With seemingly endless information at our fingertips, every question we have is a quick Google search away from being answered. It’s no wonder that 90.69 per cent of Australians use Google as a go-to source for information.
Whether it’s Googling reviews for a product you’re thinking about buying while standing in the store’s aisle, or it’s searching for the answers for a complicated math problem in your kid’s homework that you yourself haven’t seen since you were a kid, or it’s reaching out to “Dr. Google” to determine what exotic illness you might have based on symptoms you’re experiencing, it’s all micro-seconds away on the internet.
This instant access to information has truly changed our society.
I spend a lot of my time speaking with financial advisers and they’re regularly talking to me about how much has changed in the conversations they have with their clients. I see this myself with the clients I advise as well.
In the past a client would come in, seek our advice and then act on that advice. As their financial planners, they would use us as their primary source of information, education and guidance.
One of the positive outcomes of the information age is that, in many cases, clients are understanding more and more about financial matters, especially when the information comes from reputable and solid sources online.
But we’re also seeing that clients are frequently exposed to all sorts of random information, investment “hacks” or trendy options, and they’re wanting to discuss more and more about all the various options out there. In some cases, they’ve even made up their minds about what they want to do with their wealth as a result of their online research.
What does this mean for a financial planner?
Consider the following example: a client comes in and tells you: “I’ve been spending a lot of time researching what’s best for my family and I would like to establish a self-managed superannuation fund with a property and direct shares”.
If the client specifically wants this, should we set it up just like that?
Before deciding whether this is in fact the right strategy for the client’s unique circumstances and long-term goals, there are many important considerations to make, including:
- Are they significantly exposed to just the one asset class?
- How long will it be until they reach retirement or ideally want to retire?
- Will there still be a loan at retirement and will this asset provide them with the income they need to live the lifestyle they want in retirement?
Of course in some cases, if the client is extremely clear, you could rely on the execution-only provision. The problem is that in many cases clients have less than 50 per cent of the information they need before they can consider such a structure.
Perhaps the client doesn’t fully understand a range of issues that would have tremendously different outcomes to their situation. Do they understand whether to consider a structure to be with a corporate or individual trustee? What investment strategy would have the appropriate amount of risk that matches their risk appetite while also pursuing their short, medium and long-term objectives?
Financial planners have an obligation under multiple sections of the Corporations Act to not become an order taker.
No amount of client Googling can put us in a position where we take an order, implement and let the client deal with the outcomes.
Especially when dealing with the outcomes probably means more Googling!
Under sections of the Corporations Act such as 961(B) best interests duty, Section 961(G) on appropriate advice and Section 961(J) on prioritising the client’s interests, we cannot just be order takers, no matter what the client is ordering.
Sure, we can give the client the SMSF with the property, but it needs to be deemed appropriate. Appropriateness is defined as “suitable or proper in the circumstances”.
It’s essential that we ensure the client is fully informed about the consequences and the appropriateness of any actions.
Regardless of how much financial information is available to our clients online, we need to ensure we are their trusted adviser on what is best for their unique goals and circumstances.
Philippa Sheehan is the managing director of MyPlanner
so true phillippa great piece
Hope the customer doesn’t Google MyAdviser and enforceable undertaking Philippa!
Totally agree with you Philippa. It would be completely inappropriate to unquestioningly implement the client’s request and take their money. Yet this is what accountants do all the time! Financial planners have rapidly overtaken accountants as a much more professional and more regulated source of financial advice.