It is time to out the banks!

[birchcorp]

It is time to out the banks?

As you may be aware I am often posting controversial topics in relation to outing the marketing and issues I have with lack of transparency around financial products. For the record, I also include the advice around purchasing property (off the plans with associated depreciation , positive geared houses for a fee, and housing developments with commissions attached) in this general umbrella of financial products, even though it is not formerly recognised as such. On this topic, I had another financial planner sit with me yesterday suggesting to me, to advise my clients to invest in property in a particular development. It’s is by co-incidence, that my brother lives in the suburb suggested and I know it well. Lets just say it is not the pick of the crop. Oh I forgot to mention, the Planner also gets a 3% commission on the sale. Taking tips of Planners can often be concerning.

But for now, Why is it that The top 50 Financial Planning groups are owned by the banks? When my Mother and Father drop into a bank for Financial advice are they being sold a product? Or are they being assessed on their merits? i.e. Why is it that all the banks buy Financial Planning firms, is it to sell their products such as Personal Insurances (Life , Income Protection, TPD and Trauma), Superannuation, and Managed funds? Lets look at the statistics and who you are visiting when you see a Financial Planner.

The following is listed as such RANK/ Company Name/ Amount of Advisers/ Real Owner

1-Professional Investment services-1551-Aviva (22) – Aviva Australia was purchased by NAB

2-AMP Financial Planning-1314-AMP Life

4-Millennium 3 Financial Services-631-ANZ (formerly ING)

5-Commonwealth Financial Planning-730-CBA

6-NAB Financial Planning-502-NAB

7-ABN Amro Morgans-450-Bank of Scotland

8-Charter Financial Planning-462-AXA-Asia Pacific- In negotiations with NAB.(refer to ACCC)

9-MLC/Garvan Financial Planning-471-NAB

10-Financial Wisdom-444-CBA

11-Securitor-438-Asguard –Who has a parent company called Westpac

12-Westpac Financial Planning-554-Westpac

13-Axa Financial Planning-356-AXA- Negotions with NAB (refer to ACC)

14-Genesys Wealth Advisers-366-Axa- Negotiations with NAB (refer to ACC)

15-ANZ Financial Planning-394-ANZ

And the list goes on with other common financial brand names such as Apogee (NAB), Guardian Financial Planning (Asteron-who is ultimately Suncorp-Metway), MLC (NAB), BT (Westpac), Colonial First State (CBA), to name a few.


So where does my Mother and Father go to visit an independent Financial Planner that will be completely transparent? My thoughts are take a tax deductible trip overseas as Australia clearly does not have the answer. This sounds ridiculous (and "NO" I am not suggesting an O/S trip) but look at the above table and you will also see ridiculous! But in case you have an O/S trip in mind this little bit of trivia may help: Remember The Australian Taxation Office’s views on the deductibility of investment advice fees are expressed in Taxation Determination TD 95/60. In summary they will be deductible to the extent that they are on-going management fees or retainers incurred in servicing or managing assessable income earning investments, including switching between such investments, and not related to the acquisition of new investments. Tax advice fees charged by a registered tax advisor or a solicitor are tax deductible. Business advice, such as ideas for a business plan or a marketing plan, and employer superannuation contributions, are generally tax deductible. Fees for Centrelink advice, personal superannuation contributions and estate planning advice are generally not deductible (this is not legal or taxation advice only a view).

www.birchcorp.com.au

In the interests of full disclosure, number three above is Count Financial- Not for Sale.

 

[marg4000]

So long as commissions and kickbacks exist within the FP industry I do not think there is any such thing as an independent financial advisor. They all have reward systems that inevitably skew their advice.
Marg

 

[chran]

From my limited experience (I ran away when I found out) they sell managed funds and not financially literate at all.

 

[csc2]

Pffft!

Financial planners are about as useful as t#ts on a bull...all smoke and mirrors!

Manage your own money cause financial planners are rarely worth a grain of salt.

im sure ill get a blast from a few of them and thats ok, its their living but putting trust in someone to manage and make decisions about YOUR money is fraught with plenty of downside.

I.ve seen many come ondone taking financial advise from these know alls who are only interested in directing your money to where it suits them best.

Finances:

- Cash

- Equities

- Quality R/E

- Quality Art

- or the ponies on a Saturday if your that way inclined.

- plus a few others

All sound investments if you use YOUR money yourself wisely and study the form....

 

[Piston Broke]

I find it interesting that you call them "financial planners" when as you point out they are merely commission salespeople.
And mostly ignorant commission sales people whose qualification may as well be put in Corn flakes boxes.

 

[wylie]

I have been sorely disappointed in the financial planners we have seen.... one about 20 years ago and one about ten years ago, when we were looking for advice and direction.

