A report written by Macquarie University professor Geoffrey Kingston – and disseminated by think tank the Centre for International Finance and Regulation – argues that baby boomers face a shortfall in professional advice.
“The allocation split between safe-haven and growth assets raises a potential conflict of interest between a client and their adviser,” Professor Kingston wrote.
“Approaching retirement, it stands to reason that an investor should orientate their portfolio towards safe-haven assets.”
The report called for the “next review of financial advice” to examine ways of requiring advisers to “reveal the fragility of financial plans” provided to clients approaching retirement.
“Commissions from product providers should be banned,” he added.
The report predicts that the age 65-plus population will grow to around 23 per cent by 2050 – in addition to a substantial increase in self-funded retirements – reinforcing the need for personalised financial advice.
Peter, your comment is ill informed, inflamatory and gutless. You make an anonymous comment that has no basis and does not contribute in any constructive way to the forum. There are many professionals in our industry who do stategic work, work pro bono for charitable organisations, assist those less fortunate than yourself to get a fair go at centrelink and get guidance into retirement.
Your gutless, and I have the courage and conviction to include my name, and would not hesitate in saying this to your face.
Peter F, how about you come along to the IFA Business Strategy Day that IFA is holding in March.
It will change you view on the ‘industry/profession’. Might even change you view on life a bit…
I’m self funded and feel that Im doing Ok without financial advice. Get into an investment group and learn how to invest. The whole industry is a sap sucking lot of thrips
I just lost 5 minutes of my life I will never get back reading this non-sense…
Advice = greater long-term outcomes for clients vs no advice, in 99% of cases. PERIOD!
Another unqualified academic who does not like paying fees. Ask his retiree audience today if they want to sit in 1% interest accounts losing 2.5% to inflation today and see how happy they are. Just another academic out of touch with the community and it appears in need of being retrenched as he is useless.
[quote]Pre-retirees should be investing in safe-haven assets but are often led astray by advisers backing high-commission products, a university academic has claimed.[/quote]
Is this a serious statement? And its actually published?
In fact, the whole article here starts deluded and by the end of it, I need a good stiff……
[quote name=”Steve A”][quote name=”Matthew Carlsen”]
Finally, it’s all well and good to say retirees need to move to safe-haven investments, but what about Longevity Risk?
30 years of retirement, earning defensive returns, you’ll need a large starting base, or hope Centrelink is still around to care for you in your 80’s and 90’s.[/quote]
No doubt he has a UniSuper defined benefit pension lined up and doesn’t have to worry about making his funds last for 30 years in retirement.[/quote]
Unless Unisuper wind up on Four Corners again for Trustees changing the rules to the disadvantage of members like the last time….
[quote name=”Matthew Carlsen”]
Finally, it’s all well and good to say retirees need to move to safe-haven investments, but what about Longevity Risk?
30 years of retirement, earning defensive returns, you’ll need a large starting base, or hope Centrelink is still around to care for you in your 80’s and 90’s.[/quote]
No doubt he has a UniSuper defined benefit pension lined up and doesn’t have to worry about making his funds last for 30 years in retirement.
This guy must be trying to get a mention in SMH or ABC Radio by joining in their “all financial planners are bad” narrative. And it appears he was willing to compromise the academic reputation of Macquarie Uni to do it. Let’s hope he is appropriately sanctioned.
This is what happens when people with absolutely no idea have an opinion, just like politicians telling us how to provide advice…..
Ladies and Gents, take a deep breath!
A read of the some of the Professor’s papers (being a person I do not know) would indicate he is aware of the banning of commissions from 1/7/13, so perhaps the quote should be read as recommending banning grandfathered commissions. The Professors work suggests that investors face a significant risk from a major market downturn just before or just after retirement, and hence should be more conservative with their asset allocation leading into retirement. I frankly think this is misrepresents the problem – the problem is that investors face the biggest risk at the start of any substantial investment, as opposed to just near retirement. If you are conservative during the period of commencing retirement, when you then invest the funds appropriately (ie as per risk profile or objective), you still face the same risk. The only solution is to start early.
It is right for us to talk about this very real problem.
I’m sorry – but haven’t commissions already been banned?
