How faith in financial advice has shaped your outlook over the years

This is what you think of the professional financial advice you have paid for.

Little trust left in money advice

YourLifeChoices’ members say that they are less likely to seek advice from financial planners in the aftermath of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Tellingly, for the retirees who have sought financial advice before, satisfaction with the quality of the guidance has fallen sharply from 75 per cent to 50 per cent in the past two years.

YourLifeChoices’ 2016 Insights Survey showed that of 4155 respondents, 56.7 per cent had visited a professional to discuss finances.

The main reasons given for not visiting a planner were: perceived high costs, insufficient assets or funds or because they believed they could satisfactorily manage their own financial affairs.

Lack of trust in the profession was also cited regularly.

Among the most stinging of critics was one member who said he had worked in the financial planning industry and did not “trust most of them (advisers)”.

Said another: “They’re all rip-off merchants pushing their own products.” Yet another: “Absolutely no faith in them as a breed, having been badly stung.”

Another sizeable group said they had not sought advice because they did not understand how to assess the quality or independence of the guidance.

Still others claimed they had received bad advice that had hampered their returns – an experience that had put them off seeking financial advice again.

Today the vast majority of YourLifeChoices members (86.4 per cent) say they manage their own finances.

And they are not timid with their funds. In YourLifeChoices’ Boomer Consumer Survey conducted in October 2018, 36.6 per cent said they would be willing to take an average risk in order to receive average returns. Almost nine per cent said they would take a substantially risky punt with investments and less than a third said they were not willing to take financial risks.

The 2018 Insights Survey found the proportion of members that had sought financial advice had grown from 56.7 per cent in 2016 to 63 per cent in two years. However, the level of satisfaction with the advice received had plummeted from 75 per cent to 50 per cent.

In July last year, just as the banking royal commission was getting under way, members had started to lose even more faith in the financial services sector.

The percentage of those who had or would consider consulting a financial adviser about their retirement had fallen to 53.4 per cent.

Asked where they had sought advice, of 1719 respondents, around 500 had reached out to their superannuation fund and about 500 to financial planners.

The next highest category was banks (200 respondents), an accountant (158) and Centrelink (140).

The bank most commonly sought out was the Commonwealth, followed by AMP, Westpac, ANZ and the National Australia Bank.

The interim report on the banking royal commission’s findings continued to highlight failures in the financial planning sector, leaving many Australians wondering if they should pay for advice. The final report is due on 1 February.

“Whether the conduct is said to have been moved by ‘greed’, ‘avarice’ or ‘the pursuit of profit’, it is conduct that ignored the most basic standards of honesty,” said Commissioner  Kenneth Hayne about those providing advice.

On World Financial Planning Day in October, the Financial Planning Association of Australia outlined six steps to help people locate a reputable adviser. We outlined those steps in an article, Who can you trust with your money?

Judging from the responses of YourLifeChoices members to that article, it will take more than a how-to guide to restore confidence in a profession that has taken a battering.

Here is a sample of what retirees told YourLifeChoices after reading the article:

  • “Why is it taking so long to bring in education/regulations for new and existing advisers? This should be immediate. Why should it take five years for current advisers to meet the required standard? Either they meet it now through ‘recognition of prior learning’, which allows for experience to be accepted, or they should be suspended from working until they can. There could be another five years of poor advice before we get anywhere near lifting competency.”
  • “Massive internal changes and changes in ethos are required now to restore any faith or trust in financial institutions.”
  • “Financial advisers want profit, and they will always put their own income ahead of client interests. (Now) they will make noises. They will change the technicalities in a few rules, but nothing will change for the client.”

Other commentators on the article blamed the regulators – the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA). They are, after all, entrusted to ensure misconduct in the financial services sector is minimised.

Last month, Round 7 Hearings of the royal commission got under way. Issues the hearings   focussed on were the causes of misconduct and conduct falling below community standards.  Possible responses, including regulatory reform, plus the roles of ASIC and APRA in supervising the actions of financial services entities were also considered. The final report is due on 1 February 2019.

This article first appeared in financial newsletter Cuffelinks.

To make the most of your money in retirement, first you need to know the rules. The RetirePlanner™ tool has all the information you need.

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    COMMENTS

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    maelcolium
    22nd Jan 2019
    10:37am
    Degree Qualified accountants were already trained to provide financial advice, but political lobbying by the major banks and insurance companies who sought control of the market forced them to study a further two years compared to the Banks, who were allowed to conduct their own in house 4 week courses for their own planners to practice under their Banks licences. Consequently, and due to the ethical dilemma, around 50% of accountants ceased to provide financial advice, despite their professional associations having high ethical standards far in excess of the piddling requirements for bank planners. Now the crap has hit the fan and the banks want to unload their planning businesses to the independent cowboys, wait for the next wave of unethical practices from the planning industry. They are not independent. Many are insurance salespeople at best, many have no university qualifications and the so called professional planning body has poor ethical standards and a complete failure to enforce even the meagre standards they do have. In South Australia for example, there is only one truly independent financial planning firm, apart from the few accountants still bothering to fiddle around in this area of finance. It would be hard to make up a football team of independent financial planners across Australia.

