There is more than a little hypocrisy in calls by law firms for people to avoid using bank financial planners, given the reality that the commercial practices pursued by many law firms would not be countenanced in the financial planning industry.
When law firm Maurice Blackburn last week suggested that banks wanted to keep more of their customers’ money in-house by selling them their own insurance, managed funds and investment loans, it was stating the bleeding obvious. That is precisely why financial institutions of every stripe value their distribution channels.
Equally, the law firm was right in suggesting that an adviser working for a bank was likely to be motivated to sell that bank’s financial products – that is a given and only the most naive of clients would not understand this.
The argument being made by Maurice Blackburn might equally be made by financial planners with respect to the types of law firms someone might seek to retain – the small suburban practice versus big corporate outfits such as Corrs Chambers Westgarth or publicly-listed entities such as Slater and Gordon.
The fees a client is charged and the motivations of the lawyers differ considerably between the likes of Corrs Chambers Westgarth and a small, regional concern, and one might argue that ultimately while bank planners may be motivated to recommend bank products, young lawyers are equally motivated to pursue substantial billable hours in their pursuit of a partnership.
How often has an ambitious lawyer continued to rack up billable hours when what they should really be doing is informing their client that their case is flawed and a long shot at best?
Then, too, we must consider the fact that statements such as those issued by Maurice Blackburn last week represent a very effective form of marketing for a law firm which has on its shingle – “Compensation Lawyers – No Win No Fee Lawyers”.
Sadly, law firms and the activities of lawyers are subject to nowhere near the external regulatory scrutiny that is applied to financial planners – and all too often it shows.
The legal profession operates within a largely self-regulatory environment and it is axiomatic that it is much harder for a consumer to pursue a bad lawyer than it is to pursue a bad planner.
Even before the implementation of the Future of Financial Advice changes, financial planners were required by law and consequent regulation to be transparent with respect to the advice they were providing and the products which were being recommended. Lawyers are under no similar level of obligation.
The planning industry has it flaws and bank planners may not always be appropriately motivated, but the legal profession should get its own commercial house in order before offering lessons in morality.