Professor Kingston re-iterates his mistaken belief that the FPA example SOA is strategically typical of advice offered across the profession. The majority of his suggestions are supported by a document not based on real world strategies, but rather one that would satisfy ASIC as to its level of compliance. he also confuses active management in the funds management industry with recommendations by financial planners. While vertical integration is a problem that needs to be managed better(IMHO), the idea that planners recommend so-called high risk products because the “commissions are higher” is ludicrous.
I haven’t read this report but Professor Kingston, where the heck have you been for the last 5 years? Under a rock?
Can anybody tell me what high commission product I can legally recommend to a client? (That’s right property, I forgot). But apart from that.
It doesn’t stand to reason that a person approaching retirement should only hold ‘safe-haven’ investments. These clients still have up to 20+ years in retirement to fund and Cash and Term deposits don’t cut it. Managed Risk and diversification is what they need to maintain any dignity in their dotage.
Where do these professors come from?
Well this guy is not giving Macquarie University a great name.
He might have a decent job lined up in PR though.
Clearly he’s causing a stir to get his work cited – nothing more. Wouldn’t pay any attention to it. Doubt he’ll get much citations when people realize that he failed to do some basic research before publishing his paper.
[quote name=”tim t”]I feel like my Macquarie Uni Economics degree is now worth about as much as toilet paper.[/quote]
Just proves that a degree is not the answer but more relevant and up to date ongoing training is required!
Is this guy living in the past? I was under the understanding that commissions from investment products are already banned
I feel like my Macquarie Uni Economics degree is now worth about as much as toilet paper.
Interesting article if it was written in 2005. The point raised that advisers earn more if funds are invested in growth assets is not terribly relevant today. 90-95% of funds via advisers are invested via Wraps and the fees earned by advisers are generally the same irrespective of the asset allocation of the underlying portfolio.
Don’t shoot the messenger. IFA was right to publish this – we need to know who our enemies are!
Academic simplicity.
Its not about volatility (what this academic is really talking about), its about the security and constancy of the underlying income streams being generated to sustain living standards in retirement.
Where has Professional Kingston been for the last decade. The Financial Services Industry has been regulated since 2003 and the provision of financial advice process recently became law. The driver of this was transparency to the client. Commissions for wealth product selling became illegal in 2010.
Product selling rather than providing advice according to individual needs and goals is still going on as non-aligned product providers who are not regulated by ASIC sell their own products resulting in lack of choice for the client.
FOFA has gone overboard in its processes but the spirit (now law) that the client comes first is without question the right objective. Most advisers would do that in any case.
The industry has its share of dodgy operators, they will never change and the faster they are detected and ejected from the industry the better.
What an academic nightmare, Professor Kingston has no idea what he is talking about, if this man is a professor then its obvious a University degree is not the answer to financial planning. Safe Haven what is a safe Haven? does it keep up with inflation? does it exceed inflation? does it take into account the clients real needs? Commissions banned? why because the adviser gets paid? or is it simply a perception of being paid for something the adviser should be doing but is not? Professor its obvious the advisers you seek your research from are not financial planners, it obvious the books you read are from the cave man, its obvious you don’t understand that determination, persistence and experience alone are omnipotent, you don’t understand what that is do you not in reality. Universities perhaps need to grasp reality, oh sorry academics don’t know that is. How is your own personal portfolio professor?
I’d be interested to know how large the sample of pre retirees is to draw such a conclusion.
It is after all a report written by an academic and I am suspicious of his conclusions.
Not being a financial planner but retirement incomes product manager from the late 80s to early 90s it was clear even then that if people retire at 60 to 65 some people will live well into their 80s and some into their 90s.
That is 20+ years which in my view is long term.
Whilst I agree that care needs to be taken with growth assets as retired people cannot replace assets by working longer etc is seems to me that a better approach is to segment the money into funds required to support income in the short to medium term e.g. 10 years say and invest the balance for the longer term (and replace funds drawn down in the shorter term).
Saying that low risk is the way to go just does not take into account the reality of low interest interest rates and the amount of funds that people to retire on.
Is this guy serious?
Why did you print this?
