# Financial Planners Brought To Account



## Garpal Gumnut (19 November 2014)

It is not often that I disagree with LNP Policy, but tonight's Senate vote putting the screws on Financial Planners and the Banks, will benefit every Investor in Australia.

Storm and Timbercorp should never be allowed happen again.

gg


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## Julia (19 November 2014)

Do you really think some words in a bit of legislation will prevent such disasters in the future?

I didn't support the government's winding back of Labor's measure, but get that there is a genuine issue with red tape, paperwork etc.

I don't care what any government legislates, there will always be people ready to con the gullible or greedy out of their money who have the ability to do it.   

If anything, promoting the idea that consumers will now be completely safe from being ripped off because of a bit of documentation will create a false sense of security and people might actually be more vulnerable than ever.


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## pixel (20 November 2014)

Julia said:


> Do you really think some words in a bit of legislation will prevent such disasters in the future?




It's not necessarily "some words in a bit of legislation" that make the difference, but the realisation that our Justice System *really means business*that makes scammers think twice. We always have to remember that *half the Australian population has an IQ below average*. So there will always be plenty of gullible potential victims.

However, if the Law is upheld and false advertisers, scammers, and rip-off salesmen are dealt with accordingly, events like Commbank, Sonray etc will find far fewer imitators.


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## sptrawler (20 November 2014)

I tend to agree with Julia, laws are enacted, then scammers start working out ways to circumvent them.

It is like the old saying," an inteligent person can make a lot of money, a person with common sense can take it off them".


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## Vixs (20 November 2014)

The business today is already markedly different as a result of the FOFA changes that did go through. Investment commissions are still completely non-existent and weren't part of what the LNP was trying to keep out, the ability to charge fees based on a % of assets under management was still not possible, removing incentives for anyone that recommended clients leverage their portfolios to have a bigger asset base to charge fees on. The requirement to act in the client's best interest, a far harder test to satisfy than the old 'not unsuitable' rules, was still the standard.

The people harping on about all this are idiots who don't even know what is it they're 'repealing'. Removing consumer protections my ass, it was all about making the planner's job actually possible under stifling new framework.

You'd have to be a nutjob to go into financial planning these days. Much more risk for a fraction of the reward adviser's of days gone past got? Sign me up! Higher educational requirements demanded of the next generation by the previous generation that had none? Doesn't sound hypocritical at all!

Enjoy the future - you will be able to receive advice from industry fund owned advisers who can't even raise the prospect of implementing any strategy their fund doesn't offer (Need trauma insurance? Sorry, your industry fund doesn't offer it so it won't be recommended.), or bank-owned advisers based in Sydney or Melbourne that you only get to meet by Skype. Any independent firms will be priced even further beyond the reach of regular Australians and as such people that need quality advice will continue to go without quality advice.


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## Knobby22 (20 November 2014)

What complete and utter bull.

It's about planners not being paid commission to provide dodgy products.
Its about planners not being able to charge management fees without communicating with the customer.

What switched Ricky Muir was his sitting on the Timbercorp debacle.
The main guy made 7mil sales hid his commissions and promptly went bankrupt so he couldn't be sued.
ANZ were in it up to their necks and will get away with it.  

Don't believe the dross. We shouldn't have laws like this, and though the banks have pumped millions into the Libs to try to get them repealed, the people (ie democracy) has won.

If you go to an advisor now, you pay a fee for his advice, just like doctors, engineers, architects, accountants and any other professional. They will have to be properly trained and not allowed to cheat on an exam based on a sort of vege course. Whistleblowers will be protected.

I can't believe how easily some people let vested interests pull the wool over their eyes just so they can back their party of preference.


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## sptrawler (20 November 2014)

Knobby22 said:


> What complete and utter bull.
> 
> It's about planners not being paid commission to provide dodgy products.
> Its about planners not being able to charge management fees without communicating with the customer.
> ...




I think what Vix is getting at is, the ability to recommend anything other than 'safe as a bank' investments, will become too risky.
Therefore everyone will offer the same, which will end up with the Banks and AMP, being the only ones left.

The super funds will still charge you for advice, but will hand the responsibility to the Banks or AMP etc to invest it.

It will be interesting to see if the result is a drop in returns, my guess is it will be.


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## Hodgie (20 November 2014)

sptrawler said:


> I think what Vix is getting at is, the ability to recommend anything other than 'safe as a bank' investments, will become too risky.
> Therefore everyone will offer the same, which will end up with the Banks and AMP, being the only ones left.
> 
> The super funds will still charge you for advice, but will hand the responsibility to the Banks or AMP etc to invest it.
> ...




The smaller independents will struggle and get pushed towards either institutions or larger independents which have the systems and support in place to meet the FOFA reforms.

What a lot of people don't know is that the software alone required to comply with these FOFA reforms can be extremely expensive. These additional costs and squeeze on the smaller businesses margins may be enough to run a lot of them out of business. Therein lies the issues as we could lose a lot of the independent advisers to the institutions which you have eluded to.

It's a bit of a balancing act, on 1 hand there needs to be tighter legislation and consumer protection, on the other hand if the new laws become too expensive so that we get even more of a dominance from the institutions in the industry then that creates a whole separate issue.

The banks will have absolutely no problems dealing with these reforms, it's the small business owners that will have a tough time. There is no risk for an adviser to work for the bank, there is a lot of risk to be an independent adviser and business owner. If that risk does not get them any additional reward there will be no reason to remain independent.


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## basilio (20 November 2014)

The field of financial advisors has being a closely sown minefield. The casualties are the victims of Timbercorp, Storm and a myriad other scams that passed for investment opportunities.

When it's stripped bare the the financial advisor industry has existed to make money for

1) The  financial institutions who run them for a very fat profit
2) The advisors who sell the products for their own commissions
3) The financial products themselves (Timbercorp et al) who created optimistic to mythical scenarios and then used very high commissions to the advisors and institutions to sell this rubbish to Mums and Dads.

I understand that between commissions, fees, Wrap charges and whatever else is dreamed up investors pay around 40% of the returns to the above participants.  And that is before any of the investments go belly up because they were out and out frauds that should never have been sold in the first place.

http://www.smh.com.au/money/investing/six-questions-for-your-financial-planner-20140620-zsf18.html


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## Junior (20 November 2014)

Knobby22 said:


> The main guy made 7mil sales hid his commissions and promptly went bankrupt so he couldn't be sued.




A bit besides the point, but I know this main guy.  

He was legitimately bankrupt/insolvent.  Had the majority of his wealth and business assets tied up in the very same margin loan and Agribusiness products he recommended to clients.  He was sucked in by Timbercorp's slick marketing just like everyone else.

There is a lot of misinformation in the media about this.  The guy didn't walk away with $7mill in commissions, he blew it up in geared portfolios and his own personal failed MIS investments, and trying to save his business.  He doesn't give financial advice any more and probably never will, despite his ban coming to an end.

