Conflicts principles no silver bullet: ING
Some of Australia’s biggest dealer groups have given the Financial Planning Association’s new conflicts principles the thumbs up, but not all expect the initiative to mark the end of the industry’s woes.
“I don’t think this is going to be the silver bullet,” ING executive director sales and marketing Dan Powell said.
“I still see this as addressing the symptom, not the cause. Maybe [the FPA] should have a paper called ‘managing expectations’.
“I think the key is to take what the investor wants out of a relationship and what the adviser provides, and if you can get those aligned you’re going to have a happy customer and all this focus on fees and pricing will dissipate.”
“Price is your story when you don’t have one. The conflicts of interest principles do have their benefits, but it’s not going to resolve the industry’s reputation.”
BT’s Magnitude chief executive Mark Spiers, however, was all positive about the principles.
He said they were an important step forward because they will enhance consumer confidence in financial planners and provide a “proactive response to current industry issues”.
“It also starts to move us forward regarding crystallising who and what a financial planner is. The recent incidence of Westpoint amplifies that much of the advice was provided by unauthorised individuals calling themselves financial planners. But now we’ve positioned the industry to begin to lobby around enshrining the term ‘financial planner’ so it can only be used by those professionals who subscribe to a code of conduct.”
Spiers added that many planners will benefit from the first principle — separating the cost of advice from the cost of a product — through being able to more easily charge a plan preparation fee.
“One area where the industry has done itself a disservice, is that a lot of advisers don’t charge a plan preparation fee. That’s highly unusual compared to other professions.”
Spiers said that commission-based payments are still acceptable, as long as they are disclosed.
“Whether an advice fee is paid is secondary. What is important is the fact that there is clear disclosure of the fee and the customer understands what service they will receive for that fee.”
Head of the St George owned Securitor dealer group Sean West also welcomed the fact that commission would still be acceptable under the principles.
“Commission arrangements are a fact of life and they will continue to happen. Commission is still a way that people could access advice that otherwise could not afford it.
“The most important thing is the transparency of what people are paying for advice - whether they are paying a flat fee or in part or in full by commission - that they understand what they’re paying and what they’re getting for that, and at the end of the day they can say I don’t like that.”
Recommended for you
The corporate regulator has announced its first adviser banning of the year with the permanent ban of a Queensland-based former adviser that was sentenced to seven years’ imprisonment.
The Australian financial advice industry has risen by more than 20 advisers this week, with nearly half joining WT Financial and Sequoia.
Two financial advice professionals have shared their tips for success when building an effective Professional Year program as more advisers look to bring on junior staff to their practices.
Numbers are in for 2024, with Wealth Data confirming how many advisers left during the calendar year and which business models saw the largest growth in terms of new licensees.
