Note: This article is updated regularly when new financial advisers join the independence club (latest update June 2013). A financial adviser does not have to be a member of the IFAAA to join the SuperGuide list, provided they can declare that they satisfy the requirements of being an independent adviser (we now have 3 categories). Anyone seeking an independent adviser needs to conduct their own research on whether an adviser is truly independent – this article will help you with this research!
Way back in February 2010, we published a list of 14 independent advisers which triggered much controversy and angst from the financial services industry, and from SuperGuide readers. In April 2011, SuperGuide was at it again, and the number of truly independent advisers in Australia had halved – to 7! In February 2012, for the third year in a row, we published an updated list of 9 truly independent advisers.
In June 2012, we again published the updated list of independent advisers but we split the types of independent advisers into 3 categories: more on those categories later in the article. As at June 2013, we now have 24 independent financial advisers on the SuperGuide list.
Before you ask the obvious question, let me say, I have asked the same question: How do we know that the 24 advisers in the SuperGuide list are the only independent advisers in Australia?
Well, we don’t! We know anecdotally that there are plenty more independent advisers working away in adviserland. At least we’re hoping that in a country of 23 million people that there are many more independent financial advisers working away for their clients too busy to have time to register for this very exclusive list. Let’s hope SuperGuide’s updated publication of the ‘group of 24’ inspires other independent advisers to make themselves known (if they exist), or inspires others to become truly independent.
Open invitation to independent advisers
Since June 2012, we have slightly changed the process involved in compiling the SuperGuide list of independent advisers because we essentially have two definitions of independence:
- The Corporations Act 2001 definition of ‘independence’ which allows advisers to charge asset-based
- The IFAAA definition of independence, which excludes those advisers who charge asset-based fees.
We have also published an open invitation to all independent advisers to contact SuperGuide. We will add the names of the independent advisers to the SuperGuide list, subject to the adviser declaring they satisfy each limb of the independence requirements. The adviser will not need to be a member of the IFAAA to join the SuperGuide list (see end of article for link to invitation). The IFAAA has a stricter definition for independence than the independence definition contained in the Corporations Act.
What does an IFAAA independent adviser look like?
According to Daniel Brammall, President of the Independent Financial Advisers Association of Australia Limited (IFAAA), the IFAAA receives quite a few calls from financial advisers seeking to be members of the association, and Brammall sends out plenty of application forms.
“In spite of all the conversations I have with advisers interested in joining, so far these members [9 advisers in the updated list below] are the only ones who have successfully passed the IFAAA’s Gold Standard of Independence test,” says Brammall.
According to Brammall, the three requirements for the IFAAA’s Gold Standard of Independence are:
- You can’t be affiliated with a bank, insurance or investment company (that is, a product manufacturer).
- You can’t receive
- You can’t charge asset-based fees (that is, a percentage of client assets under advice or under management).”
Change from within will deliver results
Although the ban on commissions for future retail investment products (including managed investments, superannuation and margin loans) is history making (effective from July 2013), the question of independence (or lack of) will remain an issue beyond July 2013.
In the past I have made the comment that I have found the debate surrounding commissions and ownership and independence of financial advice rather depressing because the Government and financial planning industry and commentators were trying to change the industry from the bottom – dragging the worst advisers (in terms of independence) to a level that was a little bit better than ‘worst’. I stated that such an approach was destined to countless setbacks (and ultimately failure) because the broader financial planning industry as it is currently structured is a product distribution model rather than a financial advisory model.
The financial advice reforms announced by Mr Shorten were brave and industry-changing, although the changes that were legislated are, perhaps, not as brave as I had hoped. For the past 10 years (at least), I have campaigned for many of the changes announced, along with other commentators and consumer groups, although some of the positive changes that were successfully blocked by lobby groups had everything to do with protecting the profit centres of major financial organisations and nothing to do with the best interests of consumer.
Even so, real change will only occur when financial advisers drive the change rather than having the Government and regulator drag reluctant advisers kicking and screaming into a new professional business model. Initially, the leaders of the financial advising industry read the signs and were making the right noises (‘higher quality advice’ and ‘more professional industry’), although many backpedalled on significant reforms, in particular, the requirement to ensure a client periodically (every 2 years) agrees to remain a client (the opt-in rule) of the adviser. The original reform announcement referred to an opt-in after every 12 months, and then extended to every 2 years. The final reform version for the opt-in requirement now means that some advisers won’t even have to participate in this compliance requirement, provided they are bound by a code of conduct approved by
This irrational opposition from the broader financial services industry is disappointing for consumers and for younger people considering financial advising as a career. In my view, we need to reward the advisers who are operating in the best interests of clients right now – structurally, operationally and ethically.
