Sometimes it takes a fresh set of eyes to put long-running events into a manageable perspective. Bill Bachrach, the renowned consultant based in the US but a regular visitor to Australia, has some sage advice for financial planners who have suffered through the five-year Future of Financial Advice reform process.
As Bill Bachrach sits down to talk to Professional Planner at the Sofitel Wentworth hotel in Sydney, as if on cue images of former Assistant Treasurer Arthur Sinodinos flash up on Sky News on the TV screens in the room.
Professional Planner describes the events of the previous day – how Sinodinos resigned his is post after being dragged into the orbit of an Independent Commission Against Corruption (ICAC) inquiry; how this happened the day before legislation giving effect to the government’s proposed amendments to the Future of Financial Advice (FoFA) legislation entered the parliament; and how this just seems completely in keeping for legislative reforms that have been five long, tortuous years in the making.
How, Professional Planner wonders, are financial planners supposed to keep focused on the really important things – like giving great, professional advice to as many people as possible, and running efficient, profitable businesses – while all of this is going on?
Bachrach laughs.
Shocking – not
“The first thing I would say is: switch off the television,” he says.
“These things are very, very common. They happen all the time. Shocking: you’ve got a politician involved in some kind of a scandal. Shocking: you’ve got politicians who probably do not have the intimate knowledge of the financial services industry – the real mechanics of what it’s like to help Australians achieve their financial goals.
“So paying attention to all that is the first problem. I may sound facetious, but I’m not. Switch it off.”
Step away from the noise
Bachrach says stepping away from noise is essential to staying focused on what the client needs. And in any case, FoFA should not have a material impact on a good financial planning business.
“Whatever the regulations are for FoFA, primarily that’s an administrative function for the head administrative person on your team,” he says.
“What hasn’t changed, regardless of FoFA, is what you need to do to take care of your clients.
“There may be some technical thing you need to do with FoFA, maybe the paperwork has changed or the disclosure has changed. One of the comments I made last year when FoFA had even more teeth and we didn’t know Julia [Gillard] was going to go and Tony [Abbott] was going to come in and kind of gut FoFA, was that your standard isn’t FoFA-standard anyway.
“FoFA is what the politicians have put in place to try to protect Australians from unscrupulous financial advisers. I made the comment from the stage: what would your value proposition be if FoFA was your guide? ‘You’ll be happy to know that we operate at the minimum standard required by the government.’ It’s ridiculous.
Higher standards
“Your value promise and your standards are so much higher than FoFA would require anyway. The standard should be set at what you need to do to help clients succeed. FoFA requires some paperwork of some documentation of disclosure.
“Yeah, it’s a hassle. But it’s more of a hassle for someone on your administrative team. Advisers need to be focused on where they should always be focused, which is taking care of the client.”
Bachrach says a focus on the big picture is how the best financial planners develop habits, structures and ways of working that protect them from the volatility of legislative changes, changes of ministerial portfolios, economic swings and roundabouts and market gyrations.
“Financial advisers who went into the GFC with a higher ability to succeed or thrive during the GFC had better habits,” he says.
“They didn’t react to the GFC; they were already doing things before the GFC that put them in a position to be stronger when it hit.”
Using a cycling analogy, Bachrach says “you go ride hills to get strong”.
“You don’t hope no hills come up in the ride and then you go ‘Damn!’ if they do and you struggle to get up them or walk your bike up the hill,” he says.
Daily habits
“These are your daily habits, and these habits are pretty much the same if the markets are bad or if the markets are good or if the market is flat. It’s like nutritional habits. Generally eat well and exercise – you do that all the time.”
As the Sky News coverage of Arthur Sinodinos wraps up on the TV in the background, Professional Planner asks Bachrach if financial planners do feel the need to watch television from time to time, what should they watch?
“I think that’s one of the challenges,” Bachrach says.
“I think a lot of financial planners think, ‘Oh, I have to know what’s going on in Canberra’. Do you really? ‘I have to know what Tony Abbott is saying about…whatever tony Abbott is talking about’. Do you really?
“If you’re going to watch a little television, watch ‘Breaking Bad’ – watch something that really relaxes you.”
WOW, is this the same guy who was telling financial planners they are not professional unless they engage a financial planner, just last week? Sage advice indeed Bill, just more ‘noise’? Not this time, thanks for your support. (no really, thanks!)