Opinion: Advisers, don't take it personally

by |

Financial services lawyer Sean Graham says that planners need to address consumer concerns about integrity, rather than ‘shooting the messenger’.

The emerging financial planning profession has many positive characteristics; a deep and abiding focus on clients’ interests, a broad perspective and a keen understanding of clients’ lifestyle and financial needs. It does however demonstrate some equally strong negative characteristics; a lack of introspection, reactionary responses to criticism and a too common tendency to “shoot the messenger”.

Consider the ASIC Stakeholder Survey (September 2013).

This Survey Report is hardly game changing. In some respects it does little more than document industry practices and make some broad observations, but online comments (which are not necessarily representative) seem entirely predictable; they dismiss the regulator’s views entirely, point the finger at accountants and lawyers and assert that the criticism is unfair (or politically motivated).

In reality, the overwhelming majority of financial planners do a great job; they provide the advice and support that enables many Australians to lead better lives and enjoy a better retirement. Most Australians would be better off, and have a better quality of life, if they sought advice – but only one in five Australians do actively seek advice.

Let’s be clear, 80% of Australians do not actively seek financial planning advice.

There are of course a number of possible explanations why they don’t, from cost to accessibility to apathy; however their perceptions of the financial planning industry may be a more important factor than we currently appreciate. 

The ASIC Stakeholder Survey noted that 30% of respondents didn’t believe that “financial advisers operate with integrity”. This response rate increases to 34% if you exclude from the survey those that didn’t provide any response at all.

Predictably, online commentators took the report personally; they referred to their own successful practices, the small sample size and the source of the report to dismiss these observations. But perhaps a more mature and productive approach might be to accept the thrust of the issue, acknowledge the impact that failures like Storm and Westpoint had on public confidence and consider whether consumers’ concerns about adviser integrity might be an important reason why more Australians don’t actively seek financial advice.

This doesn’t require us to believe that financial planners don’t act with integrity (clearly you and the majority of your colleagues do) but shouldn’t we at least acknowledge the elephant in the room.

As much as we may disagree, the introduction of a best interest duty is an obvious demonstration of dissonance between our views of financial planners and consumers’, legislators’ and regulators’ views of financial planners. The statutory test, a redefinition of appropriateness, a renewed focus on conflicts of interest and the introduction of the client priority rule, all suggest that there are concerns about aspects of the financial planning industry.

These perceptions may be inaccurate, unfair, unrepresentative and unreasonable, but they still need to be acknowledged and addressed.

In fact, both the FPA and the AFA are doing so and they have dedicated significant resources to promoting a more positive (or more balanced) view of our industry. They continue to be strong advocates for the value of advice and the advice profession, but they don’t make the mistake of ignoring the past, apologising for the emerging profession or pretending there haven’t been mis-steps along the way.

Instead of rationalising high profile advice failures, or ignoring the elephant in the room, they’ve chosen to drive for higher standards, better education and better behaviour. It seems to be working, and they note that an increasing number of consumers are seeking financial advice.

Perhaps it’s time for us all to take a similar approach and work at improving the lives of the 80% of Australians who wouldn’t have previously sought advice.

  • James Howarth on 26/09/2013 10:56:34 AM

    It is already a profession. ASIC put a date on it. You should be up todate on such matters.

    Storm and Westpoint are ASICs fault. ASIC creates complacency in consumers.

  • carl on 26/09/2013 10:43:56 AM

    Well said, James.

  • Wayne Slager, Nexus Private on 26/09/2013 10:43:41 AM

    Thanks Sean for a well constructed, professional article and commentary on the state of the financial planning industry, and a view on the way forward. While I now work for a full advice practice I'm not an adviser so I share your advantage of not being restricted by the same mindset or positions often expressed by industry participants.

    That fact some 80% of Australians don't seek advice is much more a mirror of the industry than it is of consumers, regulators or any other party accused of making it hard for advisers to make a living. Are the vast majority of advisers ethical and do they work hard to do a good job? I'm sure they do but that doesn't mean they are meeting all their clients' needs or positioning themselves well to connect with their target market. The stats and survey responses clearly say otherwise.

    Sadly, the victim mentality is alive and well and does the industry a great disservice. One key element that addresses both relevance to consumers and practice sustainability, and is something that advisers can advocate for, is the matter of comprehensive advice on direct property.

    For all sorts of reasons it's been the historical no go zone at all levels of the industry. Might it be time to revisit those reasons to see that they may no longer be valid (or ever were) and find appropriate solutions to satisfy all stakeholders?

  • James Smith on 26/09/2013 10:07:25 AM

    Why does Graham assume that we are on a mission to evangelise to the 80% and convert them to the financial planning fold ? The 80% will not engage with advisers for a number of reasons. To assume that advisers should support industry moves to convert the 80% at whatever cost ( ie increased red tape ) is ill founded. Like any profession, growth will come from referrals from existing practises. If clients have never engaged with an adviser, the best way to market to them is via their friends/colleagues who are in an advice relationship. Our business does not need help with attracting clients. That is in our control and we are doing well. Influencing regulators and media outlets to get a better understanding of how well our industry works for the majority will be far more beneficial than ill conceived red tape.

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