Hot topic of the week...

by |
An article which many of you identified with was ‘Adviser hits back at ISA’, where Melinda Houghton spoke out about three of her clients’ struggles with squeezing life insurance and super pay-outs from industry super funds.

Her story attracted a high level of support, with advisers congratulating Houghton for sharing her experience.

John said: “Well done [Melinda] for having the guts to say it as it is, many of us have similar stories to tell, perhaps that should be a focus for professional adviser associations in that they should canvass their members and encourage their members put all their cases out there!”

Likewise, Wally “100%” agreed with Houghton. “ISN are running a propaganda war and would happily see the public receive no advice because it means more passive money remains in their funds. They have one interest and that is to fund their political ideology. You get what you pay for and industry fund service levels are mediocre at best.” 

Examples such as these should be publicised more often, CY said. “What could destroy a consumer's confidence more than the examples that Melinda Houghton has highlighted? I bet the ISA don't want to advertise these examples...but perhaps they could publish Melinda's examples on their "unbiased" online news feed, The New Daily, for all their members to take in and to independently make their own decisions about?”

Many advisers said they would not recommend clients take out industry super fund cover because of the hassle, like Karyn Hilton. “These types of issues tarnish our industry and don’t encourage Australians to seek advice and take out cover.”

A minority of commentators gave support to the industry super funds. Chris said: These three examples are terrible, but hardly damning of the entire Industry Super sector…Storm Financial was an independently licensed financial advice business...does its failure mean all IFA's are crooks?”

And Rod said: “The last time I read such self-deluding and misinformed material was reading the membership application for the American Rifle Association.” 

Read the article and more comments here.


SEE MORE HERE:

http://www.wealthprofessional.com.au/news/advisers-could-be-legally-exposed-184171.aspx

http://www.wealthprofessional.com.au/news/advisers-rank-life-insurance-companies-183959.aspx
 
http://www.wealthprofessional.com.au/news/hot-topic-of-the-week----183831.aspx



 
  • Investor on 21/02/2014 9:49:43 AM

    Chris Labor/ISA did use Storm as their foundation for saying advisers are corrupt and need this ridicules FOFA legislation to try to cripple the advice industry. They neglect to mention Trio that apparently was pushed by (this is unconfirmed) the ISA as it paid big commissions. Yes Labor/ISA has been very selective in its recognition of the failings of its own. Its quite handy to look at the failings of others while neglecting your own.

  • Innocent Observer on 21/02/2014 10:20:11 AM

    Just to chirp in on Storm Financial....

    Although by all accounts there were high fees and a failure to properly appreciate clients' risk tolerance, in actual fact the model itself was not some kind of ponzi scheme on steroids (as I think many believe).

    A diversified equities portfolio can actually deliver far superior risk-adjusted returns than, say, residential property. And yet we have constant spruiking from the real-estate-sales lobby groups and property "advisers" who have absolutely zero knowledge of how property returns behave under different market and economic conditions, let alone changes in demographics, supply etc....

    And yet every man and his dog, regardless of age or

  • Innocent Observer on 21/02/2014 10:24:21 AM

    Just to chirp in on Storm Financial....

    Although by all accounts there were high fees and a failure to properly appreciate clients' risk tolerance, in actual fact the model itself was not some kind of ponzi scheme on steroids (as I think many believe).

    A diversified equities portfolio can actually deliver far superior risk-adjusted returns than, say, residential property. And yet we have constant spruiking from the real-estate-sales lobby groups and property "advisers" who have absolutely zero knowledge of how property returns behave under different market and economic conditions, let alone changes in demographics, supply etc....

    And yet every man and his dog, regardless of age, is encouraged to lever up to his/her eyeballs for an asset that costs upwards of 6% in transaction costs to buy or sell, and trades on a pre-tax (after fees) yield well under 3% (tad lower than 2.5% here in Melbourne).

    If that isn't irresponsible, then Storm certainly wasn't (and I'm not suggesting Storm wasn't)

  • Investor on 21/02/2014 11:33:44 AM

    Innocent Observer, I saw a storm client and the strategy was destined to fail as the gearing levels were at a level that would definitely fail when you look at normal volatility levels in the market. Especially combined with margin style loans. In the short term it could work very well but was never going to work long term. Plus the projected returns were in dream land. Something like 13%-14% pa on the underlying portfolio. It can happen in the short term but aren’t going to happen in the long term! long term you will get Dividend yield + economic grow +/- market sentiment (change in P/E) Sentiment cant get rosier indefinitely as people spruiking property would have you believe.

  • Innocent Observer on 21/02/2014 2:05:55 PM

    Thanks @Investor. The only details about gearing levels I saw were after the inquiry, which had LVR at the 30% - 40% level. Unrealistic growth projections are a pet hate of mine - I "lost" two prospective clients within the last year as a result of other advisers setting their forecasts at nearly 4 x what I was predicting (for roughly the same asset allocation). Clients aren't stupid, but they can be gullible

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions