ASIC) produced the Financial Literacy and Behavioural Change report, which confirms that only a minority of Australians – 18 per cent – seek the services of a financial adviser.
And it’s gotten worse. Late last year in Goldman Sachs Asset Management’s 2013 Australian Retail Investor Survey of 600 investors only 10 per cent relied on the advice of an adviser when making investment decisions.
It’s been 30 years since the floating of the Australian dollar which caused an explosion of trading and investment deals and it’s been 20 years since the introduction of compulsory superannuation which forces every Australian wage earner to save for retirement.
Yet here we are with a dwindling number of Australians trusting the financial advice from today’s advisory industry.
Inherent conflict
ASIC said in September last year that it perceives an “inherent conflict” in most wealth businesses owned by institutions (such as banks and insurance groups).
In an exploding area of savings, Australians have established 520,000 self-managed super funds with assets of $531 billion. They face an increasingly daunting task of staying vigilant, on top of properly self-managing the means to achieve their financial dreams.
Seeking Certainty doesn’t suggest that readers should shun the products from the financial giants. Rather it proposes a better understanding of the place they fit.
The GFC was the trust-breaking point for financial advice around the world. Consumers have had enough of the self-interested individuals, groups, banks, insurance groups and others who sell financial products dressed up as financial advice.
So, the first thing that motivated me to write this book was to increase the trust, confidence and feelings of financial certainty when everyday Australians seek financial advice. Whilst it won’t happen overnight, I believe Australians are ready for an alternative.
A growing alternative
The second reason is that I want more people to know there is a small but growing alternative.
These are advisory houses and firms being created by advisers who believe in a very different future for financial advice. It’s from these firms that I’ve learnt the stuff that I’ve written about in Seeking Certainty.
When your main job is to just visit lots of great advice firms, listen to aspirations, understand how they operate, you have had plenty of material to write about. I haven’t made up any of the stuff in Seeking Certainty. It tries to capture some of the essence of these innovative advice firms. These are firms that focus on the good of the general public first, the good of their clients second and their clients’ money a long third. They stick to the simple stuff.
They don’t forget, try to hide or take for granted why their clients are paying them. They build strong professional relationships.
They understand that managing their clients financial attitudes, behaviours, habits, complexities and issues is core to them achieving their real life outcomes, not just giving them today’s best investments, tax, structural or mortgage advice.
And they never do anything to compromise the trust placed in them.
These are advisory firms that know they can’t, and don’t want to, repeat the careers of those that went before them who were too often propped up by commissions from products or by subsidies from aligned service providers.
New-world advice
The new-world advisers realise that the tsunami that has swamped the media, music, retail and phone industries is headed to the old world of financial products and they have long headed to the higher ground above the forces that drive most of today’s product, markets, and legislative marketplaces.
They shake their heads in disbelief as to why our Assistant Treasurer Arthur Sinodinos has drafted new legislation to the previous government’s Future of Financial Advice laws – enacted just last year – that reduce “best interests” obligations for advisers to making only “reasonable inquiries” rather than having to “take any other step that, at the time the advice is provided, would reasonably be regarded as being in the best interests of the client”.
The current government is cutting more than red tape in its pursuit of efficiency and protection of old-world status quo.
The third reason for writing Seeking Certainty is a more selfish one. I want to remove the financial uncertainty from the lives of Australians and I want to do it as fast as possible.
But Seeking Certainty is more than a book.
In some ways it’s a white paper on the state of the current advice marketplace and hopefully the forerunner of future books and white papers published by a growing number of advisers which will all help to pave more financial certainty and paths forward for more Australians.
A new standard
It’s also a website, which will aim to provide updated tools and videos from the book. The site will also aim to engage in an on-going conversation with readers and promote conversations between readers and advisory firms that hold similar beliefs about the future of financial advice. It’s important to note that the website will list financial advisers not because they’ve made a financial payment but simply because they can demonstrate alignment to certification standards that will be part of a new certification mark.
Seeking Certainty is also a community of like-minded Australian advisers committed to grow and share better practices to provide greater impact, greater transparency and greater certainty for the clients they serve. Throughout 2014 this community will launch its beliefs, one small audience at a time, with their own network of clients, alliances, and partners.
So, this evening hopes to start more conversations, more commitments; to grow the trust between everyday Australians and the new emerging advice profession; to increase awareness of growing breed of advisory firms that are shunning the old-world conflicted tactics of delivering financial advice; and to accelerate the removal of the chronic financial uncertainty too many everyday Australians are unnecessarily experiencing.
Vertical integration by major instos to get a bigger share of the pie and a history of insurance style commission driven remuneration of product spruikers has shaped the advice industry. The customer has never figured in the business plans of most firms.
While the consumer has been empowered by the Internet in virtually every category of consumption, the financial advice industry continues to mistakenly believe it can control its own destiny. The Cloud will soon make even the largest players redundant. Change is coming Simon. And soon.