The relatively new organisation – IFAAA – can differentiate the truly independent licensed advisers from the thousands of advisers who accept commissions and/or are employed or incentivised by the product distributors (read ‘major financial organisations’).
Note that although financial reforms take effect from July 2013, existing commission arrangement and incentive schemes will continue to operate indefinitely, and independence, and conflicted advice, will be a constant struggle for the financial advising industry.
What does ‘independent adviser’ mean?
So, what do you need to possess in the way of skills and independence to make this exclusive list?
I interviewed Matthew Ross at the time we published the original list of 14 independent advisers (in February 2010), and his comments remain relevant. According to Matthew Ross, who is a member of the IFAAA, the list of independent advisers “satisfy the Corporation Act’s definition of independent (see s.923A) which is basically no commissions, no charging fees based on volume of product sold or advised on, and no affiliation with any product manufacturer.”
Ross explained that 80% of all authorised representatives are aligned with a product manufacturer, which precludes them from describing themselves as independent. He said: “Of the remaining 20%, a large slice of them pocket commissions (on insurance and/or investments) or charge their fees as a percentage of your assets, which is commissions by another name.”
Ross argued that the big push by planners to drop commissions but to charge fees as a percentage of assets under management is simply commissions by another name. Ross said that the asset fees are usually collected through a platform, which is not considered a ‘financial product’ under the legislation, and it means the financial adviser can then describe themselves as independent.
“The issue isn’t the word ‘commission’; it’s the concept of an incentive and no matter which way you look at it, when you are paid a % of anything, there is an incentive. Incentives result in zero independence,” said Ross.
Ross hoped that the recommendations made by Bernie Ripoll to include the term ‘fiduciary’ in the Corporations Act will effectively result in the end of asset fees charged by planners.
Note: Effective from 1 July 2013, every financial adviser is subject to a statutory fiduciary duty to act in the best interests of a retail client. What this means is that a financial adviser is required to place the best interests of a client ahead of their own when providing personal advice to retail clients. I discuss the fiduciary obligations of advisers in my 2009 column THE SOAPBOX: The 25-year super war, and the reforms surrounding a ‘best interests’ duty in the article Financial advice revamp: by the Shorten curlies.
IFAAA – point of difference
The IFAAA promotes itself as the ‘gold standard’ of independence of financial advisers. Quoting directly from background IFAAA information:
Existing industry associations do not provide genuine independence. They represent the eighty-five per cent of financial planners associated with product manufacturers who receive commissions. According to the ASIC the typical financial planner acts as a “sales force for financial product manufacturers” and that advisers are “a product pipeline”. This is who the current industry associations are representing. Not one of the main four planner associations represents the interests of truly independent advisers whose interests are aligned with their clients.
According to the association’s background material, the IFAAA aims to solve the definition of independence and promote the value of independent advice to the consumers, to train and develop independent financial advisers, and to represent the interests of its members to government.
Membership of IFAAA
For a financial adviser to become a member of the IFAAA they must agree to the following:
- I declare that I am genuinely independent and acknowledge the restrictions of the use of the term ‘independent’ under s 923A Corporations Act (2001).
- I avoid all real and perceived conflicts between my interests and my client’s interests.
- I do not receive commissions for my client purchasing a financial product.
- I do not receive payment or inducements to recommend financial products to clients.
- I do not have in place any fee structure that means I will not be paid unless my client purchases a financial product.
- I declare that I have an interest in promoting and encouraging the professional development, independence and concerns of financial advisors.
- I acknowledge that membership is contingent upon payment of an annual membership fee as determined by the Board from time to time.
Financial advisers are not the only experts who can provide independent advice.
Group of 24 (9+5+10) – the list!
SuperGuide publishes, and intends to regularly update, a list of three categories of independent advisers:
- those advisers (and AFSL holders) who are members of the IFAAA
- those advisers (and AFSL holders) who satisfy the IFAAA independence requirements but are not members of the IFAAA
- those advisers (and AFSL holders) who satisfy the independence requirements under the Corporations Act but may charge asset-based fees, which means they don’t satisfy the additional IFAAA requirement of only charging fees based on hourly rates or retainers.