Agreed with Vixs, the changes already in place will significantly improve the quality of advisers out there. 

Although I do think more should be done.  High upfront insurance commissions, minimum education standards and conflicts of interest (particularly FPs who have arrangement with real estate groups) are all areas which need to be looked at.


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## Knobby22 (20 November 2014)

Hodgie

The smaller advisors and the organisation that reflects their views are for these changes.
The larger advisors including AMP and the bank owned companies are against.

The large advisors do not want people to get financial advice based on ability. They would rather sell them a range of white good style products through a barely trained and cheap functionary where they can skim profits in a myriad of ways.


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## Knobby22 (20 November 2014)

Thanks Junior


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## Hodgie (20 November 2014)

Knobby22 said:


> Hodgie
> 
> The smaller advisors and the organisation that reflects their views are for these changes.
> The larger advisors including AMP and the bank owned companies are against.
> ...




The dodgy products you mentioned before were recommended by independents, those are the ones that would get the 10%+ commissions by recommending agribusiness products such as Timbercorp. They wouldn't exist on a bank owned Approved Product List (APL) as they thought they were too much risk. 

I agree 100% that a prudent financial adviser should have no problems with these changes and it should actually provide opportunity for them to show their worth over an institutionally owned adviser who can only recommend the same products to every client, I'm just saying that it is really expensive and contains a lot of risk to go out on your own. if that risk isn't worth it they just wont do it when they have an easier option to make money.

I have friends that currently work for banks as financial planners, they have told me how simple and easy these changes are for them, they don't have to do anything different and they take on none of the risk, the support and systems are all provided to them by the bank.

I know that these changes are not so simple for small business owners. 

I completely agree that financial planners who do not have much scope in their advise and just flog off products should be worried


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## sptrawler (20 November 2014)

Knobby22 said:


> Hodgie
> 
> The smaller advisors and the organisation that reflects their views are for these changes.
> The larger advisors including AMP and the bank owned companies are against.
> ...




When I was at work, a few of the guys got involved in lemon myrtle, strawberries and I think tee treas.

They said this is brilliant you put in a wad of money, the tax return pays off the loan, then you get an income stream from it.
I said, no thanks, sounds shonky, it wasn't being pushed by the banks and they did get burned.
They are still screaming it was unfair that the ATO had to be paid back. 

How do you make laws to protect people from their own greed? They will just look for something else to make easy money on.
The next thing will be suing financial planners, for any losses incurred, I can see liability insurance going through the roof.


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## banco (20 November 2014)

Knobby22 said:


> Hodgie
> 
> The smaller advisors and the organisation that reflects their views are for these changes.
> The larger advisors including AMP and the bank owned companies are against.
> ...




Thing is the advice most people require isn't very complicated and isn't likely to pay particuarly well.  I'm convinced the reason they have all these trailing commissions etc. is that if it was a fee for service industry most financial planners wouldn't make over 6 figures.  You don't need to be financial genius to advise a couple with a vanilla SMSF, an investment property and a PPOR.


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## Hodgie (20 November 2014)

sptrawler said:


> When I was at work, a few of the guys got involved in lemon myrtle, strawberries and I think tee treas.
> 
> They said this is brilliant you put in a wad of money, the tax return pays off the loan, then you get an income stream from it.
> I said, no thanks, sounds shonky, it wasn't being pushed by the banks and they did get burned.
> ...




They have had tons of those types of products over the years, I think you can still invest in a sandalwood product in WA which has a product ruling with the ATO. Apparently that was one of the better performers that hasn't gone completely bust.

People already are suing financial planners, for any losses incurred. In fact it goes beyond that, a client can sue their financial planner if their investments have not performed as well as they 'should' have, even if the client hasn't lost any money they can sue for the difference in performance of their actual investment and the performance of the alternative or 'appropriate' investment. This is the methodology used by the financial ombudsmen to calculate loss.

Professional Indemnity insurance is already extremely expensive, a lot of smaller Australian Financial Services License holders only have PI insurance purely for the fact that its the law. The insurance is so insignificant that it won't cover the potential claims that come in anyway, they have insane excesses of hundreds of thousands of dollars per claim. It's too expensive to get anything better for a lot of these companies.


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## Hodgie (20 November 2014)

banco said:


> Thing is the advice most people require isn't very complicated and isn't likely to pay particuarly well.  I'm convinced the reason they have all these trailing commissions etc. is that if it was a fee for service industry most financial planners wouldn't make over 6 figures.  You don't need to be financial genius to advise a couple with a vanilla SMSF, an investment property and a PPOR.




Any direct property is not a financial product, a financial adviser should not be giving any advise at all on a property purchase. This would put them at significant risk.

Also SMSF is a specialist area. There are actually a hell of a lot of issues that come with it for advisers. There has been a lot of crackdown in this area.

But I do agree that a major portion of clients do not require complex advise, the most common type of advise is the supple superannuation and insurance recommendations.


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## tech/a (20 November 2014)

*Financial Planners* who are qualified and can actually advise are fine.
They *CAN* advise on anything including property.

Financial Advisors who can do no more than sell the product for the company that their licence is held by
should be closed down.

Parasites who prey on those who don't know better and never will. 
Would-be's who are often worse off than their naive clients!


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## Boggo (20 November 2014)

In addition tech/a, there is no longer such a thing as an independent financial planner. They are nearly all employed either directly or indirectly by the banks.

Simialirly, look at Aussie Home Loans ("we'll look after you") as an example, sold out to the banks (which bank), how independent would their loan advice be.


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## Julia (20 November 2014)

sptrawler said:


> How do you make laws to protect people from their own greed? They will just look for something else to make easy money on.



Agree.


> The next thing will be suing financial planners, for any losses incurred, I can see liability insurance going through the roof.



Hodgie has responded to this which I was going to ask about also:


> Professional Indemnity insurance is already extremely expensive, a lot of smaller Australian Financial Services License holders only have PI insurance purely for the fact that its the law. The insurance is so insignificant that it won't cover the potential claims that come in anyway, they have insane excesses of hundreds of thousands of dollars per claim. It's too expensive to get anything better for a lot of these companies.




So, Hodgie, the insurance is actually pointless?   Wouldn't most consumers have the impression that if a planner holds PI insurance, then any failure of the investment will be covered and they'll get their money back?
This is the sort of naive assumption that I suspect many people will make.



banco said:


> Thing is the advice most people require isn't very complicated and isn't likely to pay particuarly well.  I'm convinced the reason they have all these trailing commissions etc. is that if it was a fee for service industry most financial planners wouldn't make over 6 figures.  You don't need to be financial genius to advise a couple with a vanilla SMSF, an investment property and a PPOR.



