January 2011 Update : SuperGuide - Simple superannuation information

Not the time to quibble (financial advice), accessing super early, SuperGuide Directory, top 20 articles, top 10 super topics

Happy New Year to all of our SuperGuide subscribers.

NOT THE TIME TO QUIBBLE – financial advisers should accept reforms
Queensland and Victorian floods – accessing super early due to hardship is unlikely in short term
SuperGuide Directory set to launch end of January 2011
Top 20 articles from 2010 – check out the most popular SuperGuide articles over the past 12 months
Top 10 most popular SUPER topics for 2010
Most frequent word searches for 2010 – top 10

NOT THE TIME TO QUIBBLE – humbly adopt changes to financial advice rules

I am writing this email, to give you the heads up on what significant players in the financial advisory industry are now trying to do, to further compromise the quality of financial advice.

Before I outline the latest not-so-covert attempts to stymie the Future of Financial Advice reforms (I explain these reforms later in this email), I want to point out that I believe an independent, qualified financial adviser focused on the best interests of the client can be a valuable partner for any individual’s or family’s wealth creation plans, along with excellent tax advice from an accountant. Independent financial advisers obviously hold this view too. I had hoped, after years of disappointment (mine) that the broader financial services industry would also share my views. Not so, based on recent reports in the financial newspaper, the Australian Financial Review.

It seems the holiday season is not called the silly season for nothing. While many of us were holidaying, some key members of the financial services industry were reported to be complaining about the fact that, under the proposed new rules, a financial adviser would have to meet with his or her client, and arrange for the client to renew the adviser/client arrangement each year. While reading this nonsense, I wasn’t sure whether I had misread the article. I assumed any decent financial adviser would be regularly monitoring the satisfaction of his or her clients anyway.

Unbelievable as this may sound, the industry spokesmen claimed that clients generally suffered investor inertia, and to attempt to get them to sign a piece of paper renewing the relationship is going to add to adviser costs. I still cannot believe that these individuals publicly stated this point of view. Let’s not delve into the murky issue that the financial services industry continues to reap billions of dollars by relying on a business model based on investor inertia. I want to focus on the fact that a financial adviser meets with his or clients at least once a year (some meet 2 to 4 times a year). I assume a financial adviser is also regularly monitoring any plan (and investment portfolio if investment selection was part of the service) in place. What’s the big deal about asking a client to renew the arrangement each year?

Oh, before I bang on a bit more, I should point out that the financial services executives quoted in the article also stated that a client does not fully pay for the financial plan in the first year. The cost of the financial plan is expected to be recouped with services and products in future years. In short, if a client is expected to sign a document each year confirming they like the adviser’s services, then the financial adviser will have to slap an extra 30% onto the cost of the initial financial plan, just in case the client doesn’t come back for the second year. I’m not sure what you think about this argument by the financial services industry for removing the annual opt-in requirement for financial advice, but I think it’s a load of codswallop. Just for the record, I understand that many independent advisers charge for the full cost of the plan upfront, or via quarterly retainer fees.

The broader financial services industry needs to think about the long-term survival of its industry rather than the short-term concerns regarding damage to distribution channels. Creating a more transparent service, and a more flexible advice offering, opens the industry to more clients and hopefully sustainable industry growth based on client engagement rather than investor inertia.

The financial services industry was given countless opportunities to self-regulate but chose not to make the changes necessary to ensure that consumers received advice that was in the best interests of each client. It’s too late to complain now. Let’s try something new, and if it needs to be tweaked at a later date, then so be it.

Background: The Future of Financial Advice reforms include:

Ban on commissions and volume based payments (from July 2012). No commissions or bonuses when advising or selling retail investment products including managed investments, superannuation and margin loans.
Introduction of a statutory fiduciary duty so that financial advisers must act in the best interests of their clients. An adviser must place the best interests of their clients ahead of their own when providing personal advice to retail clients. Now, don’t laugh. The fact that this is currently not the case, and that it has to be legislated is more than ridiculous. The Financial Planning Association claims to be a professional association, and this requirement was not part of their professional code.
Increasing transparency by charging for advice rather than hiding the cost within other charges.
Annual renewal notice for advice (opt-in).
Restrict percentage-based fees to ungeared products or investment amounts.
Expand the availability of low-cost ‘simple advice’.

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QUEENSLAND & VICTORIAN FLOODS – accessing super early due to hardship unlikely in short term

The devastating floods suffered by Queensland and Victoria, and parts of other states are causing, and will continue to cause, financial hardship for many Australians. Although it’s possible to access superannuation early on compassionate grounds, the rules in place are very strict and don’t specifically include flood, fire or drought. What is likely to happen however for some flood victims, and Australians living in surrounding communities, is the consequential loss of livelihood, and potential loss of homes due to mortgage payment defaults. Fund members may be able to access super benefits in certain circumstances, for example, when receiving Centrelink benefits, or if the bank is going to foreclose on an individual’s home. In terms of flood victims, superannuation benefits are likely to be the last resort due to the money that Federal and State governments will be spending in the affected areas.

Our first newsletter for 2011 will be the February edition. Due to the number of emails that we have received over the Summer months regarding accessing super early due to hardship, and emails from expats and non-residents departing our shores, we will be including a special feature in our February edition on the rules for claiming your super before you retire.

COMING SOON! SUPERGUIDE DIRECTORY

SuperGuide will be launching the SuperGuide Directory at the end of January 2011. SuperGuide Directory is a special directory for superannuation-related companies and other related service providers. Contact Robert Barnes at robert@superguide.com.au for information about how to list. Listing is free and the Directory will be available to SuperGuide readers and the general public. We will be sending a special launch email next week to all of our subscribers and to all of the companies that have listed on the Directory.

January 2011 Update

Not the time to quibble (financial advice), accessing super early, SuperGuide Directory, top 20 articles, top 10 super topics

NOT THE TIME TO QUIBBLE – humbly adopt changes to financial advice rules

QUEENSLAND & VICTORIAN FLOODS – accessing super early due to hardship unlikely in short term

COMING SOON! SUPERGUIDE DIRECTORY

TOP 20 ARTICLES FROM 2010

TOP 10 MOST POPULAR SUPERANNUATION TOPICS

TOP 10 SEARCHES FOR 2010

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