In recent years, the financial advice industry has been battling consumer and media perceptions that planners are a bunch of cowboys flogging products to line their own pockets - it's time we cut them a break.
The industry has come a long way since the 1970s, when planners were essentially life insurance agents operating in a sales-oriented culture with little, if any, formal training in providing professional advice.
Many financial planners today have undergone extensive education – beyond the minimum requirement of RG146 compliance – to obtain a Diploma or Advanced Diploma of Financial Planning, Master of Financial Planning, CFP certification and other specialist qualifications.
Since the Ripoll Inquiry in 2009, the industry has made huge inroads into increasing transparency and removing conflicted remuneration practices. There's been a shift from commission-based charging to a fee-for-service model and new opt-in notices and fee disclosure statements that will make it explicit to clients exactly what they're signing up for – and how much they can expect to pay for the service.
Importantly, CoreData's research suggests the typical client is happy with the advice they're getting.
Extensive research of financial advice clients across Australia shows the average satisfaction rating awarded to financial planners by their clients is 7.91 out of 10. In the main, planners are doing a pretty good job.
Now don't get me wrong – I have no sympathy for advisers who have deliberately misled their clients, investing their life savings in products that were inappropriate and in some cases outright fraudulent. Storm Financial and Trio Capital spring to mind.
But let's put this in perspective. While a true figure is hard to come by, there are an estimated 18,000 financial planners in Australia. Since 2009, just 61 have been banned by the regulator, the Australian Securities and Investments Commission, from practising as a financial planner.
That's just 0.3% of planners who have operated outside of the law in the last eight years.
Compare this with the legal industry and you'd find that the level of impropriety is actually lower. Statistics from the Office of the Legal Services Commissioner reveal that of the approximately 66,211 practising solicitors in Australia, 330 lawyers (or 0.5%) have been struck off the register since 2010.
It's true that the consequences of poor financial advice for clients are typically more severe than the consequences of poor legal advice, however the statistics suggest the incessant focus on financial planning is somewhat excessive.
According to the chief executive of the Financial Planning Association, Dante De Gori, the financial planning industry has been subject to 54 inquiries, reviews and consultations since 2009. Opposition Leader Bill Shorten recently signalled a royal commission into financial services if Labor wins the next Federal election, citing "systemic and widespread problems" in the banking sector.
While it's not yet clear if this royal commission would include financial advice, the peak industry bodies have both voiced their opposition to further scrutiny of the sector, and rightly so.
The large majority of financial planners are doing the right thing by their clients and constant judgement only serves to undermine the value they're adding through good advice.
Financial planners should be given the breathing space to turn their focus back to the most important aspect of this whole debate – the client.
Kristen Turnbull, Head of WA at CoreData Group
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