Perhaps there is hope for our relationship yet, Wolffboon!
The financial planning industry has been structurally flawed for a long time. The available conflicts have been apparent, however, they have been easily mitigated either by the planners themselves or if the regulator just wanted to do their job. The problem is, very few planners and licensees chose to mitigate the conflicts as that is what made the industry lucrative for many even if they weren't well educated or capable.
The issues that the banks have (widely illustrated throughout the RC) aren't necessarily commensurate with the rest of the industry. The banks, and any vertically integrated firm, have been focused on selling their own products under the guise of advice, rather than just providing advice to put clients in a better position. For years vertically integrated advice has essentially been "ok so your goals are X, Y, Z. What you should do is move your money to one of our super funds, invest in our in-house investments within that, put in place some of our own insurance and sign up to our annual review service (to rarely actually receive any service). They don't make their money on the fees charged for 'advice', they make it through the margins in their products using the advisers as a distribution force - this clearly illustrated by all the businesses being sold lately being loss making at the time of sale.
Some laws/legislation already incoming that is going to negate a lot of said issues:
- The abolishment of grandfathering on commission and pre-opt in clients. The days of being able to sign clients up to an ongoing fee and continue to collect the fee without servicing them are over. Agreements now need to be 12 monthly only and resigned every 12 months. Clients that don't get services, the fee turns off. Some advisers can no longer have 1,000+ clients (and make a mint) as they don't service them so they will leave the industry. Licensees that received 'fees for no service' as a large portion of their revenue will also leave the industry (as we are seeing).
- Vertical integration hasn't officially been banned, however, it wasn't banned as Hayne said the banks were getting out of the industry anyways. There is a gradual movement towards the seperation of advice and product.
- Education requirements. From 2024 every financial adviser needs to have a degree (or equivalent for some existing advisers). Any new adviser from this year needs to do a professional year and have a financial planning degree. Gone are the days or a short diploma course to be qualified. If you want to be a financial planner, you need to commit a lot of time to study like any other profession. This again weeds out a lot of bad apples trying to make money by product flogging without being capable.
- Every planner must pass an exam by the end of next year to continue to be authorised to provide advice.
- Life insurance framework - Commission reductions on life insurance and a longer responsibility period (claw back period). The dinosaurs that used to just churn clients between providers every year can't do it any more. The insurers also now directly report the advisers with the highest lapse/churn rates directly to ASIC for investigation.
The list goes on. The above changes make the industry must less of a mess, especially with the banks gone. Adviser numbers are reducing, its out with the old, in with the new. The crooks that were in the industry for the easy money (both planners and the banks) are on the way out. This should have happened a long time ago but the perception that all these licensees were running around saying 'We can't monitor all these advisers!!' isn't something I have seen in reality. The fish rots from the head and the businesses doing the wrong thing have been structurally flawed but always blame the advisers. The easiest money I have ever made is being short AMP from well above $4 just knowing the issues are apparent.
There are many planners out there that provide advice where there is no product recommendations at all (solely strategic planning) or if a product is required, they can recommend a wide range of the available products in the market. These planners are doing fine. There is no shortage of clients looking for financial planning advice and the industry is not as dire as it sounds if you're doing the right thing.
I think ive been pretty consistent in saying there is a place in the industry for what Intiger is trying to do. When I say this I am referring to automation and not the outsourcing overseas, that's been available everywhere for a long time and many planners simply wont do it. The issue is, we don't know what Intiger has actually achieved. They do no marketing, they have no videos of what they have actually automated etc. The announcements have been conflicting (announcing BOOM2 was released without detailing most of it actually wasn't). They could still have a place in the industry but its not this amazing fix all the industry needs, that picture has been painted incorrectly. What the industry needed was an RC and a regulator that actually did something about all the known instances of misconduct.
