I can honestly say that I love what I do. My co-worker, Julian Nowland, and I happily spend our time catching up with clients, solving problems on their behalf, and working on our business.
That passion steers us in the right direction and helps us make good choices at every turn.
Exceptions, not the rule?
Unfortunately, I can’t say the same about everyone in the industry – which I’ve been defending for as long as I can remember.
I’ve even put my job and career on the line to stop what I saw as an adviser systematically targeting the vulnerable.
I told myself he was an exception, not the rule.
More recently I’ve been helping clients fight the major banks over the shocking advice they have provided – which in some cases has adversely affected a client’s life forever.
Again, I told myself these were exceptions rather than rules, that things have changed a lot since these scenarios happened and that a new breed of educated and ethical advisers will change the financial planning world forever (which we are slowly trying to do).
With a relentless mainstream media campaign against financial advisers reaching its crescendo, surely there was a vested political interest intent on destroying the planning sector once and for all, right?
Despite all this, nothing has really changed.
Which is why, instead of just greeting a new client with “Hi, I’m Josh. How can I help?”, I spend the first 10 minutes acknowledging the presence of the poor, conflicted and uneducated advice being offered in Australia.
The “financial advisers” next door
A group calling themselves “financial advisers” moved into our building recently.
They moved out as quickly as they moved in, but for me they were the straw that broke the camel’s back. I discovered that they would cold-call working class victims (who can ill-afford to make the wrong move), lure them into their office and then subject them to high-pressure sales tactics about Victorian residential property.
The whole thing left me feeling dark and jaded — even more so than before.
In the age of CERN’s particle accelerator, nanotechnology, drone warfare and the Back To The Future hoverboard, how can the most vulnerable members of our society still fall victim to these financial scams?
I guess as humans we’ll always be susceptible to being sold the next great “get rich quick” scheme because we hope the person offering it will have the golden goose that will solve all our problems.
Hope is a powerful drug. And dishonest people know this all too well.
What can we do to rid ourselves of these “advisers”? What proactive steps can we take to eliminate the threat before it becomes a reality? I tried to contact the Australian Securities and Investments Commission (ASIC) about it, but I couldn’t find the right path to go down (assuming there actually is one).
I’m sorry, but a financial adviser register will do absolutely nothing.
ASIC is currently undertaking its first action against a licensee in Melbourne for not acting in their clients’ best interests.
The group seems to be a mirror image of our former neighbours and so we’ll be watching on with interest.
Personally, I hope ASIC gives every like-minded firm in the country a serious warning: “Take this profession and your clients’s welfare seriously, or go back to selling used cars.”
My anger is no longer directed at those trying to discredit our profession, but rather at the profession itself.
Until we all start actively culling those who aren’t worthy of their client’s trust, we’re just kicking the proverbial can down the road.
What needs to happen
In my mind, a few things need to happen:
- The government, the regulators, our professional associations and our licensees need to give us all the permission (and the right) to start a financial adviser cull;
- The government needs to make residential property a financial product;
- ASIC needs to devote a considerable amount of its additional resources targeting/monitoring those businesses with their own Australian Financial Services Licensees (which all of these advice businesses described above hold); and
- We need to start the financial adviser cull as soon as possible.
And if that means conducting a royal commission into the banking industry, so be it.
Joshua Cratchley is the co-founder of Plenary Wealth
Joshua I could go through your client base and guarantee your practice is charging the holy fee for service to many many of your clients that don’t need nor warrant the fee. In fact I will go on a limb and say that 80% of your practice is based on charging ongoing service fees that are not warranted or needed. Like most advisers you live in a glass house and shouldn’t throw stones. The fact you “honestly love what you do” is PC nonsense to justify your fleecing of clients that enable you to keep the doors open.
You do not need to charge fee for service. In years to come this will be the next advisor con to be exposed.
This just translates to “I’m a fossil”.
Josh, you seem to have taken a leaf out of ‘Mein Kampf’ or some notes from Stalin… Or am I wrong, and it is more like a mob trial and lynching? Who is the ‘we’ you discuss and who decides all the necessary rules and guidelines? I kinda thought ASIC, the Corp’s Act, fiduciary obligations, etc and all the other best interests provisions are there for that and even the FPA disciplinary committee – are you suggesting somehow you have greater insight and powers than all the regulatory bodies combined? Really? Based on what perspective of FP exactly?
This ‘article’ does little but show your naivety.
completely agree. written in very poor taste. professionals do not disparage others to advance themselves. this is one of the major issues in our industry. Advisers treating each other with disrespect. no one is going to respect us if we do not respect each other first.
While State Governments are addicted to stamp duty revenue, property will not be a financial product and regulated by ASIC
people seem to think politicians pass legislation in isolation and because it is a good idea. the “idea” goes through several iterations before it gets passed and becomes law with stakeholder input (read lobby groups), those who have the most money to spend have the most effective lobbying and the law is drafted to ensure their interests are preserved – so what if it the eventual law is in the detriment of others including the public – no politician cares.
How on earth does this crap get published?
