Responding to comments from CBA executive general manager, advice, Marianne Perkovic that the bank’s implementation of new adviser standards is a “step forward for the industry”, Australian Unity Personal Financial Services’ head of advice, Craig Meldrum, speculated that the initiative may not go far enough.
“I applaud higher education standards across the profession but I would much more like to see the CBA (and all vertically integrated advice businesses) address the structural conflicts at play where a product manufacturer owns the advice channel,” Mr Meldrum said.
“Marketing the higher education angle looks good for public confidence but it is a slap to CBA financial planners because it infers they are the (only) problem that needs fixing rather than reviewing the sales culture that David Murray was instrumental in creating,” he added.
“I would prefer to see swift action to address the conflicts inherent in [Commonwealth Financial Planning] and [Finanical Wisdom] and the inadequate response to redressing impacted clients.”
Mr Meldrum’s comment was one of more than 30 – mostly anonymous – responses published on the ifa website yesterday, the bulk of which criticised CBA’s response as focusing on individual adviser standards rather than more structural conflicts of interest.
Ian Bailey, chief executive of the boutique firm Bailey Roberts Group, commented under his own name, calling into question the bank’s myopic focus on adviser standards.
“This is not just about education,” he said. “The issue is conflicted remuneration, sales pressure , authority and job security. The banks’ interest and clients’ interest will always be conflicted. The only way to fix the advice industry is to have all advisers licensed directly.”
The comments follow revelations by AFSL application consultants that pointed to an increase in interest in self-licensing since the CBA advice fiasco escalated.
The industry faces an advice-sales conflict, derived from licensing of INDIVIDUAL financial advisers through many different INSTITUTIONAL licensees,who are mainly product distribution channels. No amount of education. CFP or other ‘new’ certifications will remove this conflict of interest from association to legitimise this emerging profession long term. A standalone licensing system/structure that distinguishes product advisers from financial advisers, distinguishes between different specialisations, education, skills, experience and competency levels. Professional associations and educational institutions can then focus on taking care of improving the education and CPD. Financial institutions/licensees can sell their products legitimately through product advisers on commission.
[quote name=”Sean”]
Who are you or the FPA to decide how much more education Marianne Perkovic needs?
She’s not a planner, she doesn’t sit across the table from clients. She is a manager, and the requirements are completely different.
I don’t get to decide anything Sean, but I like everyone, gets to have a voice and try to influence things.
The past culture in the banks has been a disgrace. It needs to change. I am suggesting that rather than just require financial advisers within the banks get the necessary qualifications, that the managers should also commit to qualifications because they are in the financial planning industry/profession too.
The issue with the banks is poor advice, the lack of management and misguided understanding of the servicing needs of clients.
I am amused at the self righteous arguments against aligned advisers who recommend an in house investment platform. These platforms provide the mechanism to implement the recommendations of the adviser in a more efficient manner than the adviser doing it all themselves. Pretty simple really. Evil ? Systemic problem ? I don’t think so. Perhaps the self righteous ones can explain how they implement their client portfolios and how this has enabled their clients to outperform. At the end of the day this is the key outcome for the client. I suspect there will be silence from the self righteous ones.
Some very good points made in this article… when will the Government stand up and enforce a separation of advice provider and product manufacturer? Can you imagine if a Doctor (advice provider) was ‘directly employed’ by the drug companies (product manufacturer)? The independence of advice is critical to confidence in such a system.
“The only way to fix the advice industry is to have all advisers licensed directly”
This does not fix anything Ian Bailey.
1. Many self licensed practices also receive volume rebates from product providers as do many non aligned licensees.
2. many self licensed practices wold not have the strict compliance standards in place that large Instituational owned Licensees do. 8 practices this week had their License removed by ASIC.
3. many practices, regardless of their Licensee have preferred platforms – it’s a business decision for efficency. Having a broad APL does not mean that it gets used.
It seems like so many people are jumping on the band wagon to critise the CBA and I wonder how many would stand up to ASIC’s scutiny.
“What a joke’ it is a shame that you write off the whole of financial advice so out of hand. Most jobs involve selling – from a self employed tradie to the headmaster at a private school to accountants and advisers. I ‘sell’ insurance and I am proud of that. But I get to choose the best insurer for the client’s need. I stand by the advice I provide and I act in the clients best interests.
The issue is not the act of selling, it is the culture of sales, sales targets,and the dichotomy of being both a manufacturer and a distributor with the attendant lack of choice for clients!
I do agree that adviser education is no silver bullet. Having educated, enquiring clients is a far more robust model.
Totally agree; to paraphrase Bill Clinton; its the culture stupid. The CBA decision has more to with the politics of deflection than a sudden epiphany on educational standards I suspect
Ah come on. The whole industry was born from a sales culture, is a sales culture & will forever be a sales culture. That is why the “education standards” argument has NEVER & WILL NEVER fix this industry. Get real people.
Hi Leonard, It might be good to define sales in the context of the discussion. A professional lawyer, accountant or GP “sells” his or her expertise in the context of providing professional services. Where the overriding conflict comes into being is where the product manufacturer owns the professional adviser and the advice process becomes not so much about the provision of professional services as the sale of financial products. I think VI could only work where, if the planner must work to revenue targets, works on and is remunerated for professional fees generated with no link of any kind to financial products. I know many excellent planners from across the big four and AMP and many have said that regardless of higher eduction and membership of a professional association, financial product sales targets do skew the advice provided. I am intersted to know how VI businesses will adequately implement a culture of client best interest.
A better analogy is the head of an organisation promoting chimps’ tea parties is now apologising for the mess made by some of the “rogue” chimps. The whole thing is old-fashioned, ridiculous and messy.
That’s your definition Rob. There are many others. There is a difference between an independently-owned firm launching product and a major institution. i think its good that IFA clealrly has a broad definition, but you are entitled to yours.
Reporters should be careful about which organisations are referred to as “non – aligned”. It seems these days that if you are not owned by one of the Big Four or AMP you are automatically non aligned. Any organistation that owns an investment product plus advisers is in some way aligned
Craig Meldrum’s comments are spurious when you consider that his own organisation also promotes a “Sales” culture. In fact there are very few advisor groups that don’t promote a sales culture. Until the whole profession recognises Selling as a broken paradigm and adopts a client centric approach to dealing with consumers the problem will continue to exist. We need advisers trained in an Educator / Coach paradigm for working with clients.