Yep, I've been pondering this a bit also.   Previously we've had planners offer a potential price of between $5000 and $10,000 to prepare a full financial plan.  Does the average couple, with only about $100,000, say, to invest, and a low risk profile, really need a complicated analysis before whacking the funds into an ETF or similar?

I'm just not sure that the abolition of all commissions which did allow fee-free advice for this sort of client is necessarily entirely in the client's best interests.

Above all, it's crazy that people like Lambie and Muir whose investment experience is probably zero, are the people deciding what should happen here.  Lambie has already shown she didn't know what she was voting for last time and probably doesn't this time.


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## Hodgie (20 November 2014)

Julia said:


> Agree.
> So, Hodgie, the insurance is actually pointless?   Wouldn't most consumers have the impression that if a planner holds PI insurance, then any failure of the investment will be covered and they'll get their money back?
> This is the sort of naive assumption that I suspect many people will make.




That's correct. Most people have that assumption, I have seen it first hand on occasions where clients have lost money and someone has told them something to the effect of "Don't worry, insurance will cover it". 

The fact is that many of these insurance policies will not cover a product failure at all. If the advice was found to be inappropriate for the clients who were recommended this product and a lot of claims come in it is entirely possible that the company will just go into administration and the claimants wont get anything back. 

I cannot be too specific on a forum but an example would be a professional indemnity policy where the excess is 150k on claims where no gearing is involved and 300k on claims where gearing is involved.

In the above scenario, the insurance company wont pay a cent on any claim until that single claim exceeds 300k where gearing is involved . Given that the maximum compensation that the financial ombudsmen can currently award for compensation is 280k per claim, this excess will rarely if ever be breached.

Non institutionally owned companies will often go under before the insurance company gets involved at all.

On top of this there will be a bulk amount which has to be exceeded, for an example say 2 million. This acts like an excess on top of the excess. So for example, if you had a claim paid out for 350k, this would only take 50k off the 2mil which has to be exceeded for the year before the insurance company digs into their pockets. Given that the only way the excess is going to be exceeded for geared advice (which is usually what most large claims are about) is if the claimant actually takes the company on in court, it would be extremely unlikely that the excess bulk amount will be exceeded. keeping in mind that this is a year on year basis.

The above is just an example of the type of insurance policy a non-institutionally aligned company may take on simply because it's the cheapest option and by law they have to have PI insurance to keep their Australian Financial services License. The insurance company is happy to take the premiums as they know there is very low risk of them ever having to payout on any claim.


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## Julia (20 November 2014)

Thank you for detailed explanation, Hodgie.  That's extremely daunting.
Such a different picture all round for independent planners than that generally held by the public, I expect.


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## Hodgie (20 November 2014)

Boggo said:


> In addition tech/a, there is no longer such a thing as an independent financial planner. They are nearly all employed either directly or indirectly by the banks.




The banks don't own everyone, at least not yet anyway. There are still financial planners that are not aligned with the institutions out there but they are becoming fewer. It is difficult to compete with the bank business model.


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## sydboy007 (20 November 2014)

banco said:


> Thing is the advice most people require isn't very complicated and isn't likely to pay particuarly well.  I'm convinced the reason they have all these trailing commissions etc. is that if it was a fee for service industry most financial planners wouldn't make over 6 figures.  You don't need to be financial genius to advise a couple with a vanilla SMSF, an investment property and a PPOR.




My experience with financial sellers is once you tell them you're not interested in property and borrowing they tend to see you as not worthwhile.

Earlier in the year I got sucked in by an FP who seemed quite good.  Even had an hour long chat on the phone explaining where I was and what my goals were and that I wanted to get an idea of the pros and cons of salary sacrificing into super.

After paying for my plan waited a couple of weeks then emailed the guy what's going on to which I was told I'd have to pay to get the plan.  When I responded I had paid it took a few more days for him to acknowledge that.  Another month goes by and he's continually telling me he doesn't want to send the plan to me until we can tee up a time to talk about it.

Then he goes on holiday.  I've yet to actually get the plan and I told myself never again.  I think getting a decent financial planner is like winning power ball...on consecutive weeks.


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## sptrawler (21 November 2014)

sydboy007 said:


> My experience with financial sellers is once you tell them you're not interested in property and borrowing they tend to see you as not worthwhile.
> 
> Earlier in the year I got sucked in by an FP who seemed quite good.  Even had an hour long chat on the phone explaining where I was and what my goals were and that I wanted to get an idea of the pros and cons of salary sacrificing into super.
> 
> ...




I'm a bit suprised you got caught up in that, you are well versed in financial matters, I would have thought as soon as they mentioned a fee you would have baulked.

I know every time I went to one, they said $4,000, I said I would get back to you.lol

Having said that, we fill in our own tax and SMSF tax returns, every year there is some issue.

It ends up never being our problem, but it is an amazing coincidence, that there is some issue.


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## sydboy007 (22 November 2014)

sptrawler said:


> I'm a bit suprised you got caught up in that, you are well versed in financial matters, I would have thought as soon as they mentioned a fee you would have baulked.
> 
> I know every time I went to one, they said $4,000, I said I would get back to you.lol
> 
> ...




the fee was $450 so not like I'm going to lose sleep over it.

I just don't think there's a lot of honesty left in the profession,.  It's a sales culture rather than helping someone see where they are and the best way forward to meet the goals they've set.

The market for this kind of advice must be massive, yet it seems nigh on impossible to find anyone willign to provide it.


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## tech/a (22 November 2014)

Due to litigation risk advice is general even though it's packaged as specific.
Don't expect advice on how to increase your wealth----that's just asking for 
Court!

Investors EXPECT profit month in month out.
If you can't do that then your hopeless.

Couldn't think of a worse profession to be 
In.


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## Knobby22 (22 November 2014)

Julia said:


> Agree.
> 
> Hodgie has responded to this which I was going to ask about also:
> 
> ...




So we should leave it to the professional plliticians then. Who wrote the coalition document. .. oh yes Arthur Sinodenos. A man who is not conflicted with only our best interests at heart.


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## Julia (22 November 2014)

Knobby22 said:


> So we should leave it to the professional plliticians then. Who wrote the coalition document. .. oh yes Arthur Sinodenos. A man who is not conflicted with only our best interests at heart.



That's an uncharacteristically unreasonable conclusion to draw, Knobby.

Mr Sinodinos has already paid the price for his indiscretion and will almost certainly continue to do so.

Whatever he is or is not, has nothing to do with the competence or capacity of people like Lambie and Muir to understand complex implications of financial legislation and to make decisions accordingly.

Ms Lambie already voted on the issue, but is now saying, oops, got that wrong, so let's throw out that legislation and start over.  (Translation:  Sam Dastyari got to me with his repeated persuasion to do what he wanted).
So first off she was a puppet to what Clive wanted, and now she's equally a puppet to the bidding of Labor and the Greens.  If you regard that as democracy at work, then I'm astonished.

And this would surely be setting a precedent:  vote however you like, then if down the track you change your mind, just rip it up and cause the entire parliament to revisit the issue.   Fantastic!
The children are apparently in charge of the Senate.


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## sydboy007 (23 November 2014)

he seems to hit the nail on the head with this one

http://www.idiottax.net/2014/11/in-defence-of-financial-planners-well.html#.VHEo9ouUf-U



> While I can't imagine the hurt and heartbreak people have suffered so the likes of Don Nygen could propel himself to the top of Commonwealth Financial Planning's league tables, I also wonder should some people just give up on investing? Admit to themselves that they will never research hard enough to be able to find and trust the appropriate person to do it on their behalf and understand a simple investment process. Alternatively, just admit they don't have the requisite personal and emotional skills to do it themselves.






> *For the average person there's little better than time, some consistent contributions and a few hairs on the chest so they make it through times like the last few months*. Stick the money into a 60/40 job (or similar variation) with 60% in equity funds across the world, plus REITs and 40% in fixed interest and cash. Some people will disagree and I realise some people who read this site come in through channels where financial literacy is high. I appreciate your ability, knowledge and the possibility you're the ones successfully making the sharp moves, but it's totally lost on the average person. Them trying to be in and out of the market and picking winners will lead them to do this every night.




Reminds me of what Albert Einstein said:

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” 

"Compound interest is the most powerful force in the universe."

then there's the people who can take responsibility for their current financial situation - well seem like maybe 10% and the rest are looking for someone to blame

http://www.idiottax.net/2014/11/da-cost-of-living-and-mine.html#.VHErYIuUf-U



> Still, it's rough out there for the average person on less than $45k (me), up to the average person on between $150k and $200k (someone else). According to News and their financial whinge survey, over half of everyone throughout those wage ranges is a combo of either frustrated or angry. Below 45k it's 80% of people and at $150 to $200k it's 53% who are crying poor.






> Who do the news.com.au howlers blame?
> The survey showed government policy was the main factor people blamed for cost of living stress, ahead of big business, a shaky global economy and the Reserve Bank. However it also showed around 20 per cent of people across all salary brackets from $45,000 to more than $200,000 were unclear about why they were struggling, saying ‘no one’ or they ‘didn’t know’ who was to blame. Around 10 per cent across each salary bracket said their own habits or decisions were to blame. Results also showed the government in the firing line, with more richer people blaming Abbott’s coalition, while a large proportion of people also said that none of the political parties knew what to do.




His budget reminds me of mine, less the care related expenses which goes into the holidays bucket.


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## Garpal Gumnut (23 November 2014)

sydboy007 said:


> the fee was $450 so not like I'm going to lose sleep over it.
> 
> I just don't think there's a lot of honesty left in the profession,.  It's a sales culture rather than helping someone see where they are and the best way forward to meet the goals they've set.
> 
> The market for this kind of advice must be massive, yet it seems nigh on impossible to find anyone willign to provide it.




You have hit the nail on the head.

I strongly believe Financial Management should be taught at school from about Grade 3 or 4. 

Simple stuff. Saving. Spending. Compounding. Initially.

Then becoming more sophisticated after Y7.

I was so pleased to see FOFA voted down. There is a god !!

gg


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## sydboy007 (23 November 2014)

Garpal Gumnut said:


> You have hit the nail on the head.
> 
> I strongly believe Financial Management should be taught at school from about Grade 3 or 4.
> 
> ...




I totally agree

I was shocked when a friend asked for help in working out the level of comissions he'd earn as the % figure increased as the income he generated for the salon went up.

He was shocked I'd sent him an email a few minutes later with the $ figures for each band.

I know we can't legislate against greed and stupidity, but hopefully we can make the bastards pay when it's clear to see they're out fleecing the gullible.

A royal commission into the financial industry is probably what we need.  Let those on the inside who have a conscience present the truth, and then compel the bankers to front up and try to justify what's happening.

I have to say my $299 subscription to the Motley Fool has paid off 100 times.  Might be the only financial guidance I've received over the years that's actually been worth the money, though I'll admit the info FIIG provides in their seminars is pretty good too.

We need to break the sales culture in the financial industry, and remove the FUM model as well.


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## Julia (23 November 2014)

Garpal Gumnut said:


> You have hit the nail on the head.
> 
> I strongly believe Financial Management should be taught at school from about Grade 3 or 4.



Yes, of course that makes sense.  But spare a consideration for the teachers who are under ever more and more pressure to teach add ons to the basic essentials of literacy and numeracy.  Not much point understanding compounding and investment if you can't write a basic letter of application for a job.

Teachers these days are supposed to be able to take over many responsibilities that should be those of the home, including sex education, use of social media and god knows what else.  Is it any wonder that so many kids are semi-literate while they spend more hours being instructed in the evils of climate change etc than how to construct a basic sentence?

There was no such financial instruction when you and I were at school, gg, yet we have managed to educate ourselves financially to a reasonable degree.  Sometimes people just have to take responsibility for their own outcomes and it's not always the responsibility of governments to try to make up the deficit when the home education and training is lacking.



sydboy007 said:


> We need to break the sales culture in the financial industry, and remove the FUM model as well.



Yep, completely agree on this.


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## Knobby22 (24 November 2014)

I think GG is right though, kids should get some basic training. The financial market are much more rapacious than they were when you were young,Julia. The use psychology and a range of tricks is common.

For instance GE Money targeted many with that sign here to get $10,000 offer and they were the ones behind the Harvey Norman deals, which as you know got a few people into trouble with the sudden onset of very high interest rates after the time is up (deliberately aimed to rip off the uneducated poor). They also had a few tricks if you got a car loan with them also.

RAMS is another company (owned by Westpac) that preys on young people.

There are many more sharks out there and the investment environment is not as good. Some arming of our youth to help protect them a little does no harm. You could tie it into maths (how interest rates work) and law (how contracts work).


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## Julia (24 November 2014)

Sigh.  I already agreed that educating kids about money is useful, essential in fact.
I simply pointed out some of the facts re the already overcrowded curriculum.

Might be good for you to make your concerns known to the Minister for Education.  I understand he is presently reviewing the curriculum.

Why should parents not inculcate financial common sense into their children?  Why do we expect the government to do everything?   I'm just sick of this general belief that whatever we are is dictated by what is legislated and delivered by governments.

(And yes, part of the above is rhetorical:  I know all too well that some parents are financial dopes.)


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## Junior (24 November 2014)

Garpal Gumnut said:


> I was so pleased to see FOFA voted down. There is a god !!
> 
> gg




And her name is Jackie Lambie!


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## Hodgie (24 November 2014)

Garpal Gumnut said:


> You have hit the nail on the head.
> 
> I strongly believe Financial Management should be taught at school from about Grade 3 or 4.
> 
> ...




