Practise what you preach, advisers told

Financial advisers are no better at managing their own affairs than the general public and must have their own personal advisers, says American financial planning coach Bill Bachrach.

Speaking to ifa, the Bachrach and Associates Inc (BAI) founder and financial adviser said the fact that financial advisers don’t seek financial advice themselves is “hypocritical” and “the most embarrassing thing about our business”.

“You read all the time about how Australians are underinsured and that you have a major insurance problem here in Australia,” Mr Bachrach said. 

“I laugh and think, ‘I wonder if financial planners are any better?’” he said. “I know the answer to that: they are not.”

Mr Bachrach’s comments come after ifa asked a number of advisers and key industry figures how important it is to the value proposition of a financial planning business that advisers seek financial advice themselves. 

Strategic Solutions Australia director Wayne Roggero told ifa that while there is no evidence of how many advisers have advisers themselves, he does not believe many do – “for a whole range of different reasons”.

“It could be that advisers don’t feel another adviser could add to what they know, or it could be that they believe they can do it themselves,” he said. 

“I have come across a few advisers who said they use an adviser – but not many.”

Mr Roggero warned of the dangers involved when advisers decide to look after their own financial affairs.

“Over the years, there have been advisers that have got themselves into financial hardship because they didn’t follow their own advice,” he said.

“For some advisers it would be very much beneficial to them that they did have a financial planner other than themselves, while for others I don’t know that it’s necessary unless they’re after specific information that is not in their field.”

A medical practitioner will self-diagnose and then decide whether he wants to go to another doctor or not, Mr Roggero said.

“I would hope that is what advisers do as well,” he said.

For Quantum Financial principal Tim Mackay the issue comes down to accountability.

“A doctor wouldn’t operate on themselves; they wouldn’t self-diagnose,” Mr Mackay told ifa. “It’s all about accountability and having an independent party work with you to have a financial plan,” he said.

“I think if you truly believe in financial planning then a financial planner should have their own financial planner.”

What it plays into is a key aspect of financial advice: that of being coached and being financially accountable, AFA chief executive Brad Fox told ifa.

“It adds an extra layer of discipline,” he said. “I certainly know of cases where financial advisers have financial advisers themselves.”

While the FOFA reforms focus on conflicted remuneration and fee structures, BAI’s Bill Bachrach believes this issue cuts to the heart of financial advice reform.

“They want to regulate that you disclose that you’re connected to a bank, they want to regulate that you disclose what all your fees are,” Mr Bachrach said. “Those are the easy things.

“If the regulators want to put in a rule, the rule should be: if you give others financial advice, if you are a financial planner, you must have a financial planner yourself and you must pay that person their full fee,” he said.

“I want to see your plan, I want to see your statement of advice and I want to see that you’re implementing.”

Mr Bachrach – a financial planning coach who uses an adviser himself - said that if he were the regulator, he would have new advisers show that they are on track after three years.

“I am a client of what I teach,” he said.

promoted stories

SUBSCRIBE TO THE IFA DAILY BULLETIN

News

Business Strategy