Revenue at all costs undermines financial planning

One of the reasons why financial planners have found themselves in trouble is that for too of they found themselves under pressure to generate revenue rather than focusing on their clients, according to academic Dr Shantha Yahanpath.

In a recently-published article, Yahanpath has argued that in a post-Royal Commission world, planners should see the purpose as starting with their clients, not with products, bonuses or performance indicators.

At the same time, Yahanpath has argued that a number of senior executives have not been held accountable for the significant reputational damage in general and brand damage in particular that has occurred.

“While some executives have taken accountability seriously others have avoided accountability where possible,” he said.

VIEW ALL

View all

“It is the clients and their well-being that should define the financial planners’ purpose,” he said and argued that much could be achieved by planners adopting Enterprise Risk Management methodology within which they could consider and mitigate risks.

Yahanpath said planners needed to understand the risk context acceptable to a client and that a “win-at-all-costs” approach demonstrated a poor understanding of risk context.

He said that one of the significant revelations of the Royal Commission had been the failure and/or delay in risk ownership which had served to aggravate problems with the result that remediation costs and penalties had increased.

“Risks taken in revenue at all costs strategies appear to have exacerbated the problems,” Yahanpath said.