It's not quite grade 3 or 4 but at the secondary school I went to they offered an elective class from grade 9 onwards called Financial Literacy which was quite good and provided a great start into learning about money management, loans, saving, some investments (they even had some basic FA/TA on stocks), compounding interest, cashflows etc. This is where I read my first book on Finance called "Rich Dad Poor Dad"

We also had Accounting, Math and Economics in addition to this so there were ample choices on the topic. They were however electives so by no means were we required to learn any of the material in these classes. I still remember that the teacher I had in grade 9 was adamant that Financial Literacy should be a compulsory subject as part of the educational curriculum.


----------



## Wysiwyg (24 November 2014)

Garpal Gumnut said:


> You have hit the nail on the head.
> 
> I strongly believe Financial Management should be taught at school from about Grade 3 or 4.
> 
> ...



That is a dumb idea. Who is gonna pay the rents and buy the crap and spend thriftily if they're all smarty pants investor types?


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## VSntchr (24 November 2014)

Julia said:


> Sigh.  I already agreed that educating kids about money is useful, essential in fact.
> I simply pointed out some of the facts re the already overcrowded curriculum.
> 
> Might be good for you to make your concerns known to the Minister for Education.  I understand he is presently reviewing the curriculum.
> ...



+1. I think that it's easy for parents (and the public in general) to point the finger and find someone else to blame, or to place a burden upon. 



Hodgie said:


> It's not quite grade 3 or 4 but at the secondary school I went to they offered an elective class from grade 9 onwards called Financial Literacy which was quite good and provided a great start into learning about money management, loans, saving, some investments (they even had some basic FA/TA on stocks), compounding interest, cashflows etc. This is where I read my first book on Finance called "Rich Dad Poor Dad"
> 
> We also had Accounting, Math and Economics in addition to this so there were ample choices on the topic. They were however electives so by no means were we required to learn any of the material in these classes. I still remember that the teacher I had in grade 9 was adamant that Financial Literacy should be a compulsory subject as part of the educational curriculum.



That sounds like a great class, sounds quite familiar in fact


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## Hodgie (24 November 2014)

VSntchr said:


> That sounds like a great class, sounds quite familiar in fact




Haha, indeed.


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## Sir Osisofliver (24 November 2014)

OK I think I'll weigh in...

Insert disclaimer here, you all know I'm a licensee representative, don't make me break out the legalese.

So most of you know I'm in the industry....it's been my experience that the vast majority of people who get into the financial services industry are not soulless parasites....many actually enter the industry from an honest desire to help people, desire to learn more themselves, and a variety of reasons. Very few enter with a dodgy attitude of "I will screw everyone to get ahead"... Of course they exist, they fill the newspaper headlines, but overall my experience is that is not the motivation behind entering the industry. 

So why do we end up with this perception that the evil financial planners/advisors are out to get you?

It breaks down to the licensee. Having an AFSL, is not a cheap process to apply, nor is easy to maintain. I'm with a boutique firm (DON"T PM ME ABOUT THIS), who has their own AFSL, and we would spend probably about 200-250k a year in doing the things that are required under the license. (CPD, Compliance, system changes, Audits etc) A bank or other institution that has significantly more Licensee staff and you could probably add a couple of zero's to that number. Our AFSL license is also limited in terms of scope in comparison to say a bank. So for this investment in time and resources, (not to mention all the other expenditure in running a business) shouldn't the company be expected to make a profit? After all that is why we get into any business isn't it, so that a profit can be made and a return on our investment is generated for the shareholders. If we can achieve this in an ethical manner that gives us warm fuzzies even better, but at the end of the day, profit is KING. 

As many of you have indicated, most often the requirements of the role of FP/FA is to sell product or meet sales targets...but this is a fundamental part of *any business*. Without sales and revenue, businesses die. If BHP stopped employing salespeople, BDM's, client service officers etc etc what would you expect to happen? The problem with the industry is the vertical integration, have AFSL and product's produced by AFSL holder....natural fit. I personally knew a FP in mid 2007 who started to liquidate clients portfolio's and transfer to cash....which was absolutely the right thing to do for his clients...who was "let go" by the licensee for not meeting revenue targets and not using the APL. This speaks volumes about corporate responsibility and the industry rather than the individual FP/FA.

So lets say you are lucky enough to work for my company... (From Basilo's link on the first page)

*1 Are you a certified financial planner? *Why yes the Responsible Manager and Senior Planner are both CFP's. They are responsible for oversight of more junior and less qualified staff.

*2 Have you ever recommended a managed agricultural scheme? * No we have not. In fact our business model is and has always been a fee for service model and we rebate commissions received from Product issuers back to clients.

*3 Do you put your clients into your own firm's funds and products?* Yes we do. There's that low cost vertical integration model, *however*...the product in question is non-discretionary in nature. It's an issue around control, and ensuring that the client has the control, not the advisor or fund manager. Our job and what we are paid for is to advise and by doing so we align the interests of the FP/FA and the client...mutual success. Clients are also not locked into any service contract...they can leave at any time...with no exit fee's.

*4 Can you show me your investment portfolio?* My investment portfolio is none of your business...however I am very happy to show you how our services have enhanced the lives of other clients in very similar situations as you, over a short and long term time frame.

*5 Do you offer flat fee-for-service pricing?* Indeed we do, as I said, we even rebate all product commission paid to us back to our clients. You'll also find that being a client of our firm entitles you to rates on certain types of financial products that cannot be achieved elsewhere (because we don't take commissions) and even that the size of the discounted rate *in many circumstances* is larger than the fee's we charge. 

*6 Can you show me a sample statement of advice? * Sure, but I'd really prefer it if you did our educational courses that we run for clients. Many clients understand the financial plans we produce significantly better once they have gone through the training. 

A statement of advice should cover

 budgeting, 
 cash flow projections, 
 a comparison of multiple strategies and 
 a discussion about what you can realistically fund in retirement. 

Yup does all that....and more.

So with all of those wonderful points in it's favour why hasn't the firm taken over the financial services industry in Australia? In fact chances are you probably haven't heard about the company that I work for. It is because the way the business model works is to service a small number of people with large investments, not a large number of people with small investments.  Below a certain figure, we cannot help you, and trying to do so *will cost the firm money.* 

Final words...

Make all the legislation you want....a fool and his money is soon parted..true then, true today. Educate yourself.
If an advisor wants to be dodgy, new legislation won't change their motivation.
Greed...of the clients...and the AFSL holder...acts to work against the client best interests.
Every time there is new legislation that increases our costs...the fee's to our clients go up...and the minimum sized client we will accept also increases.



Cheers

 Sir O


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## basilio (24 November 2014)

I just came across an idea that could go to the heart of many of the problems surrounding financial  advisors  and the financial services industry.Worth a thought.

