Hi All,
I must apologise strongly for the lack of posts since we first launched our blog, all my good intentions went by the wayside with too much time spent on the business and clients (terrible I know) and work on the Manningham Business Network (www.mbiznetwork.org.au) and their blog, where I am the President. But rest assured I will now be doing my best to add some meaningful content and discussion in the next few months, even if we do plan to emulate most of the business community and shut the office doors for a period over the Christmas season.
The financial planning industry has seen a lot of media coverage recently over the various Governmental reviews of one type or another, and if you have paid as close attention as we have to the ongoing commentary, you would be forgiven for being confused over what is the truth about fees, commissions, conflicts of interest, client best interest, independence and all the like.
On the one hand you have the ever vocal Industry Super Funds, who provide a valuable service of low cost, simple super funds and some basic advice, but who seem to have chosen the financial planning industry as a whole as their nemsis. On the opposite side of the spectrum sits the Retail product providers, who come in a very broad range of shapes and sizes, but who essentially provide the bulk of ‘option’ driven products, giving a massive level of custom tailoring and professional management, but at a noticeably higher cost. These funds are typically those favoured by financial planners due to their ability to work and control the products on behalf of clients, and also, intrinsic to the debate, can pay the planner via the super fund itself, whether as a fee or a commission.
As the poor cousin to this debate sits the Self Managed Super Fund (SMSF) sector, where individuals, typically just family members due to some legal restrictions, setup and run their super funds themselves. I say poor cousin but the SMSF sector has recently become the largest part of the industry, with greater assets, greater growth and generally better performance than the rest of the industry. But by its very nature, there are little in the way of powerful vested interests representing this area, so they struggle to get the same sort of representation as the bigger operations.
So in the wake of the Global Financial Crisis (GFC), which I am sure we are all tired of hearing about but unfortunately will still dominate our lives for many years to come despite Australia’s fortunate survival to date, we face the search of blame. Unfortunately some of the blatant and gross behaviour allowed in markets during the boom time, and their subsequent high profile unravelling, has left many hurt and scarred and searching for a scape goat. At the moment the Financial Planning Industry seems a good candidate, at least from the media perspective.
However dont let my tone deceive you into thinking that I dont believe a lot of the cries of outrage dont have merit, because many do, and some times to grow and move forward you need a cleansing of the muck and mud, something I believe the Financial Planning Industry needs. But we wont be getting this cleansing from the Government, to think you might regulate out the problem, is pure fantasy. No one is more adaptable to change and ready to make a profit anyway they can than Australia’s big finance corporates, I am not casting dispertions, just stating reality.
Banks and the like have invested billions in the Financial Planning Industry and continue to do so daily. They know that whatever comes, they will keep on kicking and do quite well from it. The questions in the general public (if they are really there and not just within the media and the industry itself only) on commissions, methods of payment and independence of planners will not really be answered by the government and outsider commentry, but I believe the industry itself and customers. This will be the true driver for change, because if it is not, we will only ever be making the appearance of changing and go nowhere.
But the system isn’t broken, no need to wreck the car and head to the sales yard for a replacement, a good solid tune-up will work wonders.
More on this and the rest of the markets soon.
Stephen