The disappointment with the one ten years ago was nothing to do with what he was trying to sell us, but with his total ingoring of our stated risk profile.

Luckily we found a chap at RetireInvest (my mum actually found him) who has helped us steer our way through an extremely complicated family and financial situation. He has not sold us anything. He put up a proposal and quoted a fee for as much advice and as many visits as we need.

He has been fantastic, and helped us chart our way through. There are good men (and women ) out there among the not so good.

 

[Dazz]

Financial planners are....

....a misnomer. It all goes wrong in those two words. It's all wrapped up in the false title.


Everyone always gets confused and in the end initial expectations are not met and disappointment then ensues, all because of the title. They have done extremely well to latch onto that title, cos it's a cracker....but that's all it is, a title.


People go and hire "financial planners" and expect to have their finances planned out. But that's not what they do.


People go and hire "property managers" and expect to have their property managed. But that's not what they do.


People go and join the "Investors Club" as a member and expect to do - I know not what. But they are not a club and you cannot be a member.

 

[Peter_Tersteeg]

Okay guys, so what are people's actual expectations of "financial planners"?

There's a lot of talk here that financial planners are a waste of air, but I think there is a place for them. I agree that they shouldn't be commissioned sales people, they should be strategists. I'd like to know what others think.

 

[wobbycarly]

I'm not an FP

A truly independent "financial planner" would be a rare find and how would they "qualify"?

MY thoughts of a financial planner would be someone who can look at an individual/family circumstance and assist them in investing, based on so many factors such as their risk profile (as wylie pointed out), their current financial literacy, current financial position, ability to handle money, attitude to debt, and many more.

How do you measure these? And how does one give unbiased, unprejudiced, appropriate advice?

Consider the range of investment opportunities available:

• Residential property
• Commercial property
• Australian direct shares
• AUS managed funds
• LICs
• Direct international shares
• Precious metals
• Collectables
• etc.

To be a competent financial planner, I'd need to know how, why and when to invest in each of these asset classes. And which ones are appropriate for my client. And know when my client is too financially illiterate to directly invest - soooo, direct them to managed funds/super. (For which I may get criticised as a commission-based salesperson)

And most of us here are already biased towards RIPs; how would an FP overcome their own bias towards their favoured class? It's human nature to have a favourite.

I'm not an FP, never have been, but TBH, I love the idea of helping people get started with direct investing in property, but then I'd become more like a Peter Spann or Reno Kings. That's NOT financial planning.

It's no wonder the FPs have their "set menu"; managed funds, TDs and super[sup]*[/sup] - it's just too hard to develop an holistic investment plan for someone else.

And when the FP develops a plan - includes purchasing a RIP, $ avg into some AUS shares, keep some cash in a TD for a rainy day - how likely is their client then to stick to it? The clients are coming to the FP because they don't know what to do with their money. Will they gain the discipline to invest, just because the FP told them to/how? Maybe, but probably not. Otherwise, why wouldn't they have gone the library and just read one book about investing. (Wild generalisation)

I'm not talking about someone who has perhaps read a number of books on property/shares/investing and now has analysis paralysis - that's perhaps where a good independent FP would help!

Hopefully all that makes sense - it makes sense in my head, just not sure how it translates to screen.


[sup]*[/sup]Yes, I know super is just a vehicle and not an investment class, but the masses generally do not.

 

[joanmc]

I think FPs serve a purpose in society as not all people have the get up and go to be self directed in their investing. Their are many out there who have a feeling they should do "something" for their future but do not have the skills or knowledge to take a step. For these people putting a bit of extra cash into some managed funds is already a giant leap, and to have to pick that fund themselves? well that just isn't going to happen.

So would I use one? NO but I am a self-directed investor so I don't need one. My accountant directs me through the potential pitfalls of my chosen course and it's ramifications on my entities etc (and nags when I stuff up! lol).
BUt other than that I am happy to rely on myself.
But I know that a lot of people who are lacking in the confidence to do that, so off to the FP for them.

 

[Rolf Latham]

Consider the range of investment opportunities available:

• Residential property
• Commercial property
• Australian direct shares
• AUS managed funds
• LICs
• Direct international shares
• Precious metals
• Collectables
• etc.

Therein lies the majority of the problem.

Any planner can only do what they are licensed on, they cant get PI on most of the above, which is why the industry has set researched items that they can use.

When I did my PS146 compliance direct property had about an hour dedicated to it.........

ta
rolf

 

[Dazz]

they cant get PI

....exactly....same as everything else in life....it's dictated by the extreme fear of litigation.

Don't want to get sued - got to have insurance to cover the butt.

Insurance lawyers won't protect you from others lawyers unless you follow exactly what they want.

