What holds us back.
Before you volunteer your opinion, consider the ASIC Stakeholder Survey (September 2013). While it was hardly game changing, it made some valid observations about the industry and industry practices.
The overwhelming majority of financial planners do a great job and provide the advice and support that enables many Australians to lead better lives and enjoy a better retirement. I believe that most Australians would be better off, and have a better quality of life, if they sought advice and actively engaged in the management of their financial affairs.
But only 1 in 5 Australians actively seeks financial planning advice. In fact, 80% of Australians choose not to do so or simply don’t get around to obtaining financial planning advice.
There are of course a number of possible explanations why they don’t, from cost to accessibility to apathy; however their perceptions of the financial planning industry may be a more important factor than we currently appreciate. In fact, the ASIC Stakeholder Survey noted that 30% of respondents didn’t believe that “financial advisers operate with integrity” but this response rate increases to 34% if you exclude from the survey those that didn’t provide any response at all.
Perhaps failures like Storm and Westpoint have had a more significant impact on public confidence than we appreciate. Perhaps consumers’ concerns about adviser integrity might be an important reason why more Australians don’t actively seek financial advice. Perhaps vertical integration, education standards and the failure of effective self-regulation have also contributed.
In my opinion, the introduction of a best interest duty is an obvious demonstration of dissonance between our views of financial planners and consumers’, legislators’ and regulators’ views of financial planners. The statutory test, a redefinition of appropriateness, a renewed focus on conflicts of interest and the introduction of the client priority rule, all suggest that there are concerns about aspects of the financial planning industry.
Identifying the problem is the easy part, but maybe it’s better to first try to correctly identify the cause.
Recently, I solicited opinions from industry participants about "What holds us back?" to identify the practical obstacles to the emergence of a broadly respected financial advice profession. In order, the top five issues identified by the respondents were:
1. Current competency and education requirements (30.77%)
2. Product based remuneration models (23.08%)
3. Over-regulation (23.08%)
4. ASIC, FOS and the Media (15.38%)
5. Institutional ownership (7.69%)
Interestingly, the two leading obstacles identified by the respondents resonate with ASIC’s findings and the general consumer sentiments identified in the ASIC stakeholder survey. So maybe it wasn’t as unrepresentative as some critics have claimed and maybe, just maybe, it’s time for all of us to start to tackle the real issues holding us back.