Welcome to the new millennium debate Prof Kingston, glad you could join – just a few years behind. I agree on safe haven investments but people living the next 20-30+ years in retirement also cannot ignore growth assets. In giving advice to retirees we are also somewhat hamstrung by risk profiles of baby boomers who appear more aggressive on paper than probably what they should be and compliance slap us if we don’t “match” advice to risk profiles. While producing good advice for each client should be straight forward it often is not the case. The real question is are Advisers order takers or real advice givers ? I also thought the commission argument was done and dusted. I really am done caring about what outsiders have to say and just try to do the best for my clients in front of me.
The author has obviously just woken from a coma he has been in for a decade. No more to be stated other than he needs to have a basic exam to ascertain if he is qualified to utter such garbage. Professor of ??????
What a load of rubbish. I think this academic should have ‘claimed’ this 10 years ago when it was happening.
Commissions are nearing extinction, and I certainly haven’t seen any high commission products in the past 5 years.
The asset allocation split is not a conflict of interest. Charge a flat Fee for Service for the advice, whether that is for a conservate portfolio or a growth portfolio. Makes no difference.
Commissions from product providers should be banned – Appears this academic, for all his brilliant research, didn’t come across the FoFA legislation either…
Finally, it’s all well and good to say retirees need to move to safe-haven investments, but what about Longevity Risk?
30 years of retirement, earning defensive returns, you’ll need a large starting base, or hope Centrelink is still around to care for you in your 80’s and 90’s.
Is it just me or does the good Prof need to bring himself up to speed with current legislation? Commissions from product providers should be banned DER
Its about time one of these experts did a paper on the associated costs to consumers and business each time they have an epiphany. Its worn very thin with me.
Would be nice if he knew the law – commissions are banned. Perhaps the next review should be to ensure people who lecture on these matters actually know the subject matter.
How embarassing! If anyone should retire, it is Professor Kingston. He is clearly out of touch and hasn’t done his homework. Commissions were banned on investment products almost 2 years ago!
Hi Geoff,
Pre FOFA advice rang and would like to have a read of your outdated report. Commissions have been banned, and if anything, the current direction of advice is too conservative in reply to the misallocations of the past, and the desire to avoid being cast into ‘that group’
If I see one more retiree with a portfolio yielding 3% and they are blowing through it at 8 – 10% thinking all is grand I will eat my hat.
As usual, an up to date comment, by one who can’t, so teaches. Ban product commissions -what year is this?
Dear Geoffrey, whilst I agree the professional standards of financial advice need to improve. And my Macquarie Uni B.Ec with double major in Economics and Business Law, Dip FP and SMSF Specialist, should be required academic education.
In the real world of providing advice, you might recall legislation a few years ago called FOFA, that banned investment commissions.
We always charged fees for service anyhow.
More bagging advisers for an out of date reason, cause why not.
Poor old Professor Kingston, another derelict academic crawling out of the dark woodwork of his safe shelter. For God’s sake, will someone tell him commission on investment products has been banned for how many years? Thank You! Now that our dear old Professor has had his moment of press time, he can crawl back into the woodwork again and safely resume his snoring….(Where do these clowns come from?) Merv Gay
Hopefully Dr Kingston has spent plenty of time modelling the effect of “safe haven” assets on the ability for someone to live a reasonable lifestyle for the 20 to 30 years after retirement. His advice is likely to send people to the poverty line. He should look to his other academic colleagues to help him understand the problem of investor behaviour being the biggest detractor of investment performance BTW Dr Kingston, commissions from financial products are banned and have been since 2013. Are you in some time warp?
I agree…they should be more heavily invested in term deposits and get 3% or in overpriced AAA bonds that often become CCC for cactus.
More poor journalism and uninformed comment. Commission from product providers, other than for life insurance, has been banned since 1 July 2013. The life expectancy for baby boomers is far higher of any previous generation. When 4% on term deposits falls below the real poverty level what does an 80 or 90 year old do, go back to work? an appropriate level of exposure to growth assets to counteract inflation is good planning.
Who is this ill-informed academic?
If he had done his research properly, he would have found out that for Licenced Financial Planners, commissions have been banned a number of years ago?
Seriously? You published this?
You aware that commissions on new investment and superannuation products are already banned aren’t you?
ummm. thought commissions WERE banned.