I’m 100 per cent for this. Over the past two weeks I’ve had four client review meetings where my clients have expressed their extreme anger to me about the stupidity of all of the paperwork and fee disclosures that we keep sending to them – all supposed to “protect” their interests.
They know it’s not my fault, but they feel so frustrated by what they need to do to receive our advice that they want to express their feelings but they don’t know anyone who will listen except for me. I feel for them – but I need to bombard them with paperwork so I can keep my authorised representative status.
My current dealer group is absolutely brilliant and this article is in no way a reflection on them, but as we all know it’s an easy thing for ASIC to wipe out any financial adviser’s livelihood if their files and disclosures aren’t 100 per cent perfect. I’m watching this space with keen interest – and this will definitely be a topic I will write about in a future article.
Here is something that my family has recently experienced and it shows just how incredibly wrong the people are who make the rules that affect us as financial advisers:
Last October I had a major sinus operation. My broken nose (from a touch football collision 20 years ago) was fixed and my sinuses were cleaned out. After I was given a pre-med (similar to two double scotches) and while I was lying on the bed about 15 minutes before they rolled me into the operating theatre, the doctor met with me to run through his “Consent for Treatment” form. After he spent one minute reading it with me, he asked me to sign it. That’s it. That’s all the paperwork for risk disclosure.
One piece of paper with one signature. While I was drowsy. Wow!
I had a very serious operation with an overnight hospital stay. I had a major bleed after waking up in the recovery room and my blood pressure went through the roof and I had to be given emergency blood loss treatment. That night I didn’t sleep and the pain in my head was phenomenal. It took me weeks to recover.
The operation fixed the sinus issues I’ve had ever since I was five years old and I’m so happy I had it. But the full risk disclosure was just one page – and I signed it after having a pre-med 15 minutes before my operation! A few years earlier my wife had a hysterectomy. Similar situation – simply a onepage document that she was asked to sign while drowsy after being given a pre-med – and just 15 minutes before her operation.
Both my wife and I were 100 per cent happy with this because we had an initial meeting with each of our doctors and they verbally explained the risks to us and we asked our questions to them. Nothing was signed during these initial meetings. We were responsible for our decisions.
Contrast that with the ridiculous paperwork a financial adviser has to provide to a client who wants to invest $25,000:
1. Financial Services Guide (FSG) 2. Client Engagement Agreement 3. Statement of Advice (SoA) or Record of Advice (RoA) 4. Ongoing Service Agreement 5. Investment Application Form with Fee Consent 6. Product Disclosure Statement 7. Fee Disclosure Statement (FDS)
Fees repeated at least six times. Risks restated multiple times. Jargon and legal words that clients know are not there to protect them but only designed to protect their adviser’s dealer group.
Given that our society has shown it’s acceptable for one page to be signed to acknowledge the risks of a serious (and maybe life threatening) medical operation as opposed to hundreds of pages of multiple documents that a client is expected to read and sign just to invest $25,000 – can’t the government urgently take steps to fix this ridiculous situation?
Next article I’ll outline my solution for this problem. Maybe I should give my clients a double single malt each time I need them to sign off the documents for my advice!
Important: So no one gets upset, this is the personal opinion of Timothy Munro, and Timothy is not speaking on behalf his dealer group or his professional accounting body!
The medical analogy always illustrates the message well! Nevertheless, as devils advocate (and stating the obvious) a 2 day, online, open book (virtually impossible to fail) RG146 diploma simply did not stack up to the 10+ years of education and training a surgeon goes through before ever picking up a scalpel. Alas, the degree requirement and on-the-job training and mentorship (professional year) (new FASEA requirements) are certainly in the right direction. Although given advice is much more of a consumer service compared to medicine it will never be equal in its professionalism and trust, but it can get part way there, which is where it needs to be. Professional, but commercial.
The author raises an interesting point about the massive volume of “jargon and legal words that clients know are not there to protect them”.
Reflecting on the Hayne circus, many will remember that Dover was crucified for having legalistic jargon in their client engagement agreement that purported to be for client protection but in reality was not. Hayne’s bovver boy called it “Orwellian”.
But surely the same could be said about pretty much the whole financial services disclosure regime that advisers are forced to inflict on consumers? The regulators who designed it claim it’s to provide client protection, but clearly it does not. It just adds to the cost and complexity of professional advice, and pushes more consumers towards unregulated advice and dodgy products. If Terry McMaster was crucified for one paragraph in Dover’s engagement agreement, then everyone involved in the design of our current disclosure regulations should be similarly treated.
The point you are missing is that one page sign off with a medical specialist is suffice if things go wrong. Their PI cover would still compensate you.
Whereas a rogue financial planners actions will not compensate a client.
Therefore these checks and balances are necessary.
I had to laugh. Even ten years ago, before the tsunami of additional regulation, a friend who heads up a hospital emergency department told me she was shocked at how much more paperwork our profession needed than hers!
Maybe when it boils down to it, governments know they are obligated to help their population stay healthy and alive. But financial planners could be helping people ultimately optimise their tax and benefits situation, which is probably the last thing the government wants. So why not squeeze us out!
It’s about much more than tax. Both major political parties are highly aligned with industry sectors that sell financial products via advertising and unregulated sales reps. Labor is aligned with union (aka “Industry”) super funds, and Libs are aligned with the property industry.
It’s in the interests of both parties for consumers to acquire financial products based on advertising and sales, without the aid of professional advice. That’s why both parties have pursued policies that make professional advice more complex and expensive for consumers.
Tim great article. Your clients should have complained to their local Federal MP and sent a letter to ASIC. I have got my clients to do the same about the barrage of paperwork they have to deal with. To date my clients’ complaints and representations to their local MPs and the regulator have been ignored! Surprise surprise. The reason Doctors (and other professions) can get away with light touch regulation is because they are professions, we are not there yet, they have great representation in Canberra through the AMA and they haven’t been smashed by scandals over decades like financial planning has been. So our member bodies have to get better at lobbying in Canberra, we have to continue to raise standards among the remaining advisers and have to pray there aren’t any large scandals in the years ahead.
Great work Tim…I will say it again…. we will all become “money coaches”…..no compliance whatsoever.