It is confirming what the results of ongoing ASIC and APRA Reports have been telling us for some time. An ASIC Report published in January 2018, for example, reveals that the big four banks and AMP failed to meet the ‘best interests’ requirement in 75% of super fund switches.
It’s behaviours like these that are costing the industry. Poor financial advice, along with various scandals and alleged misconduct, have cost major banks and insurers $480 million in compensation since 2016 and given what we are hearing from the Royal Commission this may be just the tip of the iceberg.
Then there is the reputational cost. Financial advice is being viewed as conflicted, too product focused and serving the interests of vertically integrated financial services firms rather than clients.
The big question is, how do we fix this?
Do we wait for ASIC and the Royal Commission to bring down mandated change through regulation? Or do we proactively turn the financial advice model around to focus on its true sole purpose: helping people make better decisions about their money.
Do we wait for the stick? Or do we create our own ‘carrots’ that make the lives of our clients better, more secure and less stressed by helping them build their financial fitness?
Proactively re-building trust
We’re already starting to see a shift away from vertically integrated banking models and their inherent conflicts. However, the ASIC review showed that even when financial incentives were removed through the FOFA reforms, advisers were still far more likely to recommend the parent company’s products – and one in 10 clients were actually worse off as a result of this advice.
Fintech as an agent of change
Fintech has the power to transform product-led advice into consumer-led advice because it is making it it possible to embed self-directed online financial planning tools into advice-led models. Online financial planning tools allow people to experiment with options and access or update their financial information 24/7. There’s no product push and there’s no pressure.
This transformation means the industry can stop selling products and start offering solutions to needs that consumers uncover for themselves. Products become simply by-products of positive, proactive online engagement.
The opportunity
This actually represents an untapped opportunity for the advice industry, even beyond the 20 per cent of Australians who currently use financial advisers.
If our industry’s purpose is to help people reach their financial goals, then surely we should be helping every Australian with their financial fitness and well being? Those forgotten, financially-stretched other Australians still need fair dinkum quality advice.
Our own research shows one in two working Australians is worried about their finances – they don’t have enough in emergency savings, they’re stressed they won’t be able to retire when they want to, and healthcare costs and regular bills add to that pressure. Almost one in three are ‘financially unfit’. These are the very people who most need advice, support and guidance.
Clearly it’s not realistic to physically service every Australian with comprehensive, face-to-face advice, but fintech has the potential to enable every Australian to take the first steps towards building their own roadmap to financial fitness and freedom. This is the premise on which we built Map My Plan, a program which does just that and we are making it accessible to people enmasse by partnering with employers, advisers and financial institutions.
Employers, such as EY (Ernst and Young) provide the tool to their staff to help them reduce financial stress – and this also helps to increase their productivity. Map My Plan also allows advisers to expand the number of clients they work with without adding to their admin – and they know exactly when to offer proactive individual advice.
Banks, super funds and insurance providers can use it to positively engage with more customers, and provide solutions to help them meet specific goals in that moment of need.
In the changing landscape of financial advice, it is going to take more than regulatory reform to fix our core problems. It’s going to mean turning the entire advice model on its head.
Bernie Ripoll iis a director of Map My Plan and the former federal Labor MP for Oxley. He headed the so-called Ripoll Inquiry that led to the FOFA reforms.
Sales pitch for MapMyPlan? Hope not.
Two articles in a row damning the financial services industry for failing to manage conflicts of opinion and proposing Fintech as the solution by the Fintech-owning Bernie Ripoll. ‘Independent Financial Adviser; not so “independent”.
The key phrase here is ‘self directed’ and unfortunately there is no place for this enabled by the legislative framework for purchase of financial products in Australia. Any ‘advice’ directed to a person by themselves and their own choices unfortunately – in the Australian legislative framework – is the responsibility of some AFSL holder – which is clearly nonsense. I think Bernie that was your big omission – not doing something to enable this when you were in a position to do something about it. Ignore the rest of the comments here and use your connections to do something to get this to happen – suddenly the whole scene will change.
Typical politician with his snought in the trough. Do as I say, not as I do
Um, snout? What’s a snought? Lol
Oh Bernie I like to use FINTECH and experiment with ny options ???? Must be written by a Canberra based public servant . Get on the Gravy train Bern !!!!
Mate heard you speak at tattersall club way back. unfortunately unles you have creditionals of setting clients up correctly going through the downturns (GFC) reviewing clients regularity as they age you are just another Politician with profile, one foot out the other foot in to stop the dribble
The problem with fin-techs is that they are a vertical integrated business model.
How you say:
Complete this fact find and we will produce an SOA for you recommending our product that we have put together.
And what is that – generally an ETF that will suite your risk profile. Its one of our model ETF’s.
Now I ask, that doesn’t sound like a cookie cutter model to you does it?
Also how is that any different to what the big banks in trouble now have been doing?
The more things change the more they stay the same. Just different faces.
what a lot of self serving rubbish!
FFS! Were you wearing your A Frame advertising board around your neck when you write this?
Bernie – Assume you also include the vertically integrated ISA in this? Asking seriously, please respond.
don’t be silly… industry super has quality service (via call centre) and exceptional insurance benefits. One size fits all.. forces clients to use their own financial planners… ISA is a great model??!!!!
Quality advice via a call centre? Where is “Best Interest Duties”? And quality Insurance? Usually twice the cost of Retails products
Sounds like a conflicted sales pitch. Quick, someone ring the Royal Commission!!!
+1
Nice sales pitch / solution thanks Bernie.
Oh and don’t forget the Fintech industry is asking for all sorts of reduced regulation to try to become profitable and reduce the standard AFSL heavy red tape and compliance costs.
Now that sounds fair hey Bernie.
From the bloke who promised that adjusting remuneration structures would remove conflicts. Shameless.
This is an advertorial?