Worse than expected

[James Millar]

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Some more interesting data published by ASIC yesterday pertaining to the financial advice industry around investment planning. I thought this stat was of most concern….

…”The review also found there was a massive disconnect between the trust or level of comfort consumers felt with their advisers and the quality of advice received. The review found that while 86 per cent of consumers rated their advice as good quality, ASIC found that just 3 per cent of that advice was actually of good quality.” The SMH 15/10/19 https://www.smh.com.au/business/banking-and-finance/a-warning-on-warnings-asic-to-crack-down-on-financial-products-20191014-p530ee.html

I’m not entirely sure what ASICs measure of “good quality advice” is but its likely to be relatively robust, methodical, compliant and trustworthy as compared to data provided by the industry. If the data in anywhere near right and only 3% of financial advice is decent quality then I would say the financial planning industry has a big problem on its hands.

Equally interesting is the disconnect of the perceived standard of advice from the consumer end. 86% thought the advice they were paying for was of good quality.

This all tells me that the average Joe is vastly under equipped to evaluate financial advisory solutions. You don’t know what you don’t know.

Does the same disconnect occur in evaluating accountants and tax advisors? Probably but my hope is the gap is not quite so large. It would be interesting if the ATO reviewed tax agents to evaluate the quality of their advice as compared to the perceived quality. My guess is there would be some surprises for sure.

How do you figure out who to trust in business?

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900

[RunicConvenience]

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honestly I find most *financial advisors* are just shovel sellers giving hope at a fee. I have little trust in them as shown in the studies monkeys are better “investors” than humans overall as we let emotions panic us.

when at the end of the day investments should always be long term you don’t sell when everyone is *dooming and glooming* that is normally all the emotional investors and most financial advisors pray on those emotional investors with schemes and unrealistic returns.

[bb1]

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JamesMillar, post: 267480, member: 5318 wrote:

How do you figure out who to trust in business?

That is a question that if you could provide the answer all business’s would be far better off.

Just to use the accountant / Book keepers as an example, from what I have seen talking to various clients, it’s not till you go to someone else that you really find out that you previous person was good or bad. And then you really only go based on what the newbie is telling you, yet they could be the ones doing the dodgy job, whereas the previous one was great.

It comes back to the thing I have often said on here, we shouldnt have to be an accounting, SEO, Legal guru to pick the right professional. But the more I see of it, yes you do have to know a lot to find the right person.

And in reality financial advisers like others really only recommend products / strategies which result in a bigger kick back for themselves. A bit like all the accountants recommending xero, why, because they get the best kickback/benefit from them.

If I recall right for some franchises / professional organisations you only need to do one days training to call yourself a financial adviser or put some fancy letters behind your name.

[Paul – FS Concierge]

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One simple way of determining if financial advice is good advice s to compare the outcomes vs index tracking ETF’s.

It wouldn’t show the whole picture but it would be a good starting point.

[James Millar]

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Interestingly Paul – if you asked most financial planners now (post RC) whether it was their job to achieve a higher rate of return than you could otherwise get yourself the answer would generally be no or a version of no. Fact is that very few outperform the market on regular repeated basis. There are so many variables it would be a bold claim for someone to say they were going to do better than you could do yourself. Now that the data is out most of them are not bold / stupid enough to claim they can achieve superior financial returns.

So the question is – if an investment wealth planner is not hired to outperform the market then what are they hired for? There are all sorts of answers I have heard but it largely boils down to admin. Many of these firms are effectively just administering your finances at a pretty hefty costs. Parking your money, send you a few reports and collecting 1% per annum of your portfolio in fees. Some of the new fintech coming out is making that admin function pretty redundant – so where is their place?

There are certainly people that have a low financial literacy and have wealth that needs to be managed by someone. There are also some very switched on investment advisors who could probably achieve better investment outcomes and are worth their salt. But generally, I find the solutions are sub standard and not worth paying for. My biggest measure is when a client walks in and tells me their are paying $10000 per annum to a financial planner – but they have absolutely no understanding of the retirement plan they have paid for. As far as I’m concerned if the client doesn’t understand the plan, timeframes and the numbers then the adviser has failed in their job.

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900

[steve201]

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As somebody whom is in the financial services industry, I can fully relate to the current issues post royal commission.

To summarise the major issues,
1- poor Approved product lists or APLs of licensors which are chock full of products that don’t pass muster for current customers
2- Education of new advisors is so regulatory and impractical for customers to get their heads around never mind the planning community.
3- the dumping of experienced advisor numbers enmasse because they must be relearning via a new formal course costing thousands at a time of life when they themselves need retirement advice, but because the industry is disfunctional these people are now abandoned. Why is professional development for a minimum of 40 hours a year considered absolutely wrong by them?
4 – a variety of financial literacy and financial skills sets.
5- the massive opportunities for digital disruption in what’s left of this industry.

In my experience of 23 years as an accountant I can confirm many basic and everyday issues can be easily solved over an inexpensive and friendly cup of coffee …or your choice of beverage.

Many collegues feel there is a need to charge hundreds or thousands of dollars just to enable them to have a ‘ corporate’ or flashy image , office , car , phone, and other toys. When the reality is it’s the clients whom are suffering for what one might be able to argue as being , “ fluffy”.

