04 Aug It Is All A Matter Of Trust
Before I get into this article, I want to highlight that this article is undoubtedly one of the hardest I have found to write. Usually, when I write, I can get into a “flow” and get a blog post done in an hour in one sitting. This one took at least three sittings, multiple hours and reviews.
I was ready to give up on this post. However, I knew deep down this is something I wanted to write.
Correction, something I NEEDED to write.
Because in this mess I think it is important to hear the views from someone who is in financial planning every single day. Someone who has seen the best of financial planning. Someone who has seen the worst out of it.
I hope you find this article provides a bit more clarity in regards to the Royal Commission and financial planning.
Don’t we love a good, juicy scandal?
We love to hear about when our sporting heroes are cheating to get ahead.
We love to hear about dodgy tradespeople who are ripping off people.
We love to hear about which celebrity is cheating on their spouse.
Every time we turn on the TV we hear about the shocking actions of individuals or corporations which makes us question humanity as we know it (at least that is what the journalist claim).
Why do we love scandals so much? According to Dr. Susan Kolod, there are five reasons why we love scandals so much:
- Vicarious pleasure in the rule-breaking of another
- Pleasure at the punishment of the transgressor
- Pleasure at watching someone “get away with it.”
- Pleasure at being asked to forgive
- Distraction from the tedium of one’s difficult everyday problems
Source: Psychology Today
It serves as a distraction, fulfills a sense of justice and makes us justify our behaviour. In short, we love scandals because they make us feel better.
The media knows this, and that is why they fill their newspapers with scandals.
And that is ultimately why we now live in a society that struggles to trust other people. We hear about the worst in people every day we assume that everyone is like that.
As I write, we are in the middle of a Royal Commission, designed to put on display the worst in the finance industry, mortgage broking, and financial planning.
As a financial planning professional, it is painful to hear some of the testimony that is coming out from the royal commission.
Financial planning has come a long way over the last ten years, and there are further plans over the next ten years to further reform the industry.
Everyone is aware that pre-GFC financial planning was an industry for cowboys and salespeople. Significant reform was introduced on 1 July 2012 to address some of the significant issues and conflicts of interest in the industry. But it is a massive concern when one of the largest providers of financial advice AMP is found out lying to a government regulator less than three years ago.
I have been in financial planning for over seven years now, and I have seen my fair share of bad advice. There is no doubt there are financial advisors who are driven in the best interest of their back pocket, rather than the best interest of their clients, in the name of “commissions.”
But I also want to make clear that “commissions” make financial planning within reach of normal people. The rich will get richer if commissions are removed.
But regardless of whether your financial planner is paid, they are required by law to act in your best interest. If they are replacing one of your existing super, insurances or another product they need a damn good excuse as to why.
Some financial planners have not been acting in this way.
It has been well reported that to become a financial planner you only need to complete a two-day course. The media catchcry is that you can be a used car salesman on Monday and a financial planner by Friday.
Technically this is correct. Practically it is not.
The “two-day course” (known as RG146) is used as an introductory course in financial planning. But if you can have complete mastery of your finances in just two days, there will be no need for financial planners.
No reputable financial planning company (including the big four banks) will hire someone with just a two-day course. Most, if not all, reputable financial planners will have a degree or advanced diplomas which takes a lot longer than two days to obtain. And by 2024 you will need a degree to be a financial planner.
I welcome these changes. The more educated financial planners become, the better advice customers can receive. And those who have invested years in their education are less likely to throw it away by providing shoddy advice.
Compliance Does Not Stop Bad Behaviour
But I should also point out that some of the cases being raised in the Royal Commission are from advisors who are degree qualified. They also have further qualifications (CFP or Masters) and are members of professional organizations who regularly talk about ethics and proper behaviour.
But this is ultimately the main issue – if someone chooses to do the wrong thing, they will find a way.
If a checkout chick wants to steal from a register, they will find a way.
If a doctor wants to take shortcuts when dealing with their patients, they will find a way.
If a teacher acts inappropriately with a child, they will find a way.
You can have all of the laws, regulation, and checkpoints in the world. But you will never be able to regulate against bad behaviour.
Rules and regulation to minimize the chances of bad behaviour, but they will never get rid of it. Bad people are all over the place – there is nothing we can do to prevent this.
That shouldn’t mean we should be walking around in cotton wool and not trusting anyone. I hope we can be more open and trusting as a society (without being completely naive).
The Royal Commission is highlighting cases where the worst behaviour and advice has been provided to customers. This bad behaviour must be highlighted, and the financial planners who have provided this advice should be reprimanded professionally, financially and in extreme instances, incarcerated.
Nothing pisses me off more when good people such as yourself see a financial planner and they get completely screwed over.
However, perspective is also needed as well.
Crunching The Numbers
My understanding is there are 25,000 registered financial advisers in the market today. If they are providing only one personal formal advice every week, there are 125,000 advice documents delivered each year in Australia. Even if we get it 99% right, there will be 1,000 pieces of advice that will be complete crap!
But I believe that the significant majority of financial planners, regardless of employer, education standards or however they are paid, are good people. And they want to look after their customers, and they do.
And I have still not met a financial planner who would like to be trashed in the media and courtrooms. No amount of money is worth this.
So my message is this – when speaking with your financial planner, go with an open mind but also rely on your instincts.
Ensure you understand the advice provided and how it will impact you.
If you are unsure how your financial planner is compensated, don’t be afraid to ask.
And if in doubt, seek a second opinion.
Great financial planners can make a massive positive difference to your financial situation and your peace of mind. Clients will rave about their financial planners to their friends and family and trust them in complicity.
Unfortunately, these stories rarely make it into the media.
If this is a topic that you would like to discuss in more detail, please go to www.MasterYourMoneyNow.com.au/getstarted to book in your complimentary 30 minute strategy session.
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Chris Carlin is an Authorised Representative (No. 1235031 for financial services and No. 514748 for credit) and Master Your Money Now Pty Ltd ABN 65 627 229 681 is a Corporate Authorised Representative (No. 1265677 for financial services and No. 514747 for credit) of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523