The financial advice market isn’t a level playing field, accountants are taking away client control and revenue and Mark Bouris is a great Australian success story, say AIOFP executive director Peter Johnston.
Our market will never be a level playing field whilst we have cross-subsidisation of the advice function by platform or SMSF administration revenue. Thankfully Treasury has recognised this reality and intervened in the FoFA direction.
We are great supporters of the SMSF market but we should not lose sight of the fact that accountants have taken the revenue and control of clients away from the institutions and given it to themselves by recommending that they establish an SMSF structure.
What is the difference in conflict and self-interest terms if you have an adviser recommending their favoured platform because they get a rebate/dividend, and an accountant recommending an SMSF because they get the fees? Absolutely nothing.
In fact, I would prefer my money to be in an institutionally-owned platform, rather than with an accountant if some type of fraud takes place. With all due respects to our accountant comrades, there are a lot more accountants in jail for fraud than advisers, and institutions do have a habit of settling problems to avoid brand damage.
Treasury also recognised that the demands on the true independent adviser [i.e. no cross-subsidisation from product or SMSF revenue] were simply unrealistic. How is an adviser going to survive in a market on an hourly rate with a public that has only ever known so called ‘free services’ on advice from institutions and SMSF sellers taking admin fees and masquerading as ‘independents’?
It’s extremely hard. That’s why some are predicting the end of the true independent. Further exacerbating the conundrum are papers like former Chief Justice Jim Spigelman’s Tyranny of the Billable Hour which virtually says professionals charging hourly rates cheat their clients with ‘slow work’ and over charging to meet budgets. How can an independent adviser survive in this environment?
We all agree that product commissions are a conflict and should be abolished, but the whole issue is confused by ASIC classifying platforms as ‘investment products’. This is an issue we have lobbied Senator Cormann on.
Platforms are administration services period. SMSFs are an administration platform and so are industry funds – and they all subsidise advice. Thankfully, Treasury has intervened to sort out the absolute political hypocrisy and opportunism that swelled around this issue.
Recently we had YBR’s Mark Bouris at our conference to talk about market domination by the institutions, and how he not only survived but made hundreds of millions personally from the risks he took when he sold Wizard Home Loans.
What a great story from a person many are a little envious of. His message is very clear, we independents are very much a minority in a market that’s 85% dominated by the institutions, and we all must unite to create the fifth pillar to survive. Just for the record, Bouris thrilled the audience with his humble and affable approach and displayed why he is a great Australian success story.
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