Last week’s Interim Report on the findings of the financial services royal commission continued to highlight failures in the financial planning sector, leaving many Australians wondering if they should pay for advice any more.
“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.
The Financial Planning Association of Australia (FPA) is now working hard to rebuild trust in the sector and to coincide with World Financial Planning Day (October 3) it has issued six steps to help people locate a reputable adviser.
The move is part of the global Financial Planning Standards Board’s 2018 #PlanWell2LiveWell campaign, which was launched on Wednesday.
FPA chief executive Dante De Gori said his association’s research revealed 82 per cent of Australians are stressed about money and that those whom are “most happy with their lot in life are most likely to have a financial plan”.
FPA recommends those needing financial planning advice meet face to face with a professional. Its other advice is:
- ask family and friends for a recommendation. It’s a good idea to contact a few different planners and then choose one. You want someone who you trust enough to give you an honest reality check, as well as encouragement
- make sure the financial planner has a licence to provide financial advice. Ensure any planner you’re considering is an authorised representative of a firm that holds an Australian Financial Services (AFS) Licence issued by the Australian Securities and Investments Commission (ASIC) and verify their licence by checking ASIC’s Financial Advisers Register
- check that the financial planner has professional membership. Members of the FPA must meet stricter criteria and higher standards than currently required by law. You can check if your planner is a member by using the FPA’s Find a Planner tool
- ask about the financial planner’s education and experience. Make sure your financial planner is properly qualified and trained to provide you with advice that suits your needs. Look for a planner who holds a qualification in financial planning, such as a degree or a Certified Financial Planner® designation
- avoid any financial adviser that seems focused on selling products or isn’t clear about their fees. A good planner should focus on your personal situation and offer tailored financial advice, not sell products
- go with your gut. If you meet with three planners and they are all similar, go with the one that feels right to you. If you are not happy after the first meeting, try again.
Rather than tar all financial planners with the same brush, Justice Hayne reserved his harshest criticism for the financial institutions that licence parties to dispense advice – namely the Commonwealth Bank, NAB, ANZ, Westpac and AMP.
He asserted that those institutions did not act decisively enough to stop the misconduct. He also criticised ASIC for its seemingly arms-length role as the sector’s regulator.
It is no wonder that many Australians are questioning the value of financial advice. However, the sector is likely to lift its game as two initiatives roll out over the next 18 months.
The Financial Adviser Standards and Ethics Authority (FASEA), established last year, is tasked with ensuring all advisers subscribe to a code of ethics of a monitoring body by 1 January 2020.
Additionally, from 1 January 2019, new advisers will be required to hold a relevant degree before they are eligible to sit an exam, and commence a year of supervised work and training. Existing advisers will have two years to pass the exam (by 1 January 2021) and five years to reach a standard equivalent to a degree (by 1 January 2024).
What would be needed to restore your faith in financial planning advice? Have you ever been very satisfied with financial advice you have received? Do you have your own tips for identifying a good financial planner?
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