Presently, our profession is being taken to the cleaners.
The royal commission into the banks is showing the true colours of many that are associated with the financial planning industry.
The 5 major banks within Australia (CBA, NAB, ANZ, Westpac and Macquarie) and AMP, have all had (or still have) financial planning/wealth management arms as part of their customer offering. Financial planners have been incentivised to sell products associated with the banks to assist in generating ongoing profit and meet bonus targets.
Via these financial planning/wealth management arms, some 80% of financial planners are somehow linked to these banks and these incentives.
It is because of this that we begin to see the unravelling of the industry.
When someone is paid based on the sale of a product, then they will do all they can to ensure they sell that product. They will lie, they will deceive, they will pretend to be someone else if need be, just to ensure they maximise product sales.
This hasn’t only happened with financial planners who are associated with the banks. This has happened across the whole industry with those who sell a product to get paid.
As a result of this, financial planning is being seen as a dirty industry made up of crooks and thieves trying to “stitch” up whoever walks through the door.
These people aren’t financial planners. At best, they are product salesmen/women. Unfortunately, they’ve most likely been taught that this is the way financial planning should be done. Can be done. Unfortunately, as a result, financial planning is now being seen as a crooked industry and a long way from being recognised as a profession.
Financial planning is about more than selling a product. It’s more than risk profiling, it’s more than superannuation. Financial planning involves having a clear understanding of all financial elements that affect a client’s affairs. Everything.
An effective financial planner has to understand a client’s “why,” and empathise with their beliefs. They must understand how to maximise the opportunity for a client achieving all that they want to achieve, with as little risk, cost and tax possible.
A financial planning practice needs to be very clear about the clients they are structured to help and add value to. Just as importantly, they need to be honest about those who they are unable to help. A business that is able to chat with a client and tell them that they cannot be of assistance is a practice that knows where their strengths lie and understand their weaknesses.
To be able to do this takes time, education, care and an understanding of what the professional wants from this profession.
The royal commission is currently illustrating that a number of financial planners are not professionals, and are instead nothing more than salesman looking to make a quick buck.
Because of the actions of some, the likely outcome from the Royal Commission is that the ability to gain financial advice will become more expensive for the consumers.
Possible recommendations of licenses putting in place more processors, procedures, education and oversight will increase the cost to businesses which will be passed onto the consumer, and for some, will make financial advice unaffordable.
For those of us within the industry who have established our businesses away from this model, and operate as professionals, not incentivised by the sale of the product, not a lot will change. We will continue to work with clients who understand what true financial planning looks like, and appreciate the true value we can and do provide on an ongoing basis.