IFAAA members – independent advisers
According to the IFAAA, as at June 2013, there are 9 independent financial advisers in Australia who are also members of the IFAAA (satisfy the independence requirements under section 923A of the Corporations Act 2001, plus only charge hourly rates or retainers for services). The names of these independent advisers are:
- Trent Alexander, Financial Planning Expert, VIC
- Daniel Brammall, Brocktons Independent Advisory, ACT
- Fergus Hardingham, FM Financial Solutions, NSW
- Susannah Kulincevic, Brocktons Independent Advisory, ACT
- Travis Morien, Australian Independent Financial Advisers, WA
- Michael Radalj, Eclipse Financial Advisers, NSW
- Bill Raffle, Bennelong Private Wealth, NSW
- Matthew Ross, Roskow Independent Advisory, VIC
- Neil Salkow, Roskow Independent Advisory, QLD
Independent advisers who satisfy IFAAA membership rules, but are not members of IFAAA
As at June 2013, we have 5 advisers who have requested to be on our list of independent advisers, and who satisfy IFAAA member rules, but who are not members of the IFAAA (second category of independent adviser).
The advisers listed below have declared that they satisfy the three limbs of independence required under the section 923A of the Corporations Act 2001, and only charge hourly rates or retainers of services:
- Corin Jacka, Corin Jacka Financial Solutions, Victoria
- Terry McMaster, McMasters’ Pty Ltd (Vic), Victoria
- John Wothersoon, Astute Investing, South Australia
- Simon Wotherspoon, Astute Investing, South Australia
- Berivan Yilmaz, McMasters’ Pty Ltd (Vic), Victoria
Independent advisers who are not members of IFAAA, and may charge asset-based fees
As at June 2013, we have 10 advisers (7 from the one firm) who have requested to be on our list of independent advisers, and who are not members of the IFAAA, and who fall into the third category of independent adviser.
The advisers listed below have declared that they satisfy the three limbs of independence required under the section 923A of the Corporations Act 2001 (refer earlier in the article):
- Simon Briggs, Pitcher Partners Investment Services, Victoria
- Sue Dahn, Pitcher Partners Investment Services, Victoria
- Marcus Damen, Pitcher Partners Investment Services, Victoria
- Kellie Davidson, Pitcher Partners Investment Services, Victoria
- Brendan Fahy, Pitcher Partners Investment Services, Victoria
- David Gemmell, 50Plus Wealth, Victoria
- Victoria Lindores, Pitcher Partners Investment Services, Victoria
- Kevin Smith, Professional Super Advisers, NSW
- Adam Stanley, Pitcher Partners Investment Services, Victoria
- Jack Tidswell, Exceptional Financial Planning, NSW
If you believe that your name should be on one of the lists above, then why not contact SuperGuide? A starting point is to check out our open invitation, Still wanted: all independent advisers in Australia.
Again, I invite the other financial adviser associations to write to me and present their point of view on the issue of independence
Trish, one of the problems I see is that Financial Planners are afraid of disclosing their hourly rate based on the assumption that it will scare the punters. Most accountants, lawyers, architects and other qualified professionals are OK with disclosing their rate, along with an estimate of the final cost.
Most of these professional have not only a higher education degree, but most have several years of study and experience to obtain professional qualifications.
If I can have a first rate accountant for $300 an hour, with an annual cost for company and personal tax returns, and advice along the way for less than $2,000 per year why would a financial planner expect remuneration of 4 or 5 times that?
There is sophisticated software that will, using the data from the punter, turn out a standard plan in a few minutes. Add in, say, 2 hours fact finding, another 2 hours for internal review of the plan, and another 2 hours for presentation. So lets say 6 hours at $300 = less than $2k.
I’d happily pay $10k if there was real additional value, but not for a standard advice type of plan.
The smoke and mirrors has to stop. If $300 an hour is not a reasonable rate then the industry really does have to reflect on how they think they are worth any more.
The industry should move to a cost based fee structure and educate the punters that good advice is worth paying for.
