Financial Advisers appear to have an unenviable success in creating an all-party political consensus, from the Greens to the Nationals – they all agree there is a problem in our industry. However, they are also all united in refusing to look at the elephant in the room and deal with the root of the issue. Instead they make a lot of noise, create a lot complication and surprise, surprise the problem persists and worsens.
What am I talking about?
Financial Advisers have an all-party consensus against them as there is a constant string of scandals appearing in the papers. In the annual Roy Morgan polls we don’t do so badly, with an approval rating of 27%, just under bank managers and well above all journalists, MPs, and Union leaders, though nothing like the deserved 92% of nurses. However, those of us who are insurance agents have a problem, with an approval rating of only 11%, with just real estate agents, advertising people and car salespeople below us.
Clearly, there are some excellent Financial Advisers around and their higher approval ratings amongst existing clients would be bringing our ratings off the floor.
So why are all the ever growing onerous legislative changes unable to stop the string of scandals? It is because nobody is tackling the root of the issue which is that most financial advisers are salespeople first and advisers second. The majority work with or for a company that sells insurance or investment products or both. They often have targets, get sales bonuses or other inducements. They may work for a bank or product provider either directly or indirectly, however they present themselves primarily as advisers.
The relationship is often disguised, as the big four banks and AMP (the big five) have a substantial number of subsidiaries with quite different names but the ownership and influence is always there in these cases.
The solution is very simple – require financial advisers to have no incentives of any kind to sell a particular investment or insurance product. However, that would hurt if not destroy the business model of the big five and all the other larger employers of financial advisers. An interim solution could be to reserve a title like ‘professional financial adviser’ or ‘fiduciary financial adviser’ for those advisers who are free to take care of their client without external pressures, incentives or quality product restrictions.
The current situation and ever increasing compliance is a loss for all concerned as it actually favours the big 5 whose conflict is at the root, and penalises by way of extremely onerous compliance the independently owned advisers. Therefore, it exacerbates the problem and does not provide the public with the trusted financial advice they deserve, yet the solution is very simple: Make sure that the public knows which financial advisers are free to give advice.
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