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The Royal Commission into the financial services industry has once again dragged the financial planning profession through the mud and exposed the unethical and unprofessional behaviour that still exists within the industry.
I thought with the introduction of the ‘Future of Financial Advice Reforms’ (2013), where commissions were banned and educational standards lifted, that we would finally move away from a product driven sales model to a Financial Advice Profession, highly regarded by consumers.
The Royal Commission’s findings prove that as an industry we have some way to go before we can be regarded in the same light as trusted professions like teachers, doctors and accountants. In a Roy Morgan Survey in 2017 only 25% of respondents rated Financial Planners as ‘very high’ or ‘high’ for their ethics and honesty, only marginally above TV Reporters and Politicians. I wonder how this would look if the same survey was taken now?
Yes, there have been multiple instances of poor advice from Financial Advisers who were clearly not adequately educated or experienced to give advice. But the problem is more systemic than that. It is the vertically integrated model, where a financial institution creates the financial products and employs (and incentivises) their financial advisers to distribute the products, where conflicted advice has been most prevalent.
Even before the commencement of the Royal Commission, ASIC found that although 79% of the ‘Approved Products Lists’ for the major banks and AMP were external products, that 68% of client’s money was invested in ‘in-house’ products. Can we be confident that this is ‘Independent’ Advice? Not when ASIC found that in 75% of the advice files reviewed, the advisers did not comply with the duty to act in the best interests of their clients. It also found in 10% of cases the advice was likely to leave the customer in a “significantly worse financial position”.
Unfortunately the bad press over the past few months tarnishes the whole Financial Planning industry with the same brush. The disappointing thing about all this is that many people who need financial advice may not seek it because they have no confidence or trust that they will receive advice that will be in their best interests. Alarmingly, only 15% of Australians have sought advice from a Financial Planner.
However, the fact is there are high quality advisers who are not only independently owned but also independently licensed. These financial planners have no affiliations with product manufactures and their primary motivation is to act in the clients’ best interest to help them achieve their short, medium and long term financial objectives.
At Hewison Private Wealth we are proudly Independent and have long called for the elimination of commissions, separation of financial product manufacturing and advice, and the raising of educational standards (Hewison Private Wealth Advisers have a degree qualification, Certified Financial Planner designation and minimum five years’ experience working with a Senior Adviser).
If you know someone who would benefit from speaking to a financial planner who has their best interests at heart – an adviser who is entirely unbiased, highly educated and with ten or more years’ experience please get in touch.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email firstname.lastname@example.org or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.