Financial services' unifying principles

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Wealth Professional has received concerns in the past that financial services associations in Australia need to work more collaboratively to represent the sector with lobbying. However, leading industry professionals say they're constantly working in partnership.

FPA and AFA CEOs Brad Fox and Mark Rantall both say that they discuss their positions and use that to explore policy positions.

“It’s clear given we represent different interests, from time to time we’ll have different opinions, however on balance we’re working through all of our collective interests,” says Rantall. “Constantly our policy people in all organisations have regular discussions and meetings. A good example is enshrinement, where the vast majority of industry associations support enshrining the term financial planner.”

SPAA CEO Andrea Slattery thinks back to how the industry was 10 years ago and says it has come a long way, and that there are still more opportunities for associations to work together, “for the benefit of each of our members and the growth of the integrity for each of the particular industries”.

US financial services seem to be struggling with the concept, and following a Twitter-brawl between two factions of the financial world, Forbes contributor Tim Maurer came up with a list of possible unifying principles, which representatives could agree to:

  • Regardless of how much income flows into a household, its financial success will hinge on the effectiveness of a purposeful cash flow system befitting the personal strengths and weaknesses of all parties involved.
  • Debt wisely utilized can help build wealth, but fueling bad decisions with leverage is the quickest path to ruin, and most will be well-served to pursue an eventual debt-free path.
  • Change, surprises and failure are guaranteed, and the best counter-agent is financial margin in the form of liquid emergency reserves.
  • Many of life’s risks can be adequately managed personally through risk avoidance, risk reduction or self-insuring through risk assumption; but catastrophic risks a household could not survive financially should be transferred through insurance.
  • Investing is an art and a science. Investors have found success utilising strategies on a continuum ranging from inertly passive to surprisingly active, but more managers (individually and institutionally) fail than succeed, and very few succeed without adopting and deliberately following a disciplined strategy.
  • Taxes are one of the most important elements of a majority of financial decisions, but almost never the most important.
  • Not planning for major future expenses, like education and retirement, is folly; but tomorrow is promised for none and deferring all gratification for the future strips the joy from life today.
  • Most individuals and every family with minor children should have well-conceived and precisely articulated estate planning documents; namely a will, durable financial power of attorney and advance directives (including a health care power of attorney and living will).
  • Leaving a legacy is as or more important than leaving an estate.

Do you agree with Maurer’s ‘unifying principles’? Share your thoughts below.