Elegant, breathtaking simple and most likely to stop probably 80% of the dodgiest schemes in their tracks. 

(Clearly an idea that will never get any industry support..)



> A part of the problem that neither FoFA nor Murray addresses is the role of financial product manufacturers. The ASIC stamp does not mean the product has been vetted and as it turns out you can produce just about any bit of financial rubbish with minimal responsibility, unlike the manufacturers of other goods.
> *
> If your car is seriously faulty and blows up, the manufacturer and not just the person who sold it to you has responsibilities.
> 
> ...




Read more: http://www.smh.com.au/business/bank...nvestments-20141124-11smk1.html#ixzz3JxEGr8Ji


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## basilio (24 November 2014)

Great post Sir Osis... It reminds one of how an ethical and properly motivated financial service business should work.  

Unfortunately it also highlights the problems of the rest of the industry. It seems to be very hard to be ethical and prosper in this line of work.


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## Julia (24 November 2014)

Sir Osisofliver said:


> OK I think I'll weigh in...



And you make all the salient points.

But, as you point out, you cater for hnw individuals.   Would the same model necessarily be workable for the everyday vanilla service to bank customer who has around $100K to invest, and really just cannot justify several thousand dollars of SOA, detailed plan etc.
This is where I have reservations about fee for service only model.

Knobby, in an earlier post you suggested financial markets are much more complicated now than when I was young.   Yes, that's true.  But the same basic maxims hold true, eg "if something looks too good to be true, then it probably is".

There have always been scammers ready to take advantage of the gullible.

It's up to individuals to educate themselves at least to the point where they can recognise what is valid advice.
It just ain't that hard.  Using Storm as an example again, for any of those people to claim that they thought the plan to (in retirement) borrow 90% of the value of their home to get into the share market, then to take out a margin loan to further leverage into that ever-risky environment, was a SAFE STRATEGY is ridiculous.

We all have to take responsibility for our own decisions and stop blaming governments for allowing  us to lose money.


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## Knobby22 (24 November 2014)

So Sir O. Thanks for weighing in.
What is your attitude to the changes in the law? Both the recent original and the new ones proposed. Or do you think there is a third way?


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## Hodgie (24 November 2014)

Julia said:


> And you make all the salient points.
> But, as you point out, you cater for hnw individuals.   Would the same model necessarily be workable for the everyday vanilla service to bank customer who has around $100K to invest, and really just cannot justify several thousand dollars of SOA, detailed plan etc.
> This is where I have reservations about fee for service only model.




That's spot on, as Sir O stated, with his fee model they cannot make money out of the average client, it would actually cost the business money to take on clients under a certain amount. If every Financial Planner used this model then the average 'mum and dad' investor wouldn't have anywhere to do to get advice.


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## Sir Osisofliver (24 November 2014)

Knobby22 said:


> So Sir O. Thanks for weighing in.
> What is your attitude to the changes in the law? Both the recent original and the new ones proposed. Or do you think there is a third way?




Oh Wow don't get me started...too late..

tl;dr
1) Improve/create tax concessions in fixed interest products
2) Standardised equity based remuneration
3) Broaden legislation to cover non-traditional financial products

Long version

Red tape does not equal business efficiency. The industry however has an ethical duty of care for clients, which is not reflected by the majority of firms that service the smaller clients. What really bugs me is the managed fund environment. It's evolved since Hawke/Keating "jobs for the boys" days (when every fund was an industry super fund), but it is still designed to funnel money according to an imperfect mathematical model that does not accommodate "fat tail" events and market corrections. The only way the business of managed funds works is if there is money in the system. Therefore the only way a fund and the company running that fund will survive is if the *majority of clients keep their money in the system and feel the damage done by the correction*.

I'd like to see standardised remuneration based on *client equity* regardless of product, and products to include a broader range to break the single-minded correlation we see with the Australian Share Market. IE Someone brings me $10,000. Has little to no understanding of the market dynamics and investment. Someone like this (based on risk profile - this is not advice) might be ideally suited to an ETF or Index fund. *HUGE BUT* If it's not the right time though, sometimes the best advice is "do nothing" or keep the cash, but "Do nothing" earns no dollars. This is why some kind of tax advantage needs to occur in the fixed interest product space...otherwise real rates of return make it a mugs game. If however it is tax effective, firms will be able to charge a higher fee without causing a negative real rate of return. It then becomes a viable strategy to switch that client from an ETF to Fixed Interest product because the remuneration is based upon the *equity*. By managing client equity effectively we can create financial security over time. Would be nice if it was included under one piece of legislation. (IE property falls under different legislation). The only way I can service that $10k client effectively is if I can spend a relatively short period of time and effort in doing so...otherwise that clients cost the firm money.

Funnily enough the easiest way to run such as the above is a model based on scaled advice (which is a big nono under the new legislation). But it is scaled advice *based on performance*. IE A firm would charge a basic administration fee...which is calculated to cover the costs of doing business. Depending on the model, this might mean a 0.5 - 0.75 depending upon the complexity of the model being used. 

They would then charge a retrospective performance fee minus the admin fee (which would need to be a healthy amount - because this after all is the firms profit and there is significant risk for the shareholders if their advisers are unable to perform in different market types) based upon increases in client equity (IE you don't get a higher performance fee for using leveraged products unless this translates to an increase in client equity). If client equity moves backwards the firms only make the admin fee. (Financial regulators would have to ensure this doesn't creep).

It's a far easier system to work under for an *ethical* product provider, but is wide open for an unethical adviser to abuse the **** out of.

Cheers

Sir O


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## Sir Osisofliver (24 November 2014)

Julia said:


> And you make all the salient points.
> 
> But, as you point out, you cater for hnw individuals.   Would the same model necessarily be workable for the everyday vanilla service to bank customer who has around $100K to invest, and really just cannot justify several thousand dollars of SOA, detailed plan etc.
> This is where I have reservations about fee for service only model.




Um...it's possible, but it squeezes our margins. Someone would have to do what we do, under a high volume/low margin basis...but trying to get that from the banks when they've got 85% of the market locked away? Don't think so.

Cheers

Sir O


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## Julia (24 November 2014)

All of which just reinforces my belief that we should educate ourselves and manage our own money.

But for people unwilling to do this, then I don't see too much wrong with the old commission-based managed fund model if they have only a very small amount to invest.

Totally against charges on a FUM basis.  I have a friend who thinks his financial adviser is wonderful, simply because once a year he drives four hours up here from Brisbane (charging the client for the time and associated expenses, of course) to just say hello.  He has around $1M invested, about 70% in cash (why on earth couldn't he just place this himself) and the rest in a couple of managed funds.    For this he pays 5% of FUM.  The FA has advised that the low return is unavoidable in present market conditions.  He happily accepts this.  

