Regulators generally against paying for advice
Regulators feel that investors should not pay for advice and should be in an index fund, according to chief executive of Franklin Templeton Investments Greg Johnson.
Johnson said that regulators believe that adviser service fees should not come out of investment returns, but he feels those returns wouldn’t exist without them.
He questioned the regulator’s focus on financial adviser service fees, saying that it was advisers who saved people money when the global financial crisis caused investor panic.
“How many phone calls do you think happened at that market low during that period, when clients’ attitudes were ‘I’ve got to get out, I’ve got to get out of everything’?” he asked. “What would happen if there wasn’t a person to go to with that call who could say, ‘Settle down, we’re in this for the long-term’?”
Johnson feels that that an adviser service fee is a small price to pay in light of what happened, and yet most regulators are questioning the benefit of advice.
“Many regulators’ view of the world is that you shouldn’t pay for advice and you should be in an index fund — they think anything else is a lack of disclosure. That’s a pretty extreme view,” he said.
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
