Meltdown takes heavy toll on financial planners

property/wealth-insights/dealer-groups/fund-managers/global-financial-crisis/advisers/fund-manager/

19 March 2009
| By Mike Taylor |
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Australian financial planners have revealed the deep distress they are feeling as a result of the global financial crisis and the impact it is having on their clients.

Their distress has been revealed in the latest research conducted by Wealth Insights in which, via focus groups and interviews, they have revealed the human cost of the collapse in markets and investment returns, which has included suicidal thoughts, lack of sleep and feelings of guilt and isolation.

Wealth Insights managing director Vanessa McMahon said her research, conducted through January and February, revealed that while clients were rarely blaming their advisers, those advisers were nonetheless sharing their clients' pain and feeling bereft at not having provided better advice.

"Advisers often feel a sense of responsibility for enhancing the quality of life that their clients can enjoy now and into their retirement," McMahon said.

She said almost half of the advisers she had spoken to for her latest research had experienced some sort of physical ailment that they attributed solely to their current stress levels.

What is more, she said these stress levels were being compounded by their perceived inability to know what was the best strategy going forward for their clients.

Among the comments collected by McMahon were, "I haven't had a good night's sleep in 12 months. I've never been so stressed in my life. I probably drink too much now."

And, "I've got shingles due to stress. You don't want to have to wake up in the morning and tell someone they have lost half their money."

The Wealth Insights research has also revealed brooding resentment at the quality and nature of advice being provided by dealer groups, some of which are tied to funds management businesses.

McMahon said there was an undercurrent of discontent with fund managers, dealer groups and research houses, with some planners now questioning the conflicts of interest they perceive.

She said this was reflected in comments such as: "[The fund manager's] job is to have funds under management (FUM), and they get a fee for FUM. I believe we would have taken a different view if we were getting our advice elsewhere."

And another comment: "I'm very disappointed in the fund managers, [they all took] the view that this wasn't going to be so big and they told us to stay invested … you can't prove that they knew more, but I'm sure they did."

The Wealth Insights research has also revealed that it is those advisers who established their businesses in the past few years who are hurting most and have the least knowledge about what to do.

Those who are acting to address their situation are being confronted by difficult choices, including having to accept the loss of a substantial portion of their investment in their businesses - something that has been revealed in comments such as, "I'm running at a loss. I've sold my boat and I'm about to sell an investment property. I've heard about other younger planners getting part-time retail jobs. I've thought about it too, and if I have to I will - I won't tell anyone."

And, "I've got to do something, I've got to merge, sell, tuck inside an accounting practice or something, everyone is talking to everyone".

McMahon said some of the hardest hit planners were those who had bought a practice in the past few years and paid a multiple of two and a half or three times revenue and were still paying off that debt.

"However, their revenue has dropped dramatically and worse, their business would probably only sell for a multiple of one and a half or two (of much lower revenue) today," she said.

McMahon said older, more established businesses were in a much better position to weather the storm.

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