The image of financial planners has taken a battering for years at the hands of institutions seeking to sell product under the guise of advice. It began in 1988 when the Government stopped individually licensing advisers and allowed company licensees to authorise them instead. By comparison, public practice accountants and auditors are still licensed individually to this day.
As problems with advice from conflicted interests began emerging, successive governments added a greater compliance burden for Australian Financial Services Licensees. While this raised the cost of advice for the public (not just the transgressors), it didn’t improve the outcomes. The Royal Commission should shed light on why it didn’t.
Some professionals are respected by default – the family doctor, for example. Professionals generally don’t have to win our trust because that trust is implied by their professional history. We give our trust until an individual practitioner doesn’t measure up, then we usually question whether our continued trust is well placed.
When we visit the doctor, we expect they’ll recommend a treatment plan that is best for our wellbeing, ensuring we make the best recovery. We don’t expect the doctor will only recommend certain manufacturers’ drugs, or medical organisations’ facilities. We expect our health won’t be compromised by doctors being driven by their own remuneration.
Imagine a world where Government regulation allowed pharmaceutical companies to own medical practices offering health solutions predominantly using their own product without adequate policing. Treatment plans consequently become skewed to their own products. Despite all this, a few medical practitioners in this imaginary world do steadfastly practice in the old ethical ways where the clients’ interests always come first.
But could you discern the difference? How can such impartial and professional advice be distinguished from the sullied advice that had so tarnished their sector’s role by poor policy and regulation?
The financial advice community finds itself in this situation right now. It is difficult for most people to tell whether they’re receiving genuine, independent advice. The core measure for all financial planners should simply be whatever improves a client’s financial welfare. If not, they cannot be called financial planners. Meanwhile, until real advice is distinguished from product-selling by legislation or self-regulation, how can you confidently accept undistinguished advice?
While many advisers are well qualified, personable and caring people, they’re not all able to give the advice they might wish – possibly due to the imposed obligations of their Licensee. To prove they are truly impartial, ask them to confirm in writing that they give ‘independent investment advice’. It is illegal to say this unless it is true. Being ‘independently minded’, ‘independently owned’ or any similar phrase is not the same thing at all.
While it is unfortunately rare, impartial, professional financial advice has been available in Australia for many years. Though some providers may use similar (often misleading) terms implying independence, ‘independent investment advice’ can only be used if it is true. Try Googling it. If your financial adviser cannot confirm in writing that they give independent investment advice, then they don’t. Does this matter to you enough to find out?
We believe in a higher standard of financial advice, free from product bias and conflicts of interest.
Disclaimer: All information in this article is intended to be general in nature for discussion purposes only. So you should not rely on it and seek personalised professional advice before making any decision.