I expect there are many people like him.  They don't know what they don't know and if they believe they are getting good service they are happy.  A bit like taking a placebo from a doctor.


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## Junior (25 November 2014)

Fantastic post Sir O.  Agree with most of what you have said there.

I've been in the industry for around 10 years and worked primarily for 'independent' FP practices (non-bank aligned).  The groups I've worked with generally haven't been in the HNW space, but rather the more typical 'mum and dad' investors.  I'm yet to work for a practice which has been able to consistently turn a profit without relying on upfront commissions.  Even the ones who try to move to a full fee for service model, have found they need to supplement this revenue with insurance sales (and take the full 110% upfront commission) just to break even.  This is not such a bad thing as long as one can avoid the temptation to over-insure clients.  A significant temptation when under pressure to meet sales quotas.

This has meant that ever since the abolition of upfront commissions on investment products, many FP practices have become increasingly reliant on insurance sales.  Now of course there's issues with 'churning' (flipping clients across into new insurance policies regularly to earn upfronts) which will now lead to major insurers being forced to increase their premiums to support commissions.  Also an issue with replacing industry fund cover with retail cover, which resets the 13 month suicide clause and can cause complications with pre-existing medical issues and non-disclosure.

Maybe this will be the way going forward, but I still feel the industry needs to find a better model.  Pulling apart the bank's 85% share & vertical integration set-up and increasing minimum education standards are a start.

Lower net worth individuals may just need to go to their Industry Fund planners for advice (or self-educate!!).  I don't have much experience in this area so can't comment on the quality of advice, although it must also be conflicted.  i.e. an adviser with Australian Super for example, is ONLY going to recommend Australian Super investment/super products and insurances, with little regard for what is happening in the non-super environment for that client.

As far as the FOFA changes which will now come into force, I don't believe they will significantly increase the cost of doing business.  One issue I could see is the potential for increased litigation arising from the Best Interests Duty.  It's already a nightmare getting PI cover, and if that BID means clients will be even more successful suing their FPs when something goes wrong that may make it even harder for boutique practices to stay in business.


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## Knobby22 (25 November 2014)

Thanks, its good to hear from people in practice.

It seems to me that it would be better for the boutique practices if they didn't have to deal with the elephant in the room, the banks.
I agree with your idea Junior that the banks vertical integration model should be pulled apart. 

If the less well off do not want to go through their Superannuation then they should be able to act directly, as many do on this site, and seek  help a needed. For instance you can buy managed trusts directly. If you need help with your tax set up the you can seek help for a fee. My credit union doesn't charge large fees to provide advice albeit it would not be on the same standard as I would expect from Sir O and Junior but then again its for people with only a reasonable amount of money. 

As people's super increases, the use of unbiased advice from people such as yourself will become more realisable as the sums increase. it is unfortunate however that people will often approach the banks or AMP unwittingly and be slaughtered instead. A Royal Commission or at least a white paper has been requested by many but it is not going to happen. 

The sales model with large percentage commissions should remain banned and I am very happy to see that it will.
In the case of Julia' example, if her friend was handing over $6500 in cold hard cash every year then he/she might be a bit more sanguine about getting value for money.

Last point about what you said Sir O. I know they are trying to set up an Industry organisation with regard to ethics and performance. if that works it might ameliorate some of the issues you mentioned.


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## tech/a (25 November 2014)

Some great and thoughtful information from the "Inside"
Thanks for taking the time Sir O.

*But I'm with Julia* on this one.

Your posts reinforce my experiences with F/A's/F/P's

Don't get me wrong you need to run a business.
Just like I wont be involved in 70% of the low end
market---nor can you.

But for the life of me I cant see why high end net worth individuals 
would need an F/A in the first  place. They have managed to get 
there by themselves in the first place and sure as the sun rising
no F/A is going to magically do better than they have.

*The top end of the market* is made up of 2-5% of people who will
self fund their retirement. Many like me wont just stop and will have
continual income flows---which they have already set up and know
intimately. They can set up an annuity if they wish very simply.
You don't need a Masters in Finance for that!

Julia's friend is an A +++ client! but these days 1 mill at retirement returning
5-8% P/A under management isn't really high end.

To be honest I think most F/A's in this end of the market are striving to stretch
the dollar further---(1) To ensure the client has sufficient funds ($2.5 + Million will do 
fine regardless of what he does with it---bar splurging!) for on going 30+ year retirement.
(2) Keeping an A ++ client who really only needs to see no erosion of capital year
in year out --- and continues to live the dream and continues to supply an income 
stream to the F/A. *More about people management than money management at
this level!*

*The majority of the market* are way way under the HNWI they want something 
completely different. They want their F/A's to turn them into HNWI.. A totally different
demographic.
They aren't in the position of those with millions to do what they can do!
Money makes money---it really does.
But when your an F/A and a low net worth individual is facing you across the desk
you cant even cover your fees---and really a 20% growth ---even if you could achieve 
it on $200K is nothing close to the same on 10 x that!

So Im back with Julia.
There is no magic bullet from ANYONE other than YOU the client to secure your
financial future. The earlier you start the more successful you are likely to be.
The broader the range of financial growth areas you can explore and take advantage of.
Expecting a third party to take control of your funds and do much more than spread them
out over time is in my view un realistic and a pipe dream---to the Masses---I've not seen 
delivered--not once!

F/A and F/P is a cow of an industry from my view. I know 3 advisers all of them have 
spent hrs at dinners--lunches and over a billiard table picking my brains on Property
Development. Ill guarantee you its *NOT* for the benefit of their clients!!!
Every one of them have offered ( over the years ) to be involved in a J/V.(Joint Venture) on the next project.

*Why would I want to do that??*


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## tech/a (25 November 2014)

*Footnote.*

One thing I have noticed over the years.
I'm pretty widely read on the GFC/Credit Default swaps and Q/E
They now know that. But at the time all 3 when questioned as
part of general conversation to get their point of view---and I expected
a learned and qualified opinion---very quickly showed ignorance to the
biggest thing to hit their industry in their lifetime!

NOW we NEVER talk Macro Economics and I know why---babbling is
embarrassing when around a larger group of friends. Its 
shut down with --don't want to talk house when out socially---yeh right.


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## Hodgie (25 November 2014)

tech/a said:


> But for the life of me I cant see why high end net worth individuals
> would need an F/A in the first  place. They have managed to get
> there by themselves in the first place and sure as the sun rising
> no F/A is going to magically do better than they have.
> ...




Just because someone is a HNW client doesn't mean they know anything about financial markets.

I'll give you an example of a client I have seen that needs help managing his money, he is a surgeon. Works ridiculous amounts of hours every week and earns 500k+ p.a.

He pays extremely large amounts in tax and owns a couple of properties but he isn't happy with the returns he is getting on the property because he is by no means an expert in the area, he just didn't know what else to do with the massive amounts of cash he was getting. Also because these properties are completely unencumbered they are adding more income to him personally which adds to the enormous tax he is paying.

