You might have noticed I took out full page ads in the News Corp papers on Monday to implore Assistant Treasurer Arthur Sinodinos not to proceed with ripping the guts out of the Future of Financial Advice legislation. I then followed up with an article in Business Spectator, The Australian and the ABC’s The Drum saying that FoFA should have actually been the start of reform, and that percentage fees should go as well. You can read it here. During the week I got this email from a subscriber named John: "I used to be a licensed adviser. I gave up because I wasn't a good commission salesperson (upon which much/most of the business was based). The supposedly ‘best’ approach was to send new clients off with cash in their pockets (say $2,000), having just pocketed a commission of $7,500 – 5 per cent on $150,000 (acknowledged somewhere in the small and unread fine print). Worked a charm. I couldn't abide it. To return to these bad old days is simply not good enough for 2014. Might I also concur that much ‘red tape’ is there for good reason – to stop market excesses, of which there are too many examples to even begin.” That’s the essence of the problem. John wanted to be an adviser. It turned out he had to be a salesman and he wasn’t much good at that. And what about the story of “cash back”? Appalling deception. More importantly, when people visit a financial adviser/planner, they think they’re getting an adviser or planner, but what they are often getting (not always, as I point out in the article above) is sales. That is actually very important to the big banks, and it’s why they have been ferociously lobbying Senator Sinodinos to get the law changed back. Sales disguised as independent advice is very effective, and with credit growth stalling and staying down, they need new revenue sources. I’m just very disappointed that Arthur Sinodinos has fallen for it.