    This has come about through the regulatory capture of the bank and insurance lobby of politicians who are only too keen to support those who support their political parties with healthy donations. I doubt the reasons behind the restructure of the industry will come out of the Royal Commission, and the deliberate meddling to the detriment of the accounting profession by ALP and LNP politicians who encouraged and overlooked the formation of this now corrupt industry. This is rampant neoliberalism in it's ugliest form.
    Rae
    23rd Jan 2019
    8:16am
    I agree completely with your opinion. I've found the same issue. My accountant was able to give me great advice to questions back before the banks decided to go after the superannuation fees.

    The new advisers are often just salespeople for in house products.

    Regulatory capture is huge now as you say. Politicians and business far to much in each other's pockets has never been good for the population.
    floss
    22nd Jan 2019
    11:40am
    I have used the advice of my Industry Fund adviser for general run of the mill problems and they have been more than honest.One Com Bank adviser was a complete fool and really pushed the banks product that was not suitable for our situation, it ended in a complete disaster.
    Karl Marx
    22nd Jan 2019
    12:39pm
    It reinforces the fact that we need to take control more of our finances. It's not rocket science. There are plenty of sites that can be researched for all types of information from SMSF, Superannuation, Income or pension funds even how to play the stock market if that's your thing.
    Don't be fooled by high yields etc as it's more likely to lead to disaster & pain.
    If you want to seek financial advice research independants who don't try & push one product or institution, ask family & friends if they have a recommendation etc. But still do plenty of research so you are not going in blind & right down a list of questions you want answered.
    At the end of the day it's your money, your life saving, so it's up to you to make it work for you based on good advice & research.
    BElle
    22nd Jan 2019
    2:27pm
    We ditched our FA about 16 years ago. Made considerably more income for himself than he did for us.
    I realize that at that time everyone was in a "learning curve". It never seemed to curve the right way for us. We have totally managed our own investment portfolio and have had no cause to regret that decision. We use our Accountant for advise now as and when we need it. We receive sound advise.
    Chris B T
    22nd Jan 2019
    4:19pm
    The problem with Financial Advice quality or not has a Fee for service.
    When either one achieves a good outcome we win. When one or both don't achieve the required outcome we lose and paid a fee for it.
    Good or bad financial advice a fee is paid ( Non Refundable) Financial Advisers Don't Lose.
    Who foreseen the GFC or Australia's last Rescission or further back the Great Depression.
    Financial Advice Is Just That! No Guarantees if it works you win if doesn't Who's To Blame!
    {;-(0)
    MICK
    22nd Jan 2019
    8:54pm
    "Faith" in financial advice. That's my smile for the day.
    Olga: financial planners have been a disaster. Often snotty nosed kids in suits who know nothing about life, recessions, risk and how hard life is when the tap is turned off.
    Also, shares are frequently pushed hard in the media when the big end has made its money and wants to sell out leaving the suckers (mums and dads) to suffer a loss when the share drops like a rock. You can set your clock on that one. Add to that the top end of town is invited in to startups which have a wonderful future ahead whilst ordinary citizens are kept out.
    Lets not praise very many in this industry. It is waters infested with sharks, crooks and those who knowingly flog products to you which should have the word Titanic printed on it to alert the schmucks who buy it.
    Rae
    23rd Jan 2019
    8:24am
    Haha yes indeed MICK. Right now is a prime example of the share pushing.
    PlanB
    23rd Jan 2019
    9:30am
    After working with a woman for quite a few years and finding her quite a doubtful person both in her nature and the way she handled money herself. She then left to take up her own business in financial planning -- in no time she became quite well off.
    NO WAY would I trust financial planners

    23rd Jan 2019
    9:44am
    maelcolium, Well said.

    To add, over the decades many low to middle-income earners have been burned investing in finance industry products.
    At the same time federal governments, both sides, have been trying to further restrict access to the age pension. The feds have cajoled and forced people to provide for their old age and not expect any support. Most were doing that already.
    That is why so many low and middle-income earners invested in bricks and mortar, fortunately providing shelter for others at the same time. 'Fortunately' - because government has been determined to slough off as much welfare housing responsibility as possible onto the private sector.
    bohanka
    23rd Jan 2019
    10:59am
    A question if I may... How good are Centrelink when it comes to financial advice. After all, they are supposed to be impartial, aren't they? Has anyone had any dealings with them?
    Karl Marx
    23rd Jan 2019
    12:39pm
    They are not financial advisors & won't (can't) recommend any financial services or investment types etc. this is centrelink's link to what their financial information service officers can & can't do for you.
    https://www.humanservices.gov.au/individuals/services/financial-information-service/you-need-know/financial-information-service-officers
    Alan
    1st Feb 2019
    10:25pm
    I have long used an independent financial adviser based on fee for service and the obligation to act in my best interests. During the GFC when people were losing hundreds of thousands of dollars I lost very little. Around that time I had two advisors - one was an agent of AMP and he was starting to wind down and had brought in another adviser whom I didn't take to. I went completely against the advice of this second person and am now so glad that I did as it saved me a lot of stress and money.

    My now SMSF is still increasing in value despite having to take a pension of 5% a year from it.