Money Matters Monday 30th April 2018
Most Financial Planners Provide Valuable Advice
The Banking Royal Commission has uncovered alarming cases of bad behaviour by bankers and financial planners. There is no excuse for the poor quality advice, especially where clients have suffered serious losses. Those responsible should be punished with the full force of the law.
Poor behaviour by some of the big institutions
It is surprising and disappointing that large, respected financial institutions like the four major banks and AMP are guilty of such poor behaviour prioritising their own interests.
Blame rests with both the advisers and their managers. In any bin of apples there will be a few bad ones. In any occupation group there will be a few rogues focused on benefits for themselves not their clients. Those people must be weeded out.
However, the management at Commonwealth Bank, ANZ, Westpac, NAB and AMP are primarily to blame. They hire and fire the advisers, they set the rules for advisers, they compile the Approved Product Lists financial planners must work from, and they design the pay and incentive structures.
Most financial planners provide sound advice that will improve clients’ financial positions. Advisers provide most benefit to their clients with strategy advice, recommendations of how the client can best use the rules to advantage in their individual circumstances.
Many good advisers work for the big banks and AMP. Some bank clients prefer a bank adviser and feel safer with bank owned products.
ASIC says around three quarters of clients are recommended financial products associated with the adviser’s firm. While disappointing, that doesn’t make the advice bad. The strategic advice is usually the most valuable.
Find an independent advisor who can offer more range
It is best to deal with an adviser who doesn’t recommend in-house products. However, many products are reasonably similar. For example, wrap accounts vary a little in fees and investment options but other aspects are similar.
Most offer a range of investments to suit most clients’ needs. It can be argued that the wrap accounts the big banks own and promote are simply administration services, not financial products, and it doesn’t make a big difference which one clients use.
Word of mouth is a good way to source a competent advisor
Clients should seek advisers who are long established, well experienced, and have no in-house products to recommend. Clients can check by asking who the parent company of the advisory firm is and who the owner of the products recommended is.
Advisers who own their advice practices are more likely to be around long term. Most financial planners give the first interview free, so each can get to know the other. Clients should take the offer up to see if they feel comfortable with the adviser.
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