Speaking on the live webcast of ifa sister publication Investor Daily yesterday, Lifespan Financial Planning chief executive Eugene Ardino said identifying the problems around fees for no service should be based around who received most of that revenue.
“Who received a lot of that revenue? It was the employer. It was the AFSL who employed the financial planners who were supposed to be servicing those in many cases. There weren’t too many cases where it was a self-employed planner who wasn’t servicing their clients because I don’t see any of that,” Mr Ardino said.
“I don’t think it’s an advice issue. That’s a governance, that’s a management issue, and that’s being dealt with. I don’t know that we’re going to see much more of that given how hard the regulators and the government are coming down on it.”
Adding to the debate on the best adviser remuneration model moving forward, APAC regional bureau chief at Thomson Reuters, Nathan Lynch, said it is interesting the lawyers and accountants are both vastly changing their remuneration and fee structure and models, not because of regulation but because of technological disruption.
“There’s that aspect as well which is that the industry gets on the front foot, comes up with better ways of charging that potentially move away from hours in front of a client. Accountants have had to do that because platforms like Xero are taking away a lot of the grunt work, and it will happen in this sector,” Mr Lynch said.
In response, Mr Ardino noted there was a lot of focus on how professionals charge, but personally thought the hourly rate was “a very conflicted model”.
As for the move towards professionalism, he said whether or not you’re professional doesn’t necessarily have to hinge on whether you’re the member of a professional body.
“There are a lot of people who are not members of a profession who I consider to be professionals because of how they behave, because of how they treat people. And I would say the converse. I’ve had interactions with a lot of people who are members of professions who I wouldn’t consider to be professionals,” Mr Ardino said.
“There are a lot of conflicts in the medical industry, in the legal industry, in the accounting industry. The difficulty is, in our business, when a client has a bad outcome and loses money, you can see it. In some of those others that we’ve mentioned, often it’s so complicated and you don’t see the negative impact of the poor advice that you’ve received, that you sort of don’t know where you stand. Because [financial advisers] deal in a much more tangible space and we’re at the coal face.
“So you have a product failure. Well, you recommended the product. You may have done a reasonable amount of due diligence. You may not have. But the client sees you as the cause of that and it’s a lot easier to target advisers. I don’t think that’s ever going to change.”
I am anonymous with the H7 clients. Its not that hard to pick when there is going to be a downturn. It was obvious last september that there was going to be a correction and there will be another one around the same time this year. Generally market corrections come around May and October months. Unfortunately most advisers have to spend too much time doing paperwork to research markets and analyse the data.
Opt in for fees has just pushed all my clients with smaller balances to become no ongoing advice clients. I cannot justify charging them $5k pa (minimum) for my ongoing advice. They used to get it when i was paid commissions on a percentage basis but now i can only deal with HNW clients. Unfortunately last spetember they didnt get a call from me and lost more than $5k each. I missed the market upswing by a month by the way as i was on holiday and only changed clients back to high growth at the end of January.
Dear Anonymous, I’m impressed with your ability to determine “when the market is about to turn”. Can you manage my portfolio too?
Why can’t we reply to messages anymore??
What is most annoying to me in this whole discussion is that the investment performance of the clients funds has not been taken into account. I have placed many clients in the growth phase of superannuation into MLC horizon 7. I charged $550 for the SOA and implementation and 0.5% trail with the view that I’d make up for the loss (my time) over the life of the super policy. I don’t sit down with these clients every year or even every 2 years. I dont need to. I give them a call when the market is about to turn and discuss changing to a safer option but other than that it’s mostly done through emails and of course they are welcome to call me.
Their super has been growing at over 13% pa over the last 10 years. Takeout my 0.5% and it is still WAY WAY BETTER THAN EVERY INDUSTRY FUND. Why shouldn’t the results speak for themselves. If they hadn’t come to see me they would be stuck in Australian super going no where.
Why am I being punished for getting superior returns for my clients when industry funds routinely cancel existing advised insurance arrangements to transfer funds out of high performing funds into their poor performing funds with insurance which now has automatic exclusions in it.
The sales reps at ISA must particularly be held responsible for the insurances. Too often have I seen a clients relative who has been tricked by the compare the pair adds who has rolled ho/her super over on the advice of a backpacker sales rep working in a call centre who is now sick and unable to work but has found out that their insurance in their industry super is worthless. There should be criminal charges for these funds when they routinely ruin people’s lives with their rubbish underwriting at claim time junk insurance and poor super returns