They want the FP to only recommend exactly what they researched enough, to have enough paperwork to pop on the bench for the magistrate to conclude that despite best efforts and despite all indications to the contrary, the investment the FP recommended went to **** and the dumb schmuck who blindly listened to them, lost their shirt and now is after blood.


Strategists have their *** hanging out in the wind. They get sued.

Commission flogging sales people stick to the script and are protected by their insurance lawyers.

The expectation of the FP looking after their clients interest first and foremost is false. They protect their own interests first and foremost. Shore up the defences, concrete up the bunker, once that's done, then offer a few arrows for the hapless attack.

 

[birchcorp]

It is blatantly obvious there is a need for financial Planners, i.e. who can guide your through the set-up of a bare trust with a corporate trustee to hold your property for an SMSF, who will write the investment strategy to make the SMSF compliant, who will consolidate the 5 super funds and have the information to select a low fee / well performed fund, who will suggest a residential investment property as an alternative to managed funds and the correct timing (how to acquire property increasing cashflow through tax minimisation, recycling debt and the many other strategies), who will implement CGT reduction strategies while taking into consideration all your other personal goals and objectives, who will set up Transition to Retirement salary sacrificing arrangements, who will increase cash-flow by placing your IP and life in holding super accounts that are in effect Insurance companies, who will watch all the markets each day while you are on holidays, and I could go on........ the real question is not the worth, name or title, but it is the culture of the industry. Of late, Financial Planners have been breed by the banks to be single focused on financial products that increase revenue. This revenue focus has seen a majority of planners stray from real advice into product based selling. So from me..... Yes there can be value from a Financial Planner, but the banks are turning the industry into something that is very simple and counter-productive to the real job- "Financial Planning". I apologise in advance to the planner that does have that bit of flare, but this does not excuse the direct selling of your own companies products in the way of super, managed funds and insurances when you are approached by my Mother and Father for independent advice- Independent advice should mean the best advice based on what is the best value at a particular time. This may mean advising an industry super fund as is appropriate, and at other times a retail super fund.
In a nut-shell it comes down to "Conflict of Interest" Once this conflict of interest is sorted we may have real advice again..... Why is it that ASIC or like cannot see this? Why is that a bank can sell its own products (refer to RG181 from ASIC)and still entertain the idea that my Mother and Father will have independent (not to mention transparent, in the case of using other trading names) advice. Removing conflict of interest should be the real focus to provide us with an industry that is recognised as a a value add to your finances........

 

[alexlee]

I would have thought it comes down to how the planners would get paid. Tell your average mum and dad to pay x% of their assets every year to a planner to advise on investments, etc. How many would?

Investments don't always work out. The liability would be horrendous.

You're saying we need planners who are experts in multiple investment classes AND who are independent. So who's paying for them? The average 'starter' investor can't pay much, isn't willing to pay much, and they would have to pay enough to cover the ones who use up the planner's time but don't end up doing anything. Rich investors often get the best advice because they can afford to pay for it. If that seems unfair, get the government to put on classes and educate the people.

There has to be some personal responsibility here. Your advisor is only as good as you are. If someone wants to get 'good' investment advice, they have to know how to distinguish the good from the bad themselves.

 

[Piston Broke]

It is blatantly obvious there is a need for financial Planners,

The last 25 yrs of my exp tells me it's blatantly obvious we don't need them. And that they are misleading and deceptive in how they call themselves, and promote themselves.
When they set up shop and charge only by the hour, then I'll revisit my opinion.

the real question is not the worth, name or title, but it is the culture of the industry.

Actually it is, as the deception starts from the the beginning, ie the title they give themselves.
They are selling products first and foremost.

Of late, Financial Planners have been breed by the banks to be single focused on financial products that increase revenue.

they have realised the title deception works.

This revenue focus has seen a majority of planners stray from real advice into product based selling.

They have never been into giving real advice for the last 20 years I remember.

In a nut-shell it comes down to "Conflict of Interest" Once this conflict of interest is sorted we may have real advice again..... Why is it that ASIC or like cannot see this? Why is that a bank can sell its own products (refer to RG181 from ASIC)and still entertain the idea that my Mother and Father will have independent (not to mention transparent, in the case of using other trading names) advice. Removing conflict of interest should be the real focus to provide us with an industry that is recognised as a a value add to your finances........

You see it's all in the title and fancy name they give themselves to deceive
unsuspecting people.

Most people are better off asking their accountant for an opinion.
A good accountant is worth more than any FP will ever be imo.
But it's not the accountant you pay $60 for a tax return.