I would love to be able to bill at $200 an hour
Rgds
I thought 923A also banned the use of the word independent if the adviser has direct or indirect restrictions on the financial products they can recommend. That immediately rules out anyone working from an Approved Product List apart from the commissions and asociations restrictions. So how do independent advisers cope with the thousands of managed funds, shares, super, fixed interest securities, set al. It seems to me that as soon as you say I only recommend products with a 5 star rating from XYZ you are restricting your range of financial products. Is that what the legislators meant?
When our profession gets around to creating a Hall of Fame Trish I’m nominating you.
This is true leadership Trish.
Trish,
I have now been back in Melbourne for almost 5 years after spending 14 years in Hong Kong. I must admit that I am amazed by the whole Advisor industry here. Maybe it was because I was working with money savvy Chinese, but the fact that I’d let anyone advise me how to deal with my wealth is an anathema to me. My view is that “I can lose my money as easily as you can”. I once had a meeting with a financial advisor (on the advice of my accountant) only to discover that this person could only advise on financial matters – not tax! What a broken model this is. The one good thing that come out of this episode was I now have a 2011/2012 copy of the Australian Master Financial Planning Guide. I now do my own work and have a decent guide book to refer to. A further twist for me is that no Australian advisor can give any form of off-shore advice which my or may not be relevant here.
Hi Ian,
I agree we have a broken model, and I hope we can move towards fixing it. I look forward to becoming an “official” independent financial planner in the future, unfortunately, I cannot wear that title yet (although I consider my advice unbiased). I have qualifications in accounting, but not yet tax agent status so I can provide full tax advice.
Hopefully with time, change (and a heap more ongoing study) a few more of these holes can be closed off, making Australia a better place to get advice, especially for the many multi-national based roles that are growing out of our Australia/Asia region.
Regards,
Ryan David Grant
Ian, some free advice:
Be careful with offshore investing. It could easily be viewed as tax evasion.
That’s not my advice. My advice is don’t use your name on blogs like this, it could make you a target for any ATO auditors that might be visiting this website.
If there are any advisers out there that satisfy s.923A and can call themselves independent but have chosen not to be a member of IFAAA, please record your name, company and AFSL number below.
You’re right Greg, you don’t have to be a member of the IFAAA to be independent. Let’s see how many names we get. This is a ticket clipping free zone.
Greg, for your stats, of the 14 indy’s (independents) that were initially invited to be a member of the IFAAA, only 7 joined up. One wasn’t an indy it turns out. Another three were “wealth coaches” and the other three? Dunno. Just not interested I guess. Anyone can join, as long as you meet the standard.
Trish,
With respect – the major flaw in this article could well be summed up by:
“All members of IFAAA may well be independent financial advisers, but it does NOT follow that all Independent financial advisers are members of the IFAAA (and presumably paying membership fees to the IFAAA – no doubt a nice little money spinner for Mr Brammall)”.
One has to ask the question regarding the reduction of “truly independent” financial advisers listed by the IFAAA from 14 last year to nine this year was whether five members decided not to be independent (!), or just possibly the five decided their membership fees to the IFAAA were pointless. In reality, surely the prerequisite to be a member of an organization in order to be classified as independent (or for that matter, honest, or customer-friendly, or whatever other desirable trait) is something of a nonsense!
Perhaps a more accurate assessment of the number of independent financial advisers would be for Mr Brammall to offer listing as such, without “clipping a ticket” on the way through.
Furthermore, perhaps your article’s heading should be “Only 9 members of IFAAA in Australia”.
I am not a financial adviser – merely a SMSF “punter”.
I am a client of a mob called WTC Financial Services and my Financial Adviser is Omar Palov. I am not charged a commission (or if a commission is paid it is rebated back to me) and on Omar’s advice because of my current investment strategy I changed from a flat, annual fee over a year ago, to a pay-by-the-hour arrangement, making for a considerable reduction in my fees.
I am unsure whether WTC meets Mr Brammall’s other membership criteria and I am certainly not interested in WTC having in place a requirement for them to make a “payment of an annual membership fee as determined by the (IFAAA) Board from time to time”.
Regards,
…Greg Williams
Hi Greg
Thanks for your comments. We have to start somewhere and the IFAAA is the first organisation drawing a line in the sand and stating they are independent (under the law). The financial advising industry does not provide a list, ASIC does not provide a list (although I think ASIC should_, and I am not aware of any other list that contains all independent advisers. If any other adviser satisfies the IFAAA requirements but doesn’t want to join the IFAAA, I am happy to publish your names in our own SuperGuide list.