Well said Joshua. I agree completely. The institutional must be excluded somehow and the unworthy “advisers” must be excluded
If you want to get rid of the bad advisers you need an environment which makes it easy for good advisers to thrive and easy to provide advice to all Australians. Joshua the author needs to ask himself why were individuals going next door in the first place. I know I turn clients away every day due to opt in requirements and the overall skyrocketing cost of providing advice. No doubt, this adviser was tired up with red tape and paying large dealer groups fees to pay for a mountain of compliance staff, and PD days to sell the latest in-house product, thereby making it impossible to serve the ordinary Australian. I have been an adviser for 18 years, during this time attached to a large bank aligned licensee, a product manufacturer, been a RM for a small AFSL, and then again a large privately owned AFSL with over 200 advisers. I have broke free and obtained my own AFSL for my small firm and happy to take on the responsibility and have my head and assets on the chopping block. I can’t see why advisers can’t form pods, become RM’s and take full responsibility, take ownership of clients given the existing legislative requirements now required by most licensee and just go out and get their own AFSL. If I break the law it is going to be very hard for me to pop my head up at the next AFSL down the road, and that’s the problem we face now. The problem is large dealer groups, always planning for the worst outcome and handcuffing good advisers from operating with over zealous compliance and crazy dealer group fees. We cannot have dealer groups dictating our future, advisers need to take control with the assistance of professional bodies and ASIC.
it’s ironic that you state that after 18 years of experience with what seems to me on face value substantial experience, you are turning away clients. the reforms were meant to improve the affordability and accessibility of advice and increase consumer confidence. It has failed on all these accounts. furthermore, experienced advisers like you and I are turning away clients. Great outcomes. one has to question whose purpose this law is serving? who was the law designed by and for? let’s think about that. advisers keep blaming each other -and vested interest wants that – divide and rule-, but don’t analyse the deeper issues at play, the system. that is where the issue lies. look at the system who does it favor most? advisers ? no, consumers ? no? product makers and large institutions ? …..YES it was intended to be this way. that’s all folks
It’s easy to become disheartened but it’s important to remember 2 things:
1) Clients carry with them a lifetime of experiences and baggage, not just the last 2 years.
2) You only ever hear one side of the story.
Most people still don’t know that advisers can’t accept conflicted payments for investment products or that they need to provide and FDS or even that a licensee audits their work every year.
The industry is far from perfect for sure but client perceptions are years old and it will take a decade for FOFA and other changes to be recognised by the world outside of our little bubble.
disheartened. oh sir, the good adviser in sole practice is drowning
Part of the solution is to get rid of large dealer groups, with 50 plus advisers. You either should just be institutionally aligned or become self licensed. If we are individually licensed we take of far more of the responsibility. I’m tired of the poor practices that many larger licensee’s practice, that being of taking on any adviser to get more FUM and more kickbacks, this practice makes it far more easier for poor advisers to move around. We need to take individual responsibility and become self licensed or alternatively form small pods of like minded advisers and all being responsible managers is the solution.
the solution you propose is partly the problem. the obligation to become independently licensed is not an easy obligation to fulfill. if small independent businesses – most of them with highly qualified advisers – were fostered (god forbid) and supported by the regulator they would be a force to reckon with. But, that is a distant dream. But, this was intended by legislation to drive out small independent advice businesses. and that is slowly taking shape. it is bad for the economy and it’s ultimately bad for the consumer because they have no choice
Agreed John – ASIC is like a blind loco driver, feels he’s heading down a hill so slams the brakes on and slows down the momentum just as he starts going up the next hill, so he then starts stoking the engine again to try to get the steam up…
A lot of what is wrong today is due to what ASIC did or didn’t do previously. With real guidance and practical commercial application, rather than the witch hunt they are pursuing and fostering in the likes of young naive little Jacob here, we would have a more robust system.
that is the other part of the issue, people give ASIC too much credence. ASIC is just another bureaucracy. They get lots of things wrong, but no one is there to challenge them. The accountants have had 6 months of the new system and they are all saying this is unworkable, and insane and how did this happen?
I would like to advocate a new profession for advisers who actually advise their clients. Not sales people who sell product. They shouldn’t be called advisers, or planners. They are sales people. Anyone attached to a product shouldn’t have the same title as us. PS I treat property as a financial product already… I write SoAs on them all the time. Just wish ASIC would see the same as me 🙁
the deficiency I see is that the barrier to entry into the profession is too low. why has the minimum educational standard remained so low for so long? who or what persons were involved in setting the standard of education so low and maintaining thus. that would be an interesting question to research and find the answer to. let’s address the systemic issues first before blaming “other” advisers.
Please note that one that hits the hardest is usually the one that has caused most damage. I would be careful in displaying such a holier than thou attitude Joshua. I guess you have been in the industry for 5 minutes?
Cull some advisers or cull some Licensees?
Let’s not forget the responsibility of the AFS Licensee to train and supervise.
If an AFS Licensee is unable/unwilling to properly train or supervise then ASIC should revoke the licence.
Of course, licensees may cull the people they have authorised,
Joshua – Wow. Your concept of an ‘adviser cull’ sounds a bit drastic, and who is the ‘we’ in the context of you statement ‘.. we need to start the financial adviser cull as soon as possible.’
In all seriousness though – there are still problems in the financial services industry. Many (not all) of those problems will be dealt with in the next market down-turn. During down-turns all portfolios suffer, but poor advice and strategies are exposed and magnified. Individuals operating under AFSLs (including authorised representatives) who do not meet the legislated ‘best interests duty’ will come unstuck. The maximum penalty for the licensee/representatives for breaches is $1 million civil penalty plus remedial costs to compensate the clients, and in addition a possible banning order for the individual involved – I guess that could be your ‘culling’ reference.
I agree with your broad sentiments about Commonwealth regulation for real estate investments, but there are regulatory and potentially constitutional hurdles for the Government to overcome. Not impossible, just difficult.
Well said Joshua. Its about time people in our industry started talking like this rather than keeping silent for fear of further damaging our profession.