 

[birchcorp]

Piston Broke,

Now lets clarify, please answer the following:

If I was to transfer my real estate (my holiday house- encumbered) to my SMSF is this allowed? Should the bare trust and the SMSF have a corporate Trustee and if not, for what reasons? If so, should the corporate trustee be a special purpose company to save ASIC fees? What are the stamp duty implications and CGT, and what can I do to avoid them and under what ACT! Should we use external or internal lending and what documentation is required for this process?

I am happy to hear you can answer the above, I will await eagerly! As you have incorrectly stated FP'S do not have a place in this community, for want of better words. Further, do you really think most people have the inclination or time to not only understand the theory but then put this in practice. Please, lets not simplify things so as to suggest there is not a place for Financial Planners as I am happy to keep throwing scenarios your way.

You are also incorrect in stating an Accountant may act in this manner and also very mis-leading as Financial advice requires a license. ITR and tax legislation is vastly different to regulatory requirements around superannuation, insurances, managed funds, and other investments.

I am sorry, you may have missed my point. Although independent/ transparent advisers are required, I am concerned with conflict of interest and the large body of FP's that are product driven via the mothership.......

 

[alexlee]

If I was to transfer my real estate (my holiday house- encumbered) to my SMSF is this allowed? Should the bare trust and the SMSF have a corporate Trustee and if not, for what reasons? If so, should the corporate trustee be a special purpose company to save ASIC fees? What are the stamp duty implications and CGT, and what can I do to avoid them and under what ACT! Should we use external or internal lending and what documentation is required for this process?

Wouldn't this be something you ask an accountant, or a tax lawyer?

If you can answer the above, I will await eagerly! Further, do you really think most people have the inclination or time to not only understand the theory but then put this in practice.

Why is this an acceptable excuse? It's not hard to get independent, expert advice: you just have to pay for it. The problem is that people have no knowledge, don't want to learn it, don't want to pay for it but nevertheless want good, independent advice. That's asking too much, in my opinion.

 

[birchcorp]

By and large you have to take in consideration all personal circumstances. Refer to Grant Abbott the leading SMSF speaker/educator in the country to see who he is currently training and encouraging to embrace this space- you will find that it is both FP'S and Accountants. Ask your Accountant if they will sit down with you to write a SoA taking into consideration your personal goals and objectives after completing a fact find or like? You will probably see that they have the knowledge, but no, this is not their way of making ends meet (earning a dollar) as it is too time consuming. Lawyers as a general rule do not play in this space, unless you are trying to send Mum and Dad to a place that would cost them an arm and a leg and still have to see a Financial Adviser to put it together- not really the option I would take.

Given that FP's are "Not hard to get", I will also allow you to list the independent advisers ( lets hope they can cater for all of Australia!). And when you say, just pay for it.... it sounds like something that is not available to my Mum, Dad and average Australia (they do not have unlimited funds to try 10 advisers). This gets back to the original point of finding independant / transparent advisers that have removed conflict of interest.

 

[Piston Broke]

I can find that info (if I need it) and more with a phone call to my accountant.
And why would he know? Because I know at least 10 clients of his with an SMSF.
Also Henry Ford said "why do I need to hire someone when I can just buy a book".

You are also incorrect in stating an Accountant may act in this manner and also very mis-leading as Financial advice requires a license.

That's why i said an "opinion", and not advice.
But it is an experienced opinion.

ITR and tax legislation is vastly different to regulatory requirements around superannuation, insurances, managed funds, and other investments.

That may be the case, but my accountant has assisted many clients with their SMSF taxation issues for years and has the practical experience that a FP does'nt.
And hey I'm the first here to point out accountants stepping out of their role by selling trust deeds they don't understand and giving what is really legal advice.

I am sorry, you may have missed my point. Although independent/ transparent advisers are required, I am concerned with conflict of interest and the large body of FP's that are product driven via the mothership.......

Well we both agree on this point.
As it stands imo talking to FPs (and many MBs) is in most cases like hiring a lawyer who's paid by the other party. It does'nt make sense. As you point out in the bank's situation.
My long time accountant on the other hand has no reason to not give me what he believes to be his best opinion unfettered by commissions.
Actually he has all to lose and nothing to gain as i may not be back if it turns out not so good.

My point of view has always been that accountants, laywers are just like subbies I hire to a job for me, and I pay them.
This may also include opinions based on their experiences.
And that most people don't really use their accountants as they should.

And any idea that FPs have any better concept than anyone else on predicting markets is also fantasy at best.

 

[alexlee]

Given that FP's are "Not hard to get", I will also allow you to list the independent advisers ( lets hope they can cater for all of Australia!). And when you say, just pay for it.... it sounds like something that is not available to my Mum, Dad and average Australia (they do not have unlimited funds to try 10 advisers). This gets back to the original point of finding independant / transparent advisers that have removed conflict of interest.

Well, if they can't afford it...... you can't take $5 into a bottle shop and expect Cristal.