Spread the word, and we will publish a new list with the new names.
Regards
Trish
I have been retired since 1985 when I rolled over my retirement benefits into Approved Deposit Funds and other superannuation products after studying the then limited “market”. In 1994 I set-up and administered a SMSF for myself and my wife. We have done very well without a financial adviser. We avoided the GFC by prudent recognition of trends as outlined by Ralph Cresswell in his email of Jan 31.
A financial adviser only advises. It’s always up to the client to make the final decision. The difference between an adviser and the client is the adviser’s training, access to information and, (sometimes) experience. I attribute our investment success to continually educating and informing ourselves; diversification of investments; and satisfaction with modest gains. If everyone were encouraged to do the same I submit that financial advisers would be superfluous.
Dear Trish
would advisors who work in industry superannuation funds not meet the criteria of being independent financial advisors?
My wife and I are each in an industry fund (HealthSuper and Unisuper respectively). We have obtained a financial plan for our retirement through HealthSuper, for which we paid over $1000. We have since consulted an advisor in that fund for ongoing advice, for which we have also paid. Both funds state that their advisory staff are paid salaries, not commissions. I can personally vouch for the disinterestedness of the advice received from the HealthSuper consultant, who advised me to stay in UniSuper rather than switch to HealthSuper.
Staff in this type of super fund may not be members of IFAAA, but surely what they are doing is providing clients with independent advice?
Regards
Guy
Dear Trish.
I add my compliments to the hundreds of others you have already earned for presenting the facts about investing in easy to understand terms.
As finanicial lay persons my wife and I had a long-term (20 years plus) ‘relationship’ with our former financial adviser. On receipt of an inheritance in 2006 we naturally trusted him to invest it on our behalf along with my super only. We have since been financially ruined. Our case has been before the Financial Ombudsman now for three years. We paid both an up front fee for advice as well as platform fees, trailing commissions and probably other fees which were listed in the advisers PDS but in such a way (we claim) as to disguise their totality over a time frame. In 2006 one simple bit of advice would have saved both our money and much heartache. That is: ‘The market in 2006 is currently trading well above the historical trend line. This line shows the increase in the value of the stockmarket from 1900 to now. History shows this trend will not continue. I recommend you stay in cash until such time as the market returns to the trend line and then invest. Yes, you will pay more tax now. Yes, you may not pick the bottom of the market. But this historical graph proves that your losses or gains will be moderated. No, I will not get paid any commissions for this advice but I will ultimately gain by keeping you as a long term client’.
The comments by non independent financial advisers regarding their client’s unwillingness to pay high hourly fees are valid. However those same advisers will have to work hard to prove they are worthy of those fees, hidden or not. It is an immutable proven fact that no investor or adviser can consistently out perform the market. All we sought to do was to maintain our wealth in relation to inflation. i.e. “we are not greedy”. We even printed this comment on our risk profile prior to entrusting our funds. Clearly it was ignored as our adviser sought to maximise his and his company’s earnings. To this day he protests his strategy was correct despite our computer tracking showing ongoing losses on our former investments. Several of our former investments were in sub prime mortgage schemes and here too he maintains they were not, despite being forced to admit this by the Ombudsman’s investigations and subsequent interim comments. As Lord Rothschild said: “It takes a lot of skill to accumulate weath but ten times as much to keep it”. My advice, avoid financial planners. There is enough free information on the internet for most lay people to invest their funds conservatively. Sure you may only retire comfortably, but surely that is better than relying on the aged pension. Ralph Creswell
Hi Ralph
Many thanks for your support and for sharing your harrowing investment story. Good on you for pursuing it to the Financial Ombudsman.
Regards
Trish
What a refreshing discussion! It’s not too often I stumble across like-minded people in this industry. It’s certainly an exciting time to be an independent planner. The public are slowly starting to realise the conflicts that exist with other planners and FoFA will only support the independents in this respect. Anyway, I am an independent financial planner – I established my own practice earlier this year – but i’m not on the list of 7 above. Do I need to be a member of the IFAAA to get a mention here?
Hi Trent
Thanks for your comment. Yes, we obtained this list from the IFAAA, and that is how we are verifying independence – happy to update the list if IFAAA confirm that you’re independent.
