Strong markets provide firm footing for planners

One of the most significant events that shaped 2006 was the Federal Budget, and according to Indy Singh it was a great development.

“I think that was a fantastic event. It was unexpectedly brilliant and I think it’s opened up phenomenal opportunities for good financial planning advice and for people to actually plan for their future,” he said.

Singh feels the proposed change in legislation will shift investors’ attention back to superannuation.

Another reason 2006 proved a good year for financial services was the continued strong return from equity markets and most asset classes, according to Singh.

“The year to October has seen returns of nearly 26 per cent from the Australian share market, international shares have produced about 15 per cent, property about 20 per cent, smaller companies 24 per cent, and emerging markets about 20 per cent. These are huge returns and they’ve been very supportive for the industry and for clients, who have benefited enormously,” Singh reflected.

He said the consistent strong returns delivered by just about all investment categories over recent years, including 2006, had given the financial planning profession greater credibility, as they had enabled investors to experience first hand the rewards of investing for the long term.

“After the difficult years between 2000 and 2003, investors have got what we actually set out to help them achieve. Three years ago the advising community might have been concerned that the advice we were giving about long-term investing had question marks attached to it,” Singh said.

“But the last three to four years have proven that it doesn’t and it is the right thing to do, to invest wisely, accurately, in the correct assets, and to diversify your investments the way we’ve always been taught and educated to tell our clients,” he explained.

The past year also witnessed events, such as the Australian Securities and InvestmentsCommission’s (ASIC) shadow shopping exercise examining super switching advice, which revealed some of the less reputable practices in the industry.

Aside from the immediate tangible results from the study, Singh felt it highlighted an important problem the industry has with its regulator that needs to be addressed.

“There seems to be a widening disconnect between the financial planning community and its regulator. It is a sad occurrence because we’re clients of the regulator and I don’t know if the regulator’s perception of the industry, of what the industry actually does and how it operates, is accurate,” he said.

“I don’t know if they’ve actually had the experience of dealing with good financial planners as against the ones who have had misdemeanours and they’ve started to tarnish everyone with the same brush,” Singh continued.

The collapse of the Westpoint Group of companies at the start of the year was another blot on the financial services copybook and Singh believes it has served as a warning to advisers about investor attitudes.

“The financial services industry has gone from government pensions, to defined benefit superannuation funds, to accumulation style super funds, and the risks have now moved to the individual away from the fund manager, the practitioner, and administrator. But no one likes to accept they’ve made a mistake. So when a mistake occurs the individual blames the Government, the adviser, the media, and the community; but the choice predominantly is theirs,” he explained.

According to Singh, the Westpoint episode has emphasised the responsibility financial planners have in helping their clients understand the level of risk involved with any investment opportunity.

“There are risks involved with everything. There is no free lunch in this game. There was a bit of a greed factor for investors to go into this element [Westpoint], but I think where we might have gone wrong in the industry was understanding these risks, and that’s an education issue,” he said.

But on the whole, Singh is in no doubt the positive happenings throughout the year far outweighed the negative ones.

“I’d say it’s been a great year. We’ve got a fantastic Budget, the markets have been firm and strong and have underpinned our promise, and the other legislative issues I’m sure will be sorted out in time,” he said.

— Darin Tyson-Chan