How can there be so many instances of professional negligence and abuse?
Over 600,000 clients will be reviewed and may be offered compensation from the Commonwealth Bank and Macquarie Bank financial advisory divisions for wrong, or incompetent, or conflicted financial advice. This is not the first, and certainly not the last time where the big banks and life companies have been forced into admission of wrong doing in providing unethical and inappropriate advice at a huge cost to thousands of their own customers.
Unfortunately this whole “profession” of financial advice was set up, financed, and largely controlled by these same institutions. Our government has greatly assisted in this mess by firstly making superannuation compulsory, and then complicating it beyond comprehension. At the same time it has been most reluctant to regulate the product industry or the advice, and has been easily pressured into diluting consumer protection.
The questions are; how did these banks sign up so many clients in a first place, and how can customers of financial services avoid being signed up and then exploited by such greedy incompetence?
Where possible; avoid complexity!
The major selling feature all these institutions use in collecting high percentage based fees whilst providing minimum service is with the use of complexity! They offer mysterious client solutions that involve a large range of investment products, platforms, wrap accounts and other fee /commission gathering vehicles.
What we’re seeing is that in a large number of cases, it’s all about the adviser selling a complex product. Most times this product is totally unnecessary as most client situations are never that complex in the first place.
The most recently reported instance of selling a product being confused for advice involves 160,000 “premium clients” of Macquarie bank. The issue lies in the lack of knowledge these “private wealth advisers” have as they have been caught cheating whilst trying to maintain their so called professional knowledge. The case against Macquarie Bank is based on the fact that they knew about this and continued to allow their financial planners to sell their product.
The fact that the bank will now be providing any affected clients with $5,000 to have their plans reviewed by an independent financial adviser, as their first measure to rectify wrong advice, speaks for itself.
The best way of avoiding disappointment and financial hardship is to be clear about your own financial position and ensure you clearly understand any proposed solutions that are being presented to you along with the associated costs. And where possible, avoid complexity.