Regards
Trish
Roland,
You do have a valid points. We mostly do not question doctor and lawyers’ commission and fees etc…These are established business ran for many many years. We “the planners” will hopefully get to that point soon.
Peter
Dear Trish,
I am just a reader, and found Super Guide is very helpful and informative. I am sure the community would be more vigilant when investing their savings, and providing a deterrent to improve the financial services industries in general.
Here is my own experience, in black and white:
1. The majority of advisors do not know how to invest your money, they put your money into some Investment Funds ( have more resources ) who will pay them a commission.
2.The Investment Funds do not guaranty the returns of your investments, they make money from taking a percentage out of your money. In a good year, they take more percentage out of the profit pool. In a bad year, they might or might not, depending on the accumulation from previous year.
3.Just reflect on your own super fund, if your advisor (hence the investment funds) were good, they would have guided you to avoid loss in early 2008 after the GFC. Most funds did not provide any advice whatsoever!
4.Just look at the Sun Herald Investor, the dart games and astrology are equally as good as the financial experts.
5. TTR (transitional to retirement) is good in theory only. You have to pay more fees, the return is lower than normal super funds in general, and we know the returns in super funds are not as good as a term deposit in recent years.
Sincerely,
Tim Smith
Hi Tim,
Great to read your comment. I agree entirely! Super Guide is an awesome resource and hopefully helps many people to make better decisions.
I am also glad to read your experience, and sad to see it was not great. I know very well that most advisors do not know how to invest money. I have spent many years researching the “how” myself. The truth is I play a better game of darts than I do predicting the future. For this reason I have to build a portfolio based on research, and try to best position them to avoid crashes yet still make money.Avoiding the GFC was tricky, I know advisors who pulled their clients to cash ahead of time, I respect them a lot. I didn’t. I wish I did, but I did position what was invested very conservatively because it was a high risk time. As for TTR, I have clients that have used it well and increased their net gain through lower overall tax, and clients that have not (despite my advice). Also, many of our SMSF clients have had great returns – using term deposits in super, same interest rate, no tax…
I hope your future experiences don’t include disappointments from advisors, and wish you all the best reading Super Guide. I look forward to talking again soon on these forums.
Regards,
Ryan Grant | Financial Planner
The debate on Billable hours by lawyers has been going on for decades,
Google this comment by – Chief Justice Paul de Jersey AC has condemned the use of billable hours in the legal profession, declaring that timesheets reward inefficiency and encourage dishonesty. Speaking at the Australian Lawyers’ Alliance annual state conference on the Gold Coast today (18 February2010)
So why are Financial Advisers being pushed down this path?
When will this argument get down to the basic premise of Value, how does any business person charge for the service that is provided. They charge what the buyer is prepared to pay. This has nothing to do with Independence ( talk to any franchise owner!) but it has everything to do with making sure the client gets value for what they are paying for and is given the option on how to pay, with full clear disclosure and understanding.
I don’t hear my doctor disclosing to me that he gets a commission when I fill my prescription at the chemist, so be careful about all this stuff about not being conflicted etc, most of our professionals are conflicted in ways we have not even begun to understand.
So get OFF the case of TRUE financial Advisers and get on the case of the banks owning sales channels and the enforced sales targets, that are giving US a bad name.
Sincerely
Roland Knight
When choose a financial advise, being truly independent does not guaranteed give you the best result. However, it does give us a peace of mind that knowing the adviser’s advise will not influenced by commission etc…. It functions more like a going to see a “Lawyer” which commonly charge hourly.
Peter Leah
Trish,
I read with interest your article about the number of independent advisers dropping from 14 to 7. Could I just clarify things for you and your audience.
Firstly the number 14 was those independent advisers that had registered on a certain site. I estimate that the real number of independent advisers was closer 30-40 at that time.
Secondly the number 7 is those independent advisers who have joined IFAAA. For example, I am still independent but have not joined IFAAA. I think that you will find that the real number of independent advisers has not dropped but has probably increased slightly from the 30-40.
Finally I would like to thank Daniel Brammall for his hard work in this area and yourself on your excellent site.
Regards,
Kevin Smith
Director
The Professional Super Advisers
This is an excellent article and cuts to the crux of the matter. This is very relevant in the light of the FOFA document released by government.
