The advice industry has been under close scrutiny for years, shifting the attention from good advice to a perfect compliance file and, consequently, leading to more expensive and lesser-quality advice.
According to Timothy Munro, the obstacles advisers face are oftentimes insurmountable.
“We’ve seen FOFA and we’ve seen it back in about 2013, ’14. We’ve got the royal commission with FASEA. We’ve got all these things, we’ve got layers and layers and layers of stuff being put on everyone. Have mum and dad got better or cheaper or more understandable advice throughout the whole process? Absolutely not. And it is so ridiculous,” the CEO and founder of Change Accounting and Advice said on a recent episode of the ifa Show.
The red tape and bureaucracy have pushed many advisers to the brink, leaving even Mr Munro questioning why he got into advice in the first place.
“Look, every adviser, if they’re honest is thinking, ‘Why am I doing this?’, I’ve thought about it multiple times. It is so difficult to keep doing what we’re doing in a compliant way,” Mr Munro said.
He drew attention to the multitude of issues advisers in dealer groups face, underlining the burdens imposed by both the dealer groups and ASIC and their often-contradictory directives.
“I’ve seen situations where advisers have followed what the compliance team of a dealer group have told them to do. And then afterwards, ASIC would ban these advisers,” he continued.
“I think that there’s something fundamentally wrong with our industry, because if you’re an adviser, yes, you expect to have a level of knowledge. But the point of a dealer group is that there are smarter people than you on the compliance team that will give you guidance about what you should do. Now, if you follow that and do that, isn’t the dealer group responsible for that incorrect advice rather than the adviser? But at the end of the day, it’s the adviser that’s being smashed.”
To hear more from Mr Munro, tune into the podcast here.
Dealer groups exist to distribute inhouse products. Advisers shouldn’t fall into the trap of thinking dealer groups actually know what they’re doing, or care about advisers.
This comment is so wrong because of it’s generalisations. True, when a lot of older advisers entered the industry and were given a career by the old AMPs MLC, National Mutuals etc it was all about distributing product. But the advisers didn’t complain because they were making money and compliance was a joke. Things have been progressively changing and a dealer group does not now exist to sell in-house products, sure some have in-house which they want supported, but they don’t enforce it anymore because the regulations that so many advisers hate have outlawed that practice. Some of the smartest people I have met are employed by licensees and dealer groups and they definitely work for the betterment of the industry and advisers.
Yes thing have changed. Rather than institutional dealer groups using a heavy handed approach to coerce advisers into selling their own branded managed funds, you now have “mid tier” dealer groups using more subtle ways to coerce advisers into selling the dealer group’s separately managed accounts, for which the dealer group receives extra client FUM revenue along with kickbacks from the platforms and fund managers used. The methods might be different but the core principles are still the same.
The increased compliance environment doesn’t prevent dealer groups using advisers as a distribution sales force. On the contrary, it gives dealer groups a bigger arsenal of weaponised compliance tools they can use for adviser coercion.
So back in the “good old days” Advisers were presented with a rather limited investment menu from which to recommend solutions to clients – sometimes as little as 5-6 and all run by the bank’s own funds management arm. This was seen as restrictive and not in clients best interests even before best interests was a duty. It was also seen as the advisers merely being a distribution channel for the funds management arm and often resulted in clients receiving quite average performance and outcomes (eg rarely an instance of outperformance to be seen) for expensive MERs. Fast forward to today and you have Dealer Groups wishing to “reduce risks” to advisers by getting them to recommend (some almost exclusively) inhouse MDAs/SMAs/IMAs…with very average performance, high fees and generally only the choice of 5-6 options. What has the industry become under ASIC’s watch if not a replay of the old days though perhaps now just a slightly more regulated, sophisticated set of Dealer Group executives at the steering wheel?
If the dealer group reduces risk then they are working to the benefit of the adviser. They, both large and “mid tier” groups need stop fund their services and adviser fees rarely cover the costs of service, compliance and growth. And at the end of the day the adviser always has the choice not to recommend the group’s product. You can always, well at least with the groups I’ve been with, to apply for approval to use a different product. The clients goals can always be met using a multiple of products and if you gave the same profile and goals to different advisers you would never get exactly the same strategy initiator ( read product ). So who is more right? Adviser 1? Adviser 2? The licensee?
The adviser always has the call and adviser always has the choice to find a more “suitable” dealer group or self license.
So naive.
You clearly have your head in the sand, or else have rose coloured glasses on when it comes to Dealer Groups and what they along with ASIC have and are doing to actual advice and to the profession. They’re reducing advice to cookie-cutter – any client regardless of size, need, goals, etc walks away with one of 5-6 options the same as everyone else and a bill. No real value add. No real skill involved. No experience required. Take a look at where a lot of ex bank sales managers ended up – working in the head office of your favourite name Dealer Group.
This replay of the bad old days by mid tier dealer groups is not entirely due to ASIC’s incompetence. Hayne’s inexplicable green lighting of vertical integration was also a landmark moment in consumer protection failure.
Reading this is too real
Which part is too real?
All of it, financial planning is simply a compliance check list now. It doesn’t really matter if the advice is crap all you have to do is tick the right boxes. Most advice can be given in less than 30 minutes, shame it then take 60 minutes to do the file note in case you get sued.
Sorry that is so wrong. Financial advice is a process that, if given properly, never took 30 minutes. Actually that’s not strictly correct because out the days of a one product insurance flog it took less than that. But if you are doing your advice and files note in 90 minutes your clients would be paying less than $500 with no on-going service so if they are only cost driven then they should be happy.
THIS is what’s wrong.