Reflecting on the news that SFG Australia shareholders had voted to approve the takeover bid from IOOF, Goodman Private Wealth Advisers chief executive Brad Church said he has taken a stand against businesses becoming aligned with financial product institutions, saying it will compromise advice.
“This may be a profitable decision for those owners who sell out, but as ASIC has highlighted, it affects the quality of advice being provided to consumers,” Mr Church said.
“I challenge all the financial planning professionals in this country to take the high road, step out from under the financial product institutions, and be privately owned.
“It’s time to take a stand. ASIC raised their concern about product-owned advisers back in 2009 and since then the financial services industry has continued to consolidate.”
Mr Church said his comments follow the sale of financial planning groups, in large numbers, to financial product institutions, pointing to the SFG-IOOF deal specifically.
He also said advisers who work directly or indirectly for a financial product institution will inevitability recommend a financial product that belongs to their parent institution.
“At that point you have to ask the question, whose side is the adviser on? Are they adviser to the client or the salesperson for the institution?” Mr Church said.
“Let’s not compromise the advice we give by having an institutional owner influence what we recommend to our clients.”
If an Adviser operates as an employee in a vertically integrated business, they work under direction.
If a group APL is structured in a way to favour an inhouse product set and you are an employee and you feel compromised, leave.
If you’re a self employed adviser, there are many business model choices available.
If you work in a vertically integrated group structure, again you don’t control every facet of ‘your’ business, so if that lack of control conflicts with your business ethics, change dealers or apply for an AFSL.
If you partner up with an institution, you have to compromise. That’s the nature of the deal.
And just one question for Brad Church.
What is your practices planned exit strategy i.e. Who do you think will buy your book/business and how will that transaction be funded do you think?
Do you think it’s entirely possible that an institutional buyer (equity or debt) will be in the mix?
Financial planning has been operating on the low road since it started.
The high road that Brad suggests is the smartest way for the future of financial advice to be be directed to win back the trust of consumers and gain the trust of future generations.
It’d be nice to think that financial advisers can manage conflicts of interest but history has shown that the industry cannot be trusted to. The culture needs to change. What Brad is suggesting is the best way to change the culture from an industry into a true profession.
To win back the public we need to make some sacrifices. This is one of them.
I think it is disappointing that anyone has to ascribe an element of moral superiority to their business model. To impute that a planner’s source of business capital will universally overwhelm every other ethical and legislative imperative to act in the best interests of the client is simplistic at best and offensive at worst.
To me the high road is to have a flourishing variety of financial planning business models, each proving quality advice to their particular chosen market.
Collaboration between advisers and institutions has funded much of the professional development in financial planning over the last few decades. The institutions are now being vilified by industry super funds and a self righteous few who seem to have forgotten the origins of this industry. What have industry super funds done to develop the industry apart from their cheap shots and advertising to con consumers to go direct ? Who funds the conferences put on by the self righteous advisers ? What will it take to move on from this constant self promotion at others expense ? Good luck to you if you have developed the governance, research and succession arrangements to go it alone. Get on with it like the rest of us and let your clients decide your success.
I couldn’t agree more however, it will never happen. We left an instituion 3 years ago and, despite the business not doing any better, we certainly feel better in not being forced either through moral pressure or finacial reward, to use their products.
The independent market should seize upon the opportunity afforded the CBA screwup and make some noise about the value of true independent financial advice.
With the labor party determined to destroy the financial planning industry by pushing their agenda of Industry Super Funds, the only hope is and unbiased approach to planning which gives the consumer good value independent advice
Ok, but doesn’t best interest policy cover this? One might choose a wrap that the dealer group works with but if it is comparable and not disadvantaging the client to other wraps out there why not? A business model using 20 different wraps is not efficient for administration so if adviser hates dealer group wrap they can move. I myself use non of them – I’m just commenting that I don’t believe advisers are that conflicted unless they work for a bank as an employed adviser – but where do the newbes train themselves?
If all advisers acting as Authorised Reps for adviser groups owned by product manufacturers transfer to independent licensees, “institution owned” distribution simply vanishes. The product manufacturers would have to write off any unamortised acquisition cost and this may be a good lesson for them. Whilst it would be a major logistical exercise as every client would have to request transfer with the adviser in writing, as a “grass roots” initiated protest it would, in my view, engender respect from consumers.