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Financial advice regulations to be upheaved

Discussion in 'Financial Planning' started by Simon Hampel, 5th May, 2010.

  1. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Old news I know, but I figured it was worth reproducing this here for future reference.

    http://www.abc.net.au/insidebusiness/content/2010/s2888031.htm

    http://mpegmedia.abc.net.au/insidebusiness/video/201005/r558918_3363764.flv
     
    Last edited: 17th Sep, 2016
  2. Chris C

    Chris C Well-Known Member

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    It's great to see!

    Looks like average Joe's who know they need help might actually now have a chance of getting it.
     
  3. bigbuddha

    bigbuddha Well-Known Member

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    Now it remains to be seen how good the advice is that will be given, oh and what about all the follow up from clients who recieved this initial advice, how will they pay for that, will the industry fund subsidise the follow up and admin costs. Who will be there to keep the client updated about there investments or range of investments, and if there current investments are still ok or what future investment opportunities will be available to them, and who will carry the cost of all that follow up.

    Sounds like those cheap industry funds wont be so cheap to much longer.

    And for those industry fund financial planners on salaries, because they are subsidized by the industry funds, how will they now be paid?

    They will have to do a hell of a lot of "one-off" cheap advice to cover their costs and indeed even earn a decent living.

    Now worries though, the government knows best, all there government endorsed programs end with great results with no social or economic costs at all. Joyous will be the ever lasting glow of socialism.
     
  4. Chris C

    Chris C Well-Known Member

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    No doubt it will be a tough, complicated and maybe even painful transition.

    But creating a "fairer" system that limits abuse of vested interests and the taking advantage of the ill-informed has to be a worthwhile cause that justifies the short term complications and pain for the industry.

    Despite me generally disliking government intervention, I think we all know that capitalism can be just as corrosive to social welfare as an over involved government.

    At the end of the day we are going to have to find a happy medium that produces fairness that maximises social welfare, not corporate or government welfare, which so often takes precedence.
     
  5. bigbuddha

    bigbuddha Well-Known Member

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    Tell me a period when we have had true free-market capitalism and I might agree with that statement.
     
  6. bigbuddha

    bigbuddha Well-Known Member

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    But who will set the stage for this "fairer" system?

    The Government? Creating "fairer" systems isn't exactly their forte is it now.

    Everyone has a "vested" interest, I as a small business person have a "vested" interest, I do employ 10 or so people, adding extra adminstrative costs via a "fairer" system doesn't bode well for keeping all of those 10 or so.

    One thing I do like alot about this new reform will be a move towards "fiduciary duty"
     
  7. Chris C

    Chris C Well-Known Member

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    I'm not implying it's easy - but it's what we should aspire for.

    As for who, it's society's job, though society has a nasty habit of wanting it's own "vested" interests being pandered to and tends to care little about things that don't affect them directly.

    Once again I'm not implying it's an easy process, but just because it's hard and complicated doesn't mean we shouldn't try and make progress.
     
  8. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Hi,

    What does 'fiduciary duty' mean?



    Thanks, Johny.
     
  9. Tropo

    Tropo Well-Known Member

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  10. Johny_come_lately

    Johny_come_lately Well-Known Member

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    So what does this mean for financial planners?




    Johny?
     
  11. bigbuddha

    bigbuddha Well-Known Member

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    I would question whether this process of creating a "fairer" system for financial advice is complicated at all.

    A combination of "fiduciary" responsibility and complete disclosure of fees (charging a flat retainer fee is a good option, at least for my business it is) is pretty much all that is needed, and a healthy does of "self-responsibility" would do the trick.

    Cheers,
     
  12. bigbuddha

    bigbuddha Well-Known Member

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    Being a "fiduciary"? Basically we as "advisers" must always put the clients interests first. Which is what is supposed to happen anyway and generally does but there are always the maverick elements floating about.

    So, to my mind, the natural flow of "advice" goes like this.

    1. Strategy first
    2. How to implement that strategy
    3. which products/investments (if any) are needed to fulfill the strategy.
     
  13. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Years ago, when I went to my first financial planner I said I wanted index funds. Every thing he sold me was Not an index fund. Could it be said he was not working in my best interest?




    Johny.
     
  14. Chris C

    Chris C Well-Known Member

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    Don't screw over your clients - or given them bad advice because you get a better commission.

    :rolleyes:
     
  15. bigbuddha

    bigbuddha Well-Known Member

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    Without knowing the circumstances around why he adviced on non index funds, then most likely then he was "not" working in your best interests.

    Where you paying him a flat fee or via commission? I'll take a bet and say commission.
     
  16. Dolfinwise

    Dolfinwise Well-Known Member

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    Proposed governement changes

    I'm a big advocate for the goverment making changes to separate advice fees from product to ensure consumers are not taken advantage of. I am also an advocate of trying to make the financial planning industry work for its clients and removing the impact of conflicts of interest.

    That said, the product sales part of the industry has already worked out how to get around the latest proposed moves by the government and ensure that they can keep their in house advisers motivated to sell as much of their in house products as possible. Note the lack of noise being made by the big institutions about these changes compared with the miners protesting their great big new tax.

    The better approach would be for the regulators/goverment to support and provide advantages to the small independent adviser market and help it grow. Firstly the definition of an independent adviser should be loosened to make it realistic. A definition such as "advisers and licensee who recive no more than 10% of their income from one source" would be a good start. This would cover all advisers who directly bill clients and don't take commissions or volume bonuses from a parent company's products.

    Tax deductibility could also be provided solely to this "independent" sector of the market to encourage advisers to aspire to independent status and work for their client's solely instead of corporate masters.

    Also the truely independent adviser would not need to be covered by such a heavy burden of regulation (FSRA) as they could be trusted (in a similar manner to which the accounting industry is) to work solely for their clients. Relief from the full force of the FSRA would allow these advisers
    to charge less for their advice and make independent advice accessible to more consumers.

    I have no doubt a carrot approach to encourage the right behaviours by advisers will achieve much more than the stick approach the current legislation is again seeking enforce.

    Regards
    Jason

    Brisbane Financial Planners | Financial Advice | Financial Advisor