In my view, the regulator is at fault. I have practical experience with ASIC. I applied for an AFSL over a year ago and ASIC is still busy with processing on my case. They summoned me to a hearing to state my case for the AFSL application. I basicly have to get legal representation costing $20,000 at a minimum to assist with this application. This is in addition to police clearances, membership to an ombudsman service, application fees and relevant experience as an accountant in the industry.
No wonder financial planners have to make up the cost for compliance with these extra fees. 7 independants out of 18,000 is not good – and now I know why.
Hi Hein
Many thanks for your positive feedback and very interesting comments. Good luck with your application, and perseverance.
Regards
Trish
Hi Trish,
I am an avid fan of your website and believe education is a crucial part of good financial planning. Like Roland, enjoying the Sunshine state, I am not eligible to qualify as a “truly” independent financial adviser. I give my clients options, and the majority of investment based clients are on a asset based fee, revisited on a annual or biannual basis. I am only young, and have only 5 years experience in this industry, but so far I have only had one client charged at hourly rates – an estate. Many of my SMSF and strategic clients are charged a flat annual fee to cover a set range of services. If I find that I am having to do an increasing or decreasing amount of work for a client, I will renegotiate the fee.
I appreciate your newsletter and look forward to talking with you again in the future, thank you for listening to my point of view and for providing such a good resource for our community (and many of my SMSF clients).
Regards,
Ryan Grant | Financial Planner
Why would Roland not qualify as an ‘independent’ adviser, Trish?
I am assuming the ‘contract price’ he quotes is not a percentage of volume, and is not tied to product choice or performance. If that is so, it is really an agreed rate linked to an affordable payment plan. Have i missed something?
Dear Trish,
I do congratulate on what your doing with your website, please keep up the good work.
I would like add my comments please.
People are missing the point about this discussion – it is – how is the client to pay for the services of a truly independent financial planner? the answer is easy, by the hourly rate.
Then how often do you see your Solicitor?
and when we do, we all complain about the cost. This is the track that a small group of people want the industry to go down. to charge all clients by the hour.
because they think this will somehow change the way we look after our clients.
This will simply cause the majority of people NOT to get financial advice because the cost is too high.
This has already been proven in the USA.
A recent independent study was done comparing the accounting industry to the financial planning industry and the hourly rate that should be charged. the result was a Minimum of $350.00 per hour to get advice, you can imagine the rest.
This industry is not about charging the client on a 6 minute time frame it is about forging a personal relationship that lasts a lifetime, with a full understanding of the costs, because a good adviser will add value to the client more than the cost of that advice.
I can tell you now any client that can afford to pay their financial adviser by the hour is what we call a High Net Worth Client, ie high income and a high level of investable assets.
Although by legislation I am unable to call myself independent I give every client the choice of how they would to pay – by the hour – or by contract price. 100% have said contract price.
I then give them a choice of how they would to pay via a product (if one is available) or by bank deduction, 10% of my clients have opted to pay by bank deduction.
So the moral of this story is just because I cannot say I am truly independent, I will and have always put the client’s interests before my own. The fiduciary obligations of advisers has always been how most of us have worked, so it is not new to start saying this will push us in a certain direction. we have for a long time been under the corporation act that implies this obligation anyway.
Yes I do not work for a bank nor am I aligned with a bank. So please do not put me in the same basket as the bank adviser which is where most of the blame is being pushed towards based on this commission argument.
I have been an adviser for 28 years and look forward to the next 15 years by keeping my clients up to date and fully informed including all costs.
Kind Regards
Roland Knight
a fully qualified and authorised financial adviser, check the ASIC website.
I am based on the east side of Australia in the Sunshine State.
Many thanks Roland for your comments, and well done for writing to SuperGuide. I invite other advisers to write to us and share their views. I will be following up on this issue in future editions of SuperGuide newsletter.
Regards
Trish
Hi George
Hopefully it won’t be too long before you’ll only need to take a short walk to find a truly independent financial adviser.
Regards
Trish
I will be very interested when some SA based advisors make the independent financial advisers list. It is a long walk to the East or West Coast from here.
George, to get advice from someone it is nice but not necessary that you physically be sitting in the same room as them. It’s possible, for example, to deal with clients using Skype and over the phone. An advice relationship with a financial adviser you can trust is possible anywhere in the world now.
Hi Daniel
Thanks for your comments, and for your excellent list. It’s fantastic to generate some debate on this issue and I know this list has been sent around the industry.
Regards
Trish