For example, I met with country based cafe which is culturally themed from Greece last Friday , in west Gippsland in Victoria. They were needing someone to talk too about their business position and performance because they are in the process of expansion with all the construction workers going up and back from Melbourne.

I did not charge for my time that day because the value I will be providing them via my business is still to be fully created as an accountant. In return for my approach, I was the greatful recipient of a fresh prepared bowl of country style , Greek Donuts.

I made their day…. and they certainly made mine.

Steve

[James Millar]

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steve201, post: 267517, member: 13649 wrote:

As somebody whom is in the financial services industry, I can fully relate to the current issues post royal commission.

To summarise the major issues,
1- poor Approved product lists or APLs of licensors which are chock full of products that don’t pass muster for current customers
2- Education of new advisors is so regulatory and impractical for customers to get their heads around never mind the planning community.
3- the dumping of experienced advisor numbers enmasse because they must be relearning via a new formal course costing thousands at a time of life when they themselves need retirement advice, but because the industry is disfunctional these people are now abandoned. Why is professional development for a minimum of 40 hours a year considered absolutely wrong by them?
4 – a variety of financial literacy and financial skills sets.
5- the massive opportunities for digital disruption in what’s left of this industry.

In my experience of 23 years as an accountant I can confirm many basic and everyday issues can be easily solved over an inexpensive and friendly cup of coffee …or your choice of beverage.

Many collegues feel there is a need to charge hundreds or thousands of dollars just to enable them to have a ‘ corporate’ or flashy image , office , car , phone, and other toys. When the reality is it’s the clients whom are suffering for what one might be able to argue as being , “ fluffy”.

For example, I met with country based cafe which is culturally themed from Greece last Friday , in west Gippsland in Victoria. They were needing someone to talk too about their business position and performance because they are in the process of expansion with all the construction workers going up and back from Melbourne.

I did not charge for my time that day because the value I will be providing them via my business is still to be fully created as an accountant. In return for my approach, I was the greatful recipient of a fresh prepared bowl of country style , Greek Donuts.

I made their day…. and they certainly made mine.

Steve

Good points Steve but I think its important to distinguish between financial planning services and business accounting and tax services. There are sub standard operators in both sectors but I think the financial planning sector well and truly eclipses the accounting and tax advisory market in terms of unethical conduct. Accountants don’t originate from a model and culture of sales and commissions whereas the financial planning industry does (the origins coming from insurance sales). The professional education requirements are also vastly different with financial planners being able to get operational with a few weeks / months whereas professional accountants have always needed degree qualification and generally post grade qualification with one of the major accounting associations (CPA CA).

There are SOME business accounting and tax issues that can be solved quickly (many we answer here) but there are MANY more that require careful consideration of a range of factors that really cannot be answered on the spot. I tell any graduate accountant fresh out of uni that in the real world that we operate in, if you scored of 95% on a client project then that is still a fail as far as we are concerned. There is only one acceptable standard and that is 100% correct at all times OR do not send it out the door. If there is any doubt we do not provide an answer (hence we often don’t answer on the spot).

Certainly when it comes to financial planning you can’t really answer anything on the spot because financial advice needs to go via the strict compliance process, Statement of Advice, PDS etc.

Demonstrating value is a great way of building trust and credibility but I find you need to pick your targets very carefully or it can be a time burner with no pay day.

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900

[bb1]

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steve201, post: 267517, member: 13649 wrote:

As somebody whom is in the financial services industry, I can fully relate to the current issues post royal commission.

To summarise the major issues,
1- poor Approved product lists or APLs of licensors which are chock full of products that don’t pass muster for current customers
2- Education of new advisors is so regulatory and impractical for customers to get their heads around never mind the planning community.
3- the dumping of experienced advisor numbers enmasse because they must be relearning via a new formal course costing thousands at a time of life when they themselves need retirement advice, but because the industry is disfunctional these people are now abandoned. Why is professional development for a minimum of 40 hours a year considered absolutely wrong by them?
4 – a variety of financial literacy and financial skills sets.
5- the massive opportunities for digital disruption in what’s left of this industry.

In my experience of 23 years as an accountant I can confirm many basic and everyday issues can be easily solved over an inexpensive and friendly cup of coffee …or your choice of beverage.

Many collegues feel there is a need to charge hundreds or thousands of dollars just to enable them to have a ‘ corporate’ or flashy image , office , car , phone, and other toys. When the reality is it’s the clients whom are suffering for what one might be able to argue as being , “ fluffy”.

For example, I met with country based cafe which is culturally themed from Greece last Friday , in west Gippsland in Victoria. They were needing someone to talk too about their business position and performance because they are in the process of expansion with all the construction workers going up and back from Melbourne.

I did not charge for my time that day because the value I will be providing them via my business is still to be fully created as an accountant. In return for my approach, I was the greatful recipient of a fresh prepared bowl of country style , Greek Donuts.

I made their day…. and they certainly made mine.

Steve

My take away from this is forget all the issues the royal commission highlighted, if our adviser provides us with a cup of coffee (or beverage of choice), they must be trust worthy, skilled and understand what they are doing and thinking of our best interests, not just where they can scam the biggest commission.

Its attitudes like that which convinces me the financial sector haven’t learnt anything.

[Author]

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