When I sit down with my financial planning clients for the first time, I talk to them about what they wish to achieve and why. In most cases this can be a very difficult discussion because the clients usually come in because they know they need to do something but don’t know where to start.
To keep these discussions going, and as crazy as it may sound, I talk to the clients about a financial fairy godmother – “There is a financial fairy godmother in the room who is here to grant you three wishes: it is up to you, but what would these be?” This light-hearted segue in my first appointment leads to creating great specific and measurable objectives that can get to the heart of where they would like to be.
How does this relate to our financial planning industry as whole? Although this approach with my clients has been very successful, it led me to thinking that if there was a financial planning industry fairy godmother, what would I wish for? What would I want to change?
So, sitting here on the plane as I head off to see some more of our wonderful planners, here are my three wishes for our industry:
Wish 1 – One licensing regime for the entire financial services industry
Australian Financial Services Licences are all different. Not once have I had a financial planner let alone a client ask me for a copy of my licensing capacity, yet some licences have authorisations to do things that others don’t. To add to the client confusion we now have credit licences and accountant’s licensing.
As simple as it may seem from the outside, why don’t we have one licensing regime? Let’s still call it an Australian Financial Services Licence but let it have credit and self-managed superannuation funds as just additional areas that can be applied for. This would lead to a consolidation of a complete range of both regulatory guides and legislation. It could even streamline the advice process.
Would it not be easier to then educate the public about checking to see what their financial services professional is authorised to advise on?
Part two of this wish, however, extends even further. Why is it that the most important part of what I do as a financial planner is not regulated?
I believe the most important part of the work we do as financial planners, accountants and mortgage brokers is to discuss both the structure and strategy for helping clients achieve their goals and objectives. However how is it that this element is not regulated?
In fact, as part of our licensee we are seeing more and more of our statements of advice advising in the first instance on structure and strategy with a secondary statement of advice being prepared around product recommendations if required. Our statement of advice templates in our financial planning software have been built accordingly.
Our current licensing regime still talks about financial planners being authorised to “advise and deal in the following financial products”. This has to change.
Wish 2: End to vertical integration
Now I know this is a big statement and yes, my fairy godmother is going to have to work hard for this one to happen – BUT, how great would it be to see the split between product providers and advice?
Though I acknowledge that ASIC are trying to help clients to know who owns the licensee who will be providing the advice via the introduction of the ASIC register, have any of your clients ever checked?
I have worked on both sides of the fence – vertically integrated and independent. Though I understand why this has occurred in our industry today, it is time for change. There is a space for product providers; our clients need some of the solutions they have; but do financial planners need to be owned by or aligned with these product providers?
Wish 3: Associations that lead debate
If Wish 1 of the one licensing regime comes true, then this would make this piece even easier. Our industry has a broad spectrum of associations, all which have very noble objectives.
As an independently-owned licensee, there is not one association that meets everything that I need. Whether it is the Trowbridge Report, the Murray Report or legislative changes, I will lobby with the association whom I believe has our planner and client best interest at heart. For example, which association considered the three-year clawback rule and how that may cripple small financial planning businesses?
What is necessarily wrong with having differences of opinion between groups within the same association? Where is the association that can have opposing views internally who then in turn puts both sides of the debate to government? Why do we need so many associations fighting out these issues in the media rather than keeping this behind closed doors until all issues have been considered? Why can’t we have an association that caters for the different specialist advice areas (SMSF, insurance, etc) rather than different associations that only deal with one area?
Yes, my financial fairy godmother is certainly going to be busy if she wants to grant all my wishes. I am not sure whether any of these are even possible in my lifetime but we must continue to look at industry issues at a higher level – not only financial planners as professionals but our industry as a profession.
We are already starting to see business models change at the coal face of financial planning. The emergence of objective-based advice is beginning to be seen, the client end-to-end tailored experience is here for those planners who really wish to focus on the relationships with their clients, not just a transaction.
If you had the opportunity to have three wishes for our industry, what would yours be? I welcome your collaboration with me to make all our financial planning industry wishes come true.
Philippa Sheehan, managing director, MyPlanner
