Misguided financial advice

Sydney-based planning principal, Greg Cook, questions whether advice being given to consumers by the Australian Securities and Investments Commission is really in the public’s best interest.

While the Australian Securities and Investments Commission’s (ASIC’s) Getting Advice guide has good intentions, as a guide to picking through the minefield of ‘advisers’ out there, it strikes me as a document written by public servants or consumer advocates who have never had the benefit of a successful long-term relationship with a professional financial planner.

Rather than promote further steps towards a professional regard for planners, the public are encouraged to treat the search for an adviser like judging a beauty contest. On the long road to professionalism it is a quaint and retrograde document.

ASIC has already been criticised for the website recommending that the public should avoid asset-based fee charging – a method used by many professional planners, including me – but my observations here relate to their Getting Advice document’s lack of commerciality and its general disregard for the professionalism of planners.

Yes, of course it is good to be a savvy consumer and ensure you receive value for money and quality advice. In the guide, the public are encouraged to phone around at least three or four planners and schedule meetings.

However, the list of suggested meeting questions are already required to be answered in the planner’s Financial Services Guide (FSG).

Why not get their FSG online, answer the questions for yourself, and narrow down your search before running around town wasting your time?

Our pre-appointment pack includes our FSG and our Financial Needs Analysis (FNA) form. Our FSG goes well beyond the regulatory minimum.

As well as acting as a corporate brochure it helps an individual that is new to financial planning understand the six-step process, as well as our detailed client value proposition.

The prospective client is not expected to fully complete the FNA form – it gets them thinking about the information that will be needed and allows the first meeting be sufficiently detailed to allow both parties to then decide whether it makes sense to move to the next step.

The ‘Setting up the first meeting’ section in ASIC’s guide instructs the would-be client not to speak with a junior employee (looks like I’ll have to either promote my receptionist or re-craft the job description!).

Ironically, with these tips the public are less likely to secure a meeting with a quality practitioner.

Like sought after medical specialists, some of the best planners I know only see clients who have been filtered through a known referrer.

If you follow ASIC’s advice, you certainly won’t get to sit in front of one of these planners – instead you will probably see underemployed advisers who are willing to see anybody on any basis.

Considering the common practice of not passing on the cost of an initial meeting, it is presumptuous to assume that a busy planner will take a call from a member of the public, be happy to know nothing of their needs or circumstances (don’t fill in any forms for the first meeting, ASIC recommends), sit back while being quizzed for 30 minutes, and then wait to hear if they have progressed to the shortlist.

The promotion of this tyre-kicking approach has prompted us to reconsider adopting time-charging for all initial meetings.

When I first meet with an experienced professional I allow the professional to conduct the meeting – after all, like your doctor, certified financial planners are trained in the process and have done it hundreds of times.

A professional will have you doing most of the talking anyway, but the issues that matter most will be covered, and you will get to know about the planner’s skill, suitability and rapport with you.

If you feel there is any critical information that is not addressed, simply ask about it at the conclusion. This produces a better outcome than arriving with an exhaustive list of questions.

Managing your long-term financial health is almost as important as managing your medical health and well being.

Once a client has gone through this process and chosen an adviser, the strength and quality of the ongoing advice and relationship will determine the results.

With the spurious benefits of an annual opt-in, the public will be effectively re-contracting their adviser each year.

The 50-page Getting Advice document simply suggests that clients “review their plan, keep an eye on their investments, and don’t panic”. Oh, and check what it’ll cost to have your adviser involved.

There’s definitely a benefit in helping consumers distinguish between the world of ‘advisers’ (stockbrokers, insurance brokers, bank officers, and everyone else called an adviser) and the professional financial planners out there.

I understand the Financial Planning Association was somehow involved in earlier versions of the guide but, as things have evolved, this latest version should do more to promote the respect of a professional relationship and the professional service offered by a financial planner.

Can you imagine a government guide about finding other professionals being written in such a patronising way? And this does make one wonder about the instructions ASIC’s shadow shoppers will receive.

Greg Cook is a CFP and managing director of Eureka Financial Group.