Areport measuring financial
planners' attitudes to the
recent shop survey
damning their industry shows
53.6 per cent would like to move
away from commission-based pay
to fee-based pay only, and
exposed dissatisfaction with their
industry body.
The original shop survey,
published by the Australian
Consumers Association (ACA) and
the Australian Securities and
Investments Commission, found 63
of 124 financial plans (51 per cent)
were "borderline" to "very poor"
and that "too many planners put
their own interests ahead of those
of their clients", operating more
like "salespeople for fund managers
than impartial financial guides".
However, this latest report, from
Adviser Ratings, found 94 per cent
of survey respondents felt there
should be better policing of the
planning industry and more
prosecutions to weed out bad
advisers; 92 per cent said entry
requirements to the profession
should be stricter.
David Child, chief executive of
Adviser Ratings, says the industry
will be accused of bias as long as
the commission system is in place.
"Commissions finance the
industry and put more control of
the advice industry into the hands
of the product providers [fund
managers] than perhaps is
healthy," says Child.
The ACA has called the
financial planning industry
"structurally corrupt".
However, the Financial
Planning Association insists there
is no need for further reform. It
says the Financial Services Reform
Act, which has another year before
it comes into full effect and turns
a number of long-standing good
practices into law, should be given
a chance to work.
The FPA has always argued
that many of the managed funds
pay very similar commissions and
that the differences are so small
they are unlikely to influence a
planner. Immediately after the
publication of the shadow shop
survey results, the FPA’s chief
executive, Ken Breakspear, said
that while the industry was not
rejecting the findings – and
though there was work to be done
– the industry had achieved a
reasonable performance.
But the results of the Adviser
Ratings survey asking financial
planners what they thought of the
report shows they do not share
the FPA’s view. Asked about their
attitude to the shadow shop
report, 47.6 per cent of the 700
financial planners who responded
expressed "disappointment" with
the findings, and 30.2 per cent
said the report confirmed their
belief that the industry had much
room for improvement.
The majority, or 81.5 per cent,
of the survey’s respondents say
the FPA’s media performance has
been "less than good". Forty-three
per cent of respondents to the
Adviser Ratings survey think the
FPA has done a "fair" job, 28.8 per
cent say it has done a "poor" job
and 9.7 per cent say it has done a
"very poor" job. Child is "surprised
and delighted" at the responses to
the survey because, he says, it
shows there is an awareness
among financial planners that
standards need to be improved.
Meanwhile, Neville Ward
Direct, the largest distributor of
retail managed funds in Australia,
conducted a survey of its clients
and found satisfaction levels with
present or past financial planners
were fairly low, with only 43 per
cent saying that they were
satisfied. The main reasons for
their dissatisfaction included cost,
poor advice, poor service and lack
of independence.
Most of the 700 planners
surveyed in the Adviser Ratings
report are members of the FPA.
Child believes this number is a
reasonably representative sample
of the advisory industry, although
he says there is a bias towards
more experienced planners.
Those new to financial planing
working for the banks, for
example, are unlikely to be on
Adviser Ratings’ database of 9000
planners.
A potentially worrying
response, for the FPA, was to the
question: should a professional
association be set up exclusively
for financial planning
practitioners? Almost 70 per cent
of respondents agreed with the
proposition. Child says this
response probably reflects the fact
that the FPA is increasingly
representing the interests of the
big institutions rather than
independently owned planning
businesses.
He says the influence of the big
institutions as they buy up
financial planning businesses is
seeing an increase in the number
of FPA members who are not
practitioners.
About two-thirds of the FPA’s
14,000 individual members are
practitioners. The remaining onethird
consists of salespeople who
work for funds managers or master
trust operators and others that
work in the marketing departments
of the big financial institutions.
"It’s a bit like the Australian
Medical Association having a large
portion of its membership working
for the drugs companies – the
public would have cause for
concern," says Child.
Last April, The Boutique
Financial Planning Principals
Group was launched because the
boutiques no longer felt the FPA
was adequately representing the
interests of small advisers.
Child says that the tragedy of
the shadow shop report is that it
has had the effect of tarring
everyone with the same brush.
The FPA declined to comment
on the findings of the Adviser
Ratings survey. Adviser Ratings’
website can be found at
www.adviserratings.com.au.