He has a large super balance, not really sure how its invested or the performance compared to the market.

He does not want to take the time to learn about financial products because he already works to much and in his mind he can make more money from working and building his private practice than he can by learning about the financial markets. That is how he ends up in the financial planner's office.

This is a man who has the potential to earn bucket loads of money over his working life but could end up in a complete mess financially. This is a client that needs help and it is mutually beneficial for him to get help.

There are many clients in similar situations to the above.


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## Junior (25 November 2014)

I was about to say the same as Hodgie.  Many HNW individuals are too busy working and earning their high income to have any interest using their precious spare time to learn about managing their personal financial situation.  So it makes sense to outsource this to a financial planner.

They typically pay way more tax than they need to, and can end up leaving a financial mess for their family if something should happen to them.  Along the way they'll have accountants setting up trusts for asset protection purposes, outdated wills, and no idea what's happening with their super.

Sir O would be better qualified to talk about this than I.


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## tech/a (25 November 2014)

What's wrong with a CPA?

As for what to do with the money I default to.



> To be honest I think most F/A's in this end of the market are striving to stretch
> the dollar further---(1) To ensure the client has sufficient funds ($2.5 + Million will do
> fine regardless of what he does with it---bar splurging!) for on going 30+ year retirement.
> (2) Keeping an A ++ client who really only needs to see no erosion of capital year
> ...




My friend and dentist who's wife is one of Adelaide's leading liver surgeons are similar to your example.

They make that much between them that their mind set is vastly different to Mr and Mrs average.
The don't need to increase their income---they do that with ease themselves. They just need to park
it somewhere. These are the type of clients Sir O would walk on glass for. They don't need to have a 
clue how to make money on investment. Just how to stick it in a safe place.
To them Property all over the world. Singapore-Malaysia-Hawaii and Adelaide is one option--return isn't
foremost on their mind.

Another has a world wide patent an a graffiti remover used all around the world. His day is getting up and checking what his agents have sold world wide---he makes $7.25 a litre on EVERY litre sold. 
All of Australia--New York/London/L/A Chicago---to name a few. I can assure you he doesn't crave for an F/P or F/A. Doesn't have to!


To be honest he seems bored to me!


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## Hodgie (25 November 2014)

tech/a said:


> What's wrong with a CPA?
> 
> As for what to do with the money I default to.
> 
> ...




There's nothing wrong with capital preservation at all if your comfortable with what you have.

But people have different goals. Some people always want more, some of the richest people in the world still work the hardest out of anyone and are always looking for new opportunities.

If the financial planner can help them diversify into areas the client knows nothing about and help build their empire then I see that as a mutually beneficial arrangement. We can't say what is 'enough' for everyone because everyone will be different.

I have seen clients with 24mil+ in net assets come in to look at possible investment opportunities. It makes no sense to turn them away if you believe that you can help them.

Call it greed or whatever you want to call it, the fact is there is a demand in the market for the financial planner which is simply being filled, just like any other service in life.

It's kind of like saying people don't 'need' to get plastic surgery such as breast implants or a nose job. But if they want it then who are we to stop them, if they want to pay for that service it's fine.


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## tech/a (25 November 2014)

Hodgie said:


> There's nothing wrong with capital preservation at all if your comfortable with what you have.
> 
> But people have different goals. Some people always want more, some of the richest people in the world still work the hardest out of anyone and are always looking for new opportunities.
> 
> ...




I don't disagree with you.

The point is that they are a far different client than Joe Average.
and only make up a small % of people out there.
A $24 million NWI is going to be a far better business proposition to a planner than a $240K individual.

Why would a $24 million individual go to a stock standard F/P or F/A surely he would have in house accountants!
He'd certainly know a few and plenty would want to know him. 
He wouldn't be goggling his closest F/P


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## Hodgie (25 November 2014)

tech/a said:


> I don't disagree with you.
> 
> The point is that they are a far different client than Joe Average.
> and only make up a small % of people out there.
> ...




Yeah I get your point, fair enough.


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## Julia (25 November 2014)

All valid points about wealthy people not wanting to DIY.  They are not really the people this whole conundrum should be focusing on.

The people who we are supposed to be worrying about are the sort of retirees etc, with moderate savings, who somehow get caught up in messes like Storm.

No amount of legislation is ever going to completely stop this.

The issue is well covered in this article from the SMH: 
http://www.smh.com.au/business/bank...1.html?promote_channel=edmail&mbnr=MzkzNDcxNA



> extract:
> 
> 
> 
> ...


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## tech/a (25 November 2014)

> The people who we are supposed to be worrying about are the sort of retirees etc, with moderate savings, who somehow get caught up in messes like Storm.




AND the professional F/A fraternity don't want them!

I wouldn't want them either.
They want the world and the want it NOW!
and want it for next to nothing.


One solution
Perhaps an insurance cover by the vendor to cover
catastrophic loss from the consumer.
Much like Home Owners Warranty Insurance in the Building Industry 
Or Mortgage Insurance for Low Doc Loans?


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## Sir Osisofliver (25 November 2014)

tech/a said:


> AND the professional F/A fraternity don't want them!
> 
> I wouldn't want them either.
> They want the world and the want it NOW!
> ...




Ok so here we get to the main reason why we educate our clients....is to give them reasonable expectations around levels of return and trade off between potential return and risk management, among other things. Sometimes though it's a little hard to remember your lessons when the emotion grips you tightly.

Many people also don't know where to turn for good information, because drama sells newspapers and the media can be trusted to blow any issue all out of proportion.


Cheers

Sir O


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## The Falcon (25 November 2014)

Sir Osisofliver said:


> Ok so here we get to the main reason why we educate our clients....is to give them reasonable expectations around levels of return and trade off between potential return and risk management, among other things. Sometimes though it's a little hard to remember your lessons when the emotion grips you tightly.
> 
> Many people also don't know where to turn for good information, because drama sells newspapers and the media can be trusted to blow any issue all out of proportion.
> 
> ...




Spot on. During the "get to know each other and see if we can work together meeting" my advisor gave me a copy of Peter Thornhill's "Motivated Money" and said, have a read of this, this is broadly how I think about stocks, tell me what you think once you have read it. (For the unitiated, Thornhill is long, value, dividend reinvestment and letting compounding work, industrial stocks focus, quality, ignore all the daily noise, embrace volatility and buy when there is blood in the streets, never sell, get rich slowly etc). All of this made plenty of sense to me then and still does, so I was happy to work with him. 

The bloke is a CA & CFP, has his own AFSL and a couple of staff, provides private wealth/family office services which extends to co-ordinating legal, and tax planning (with my accountant). Fee for service only (retainer basis), doesn't do "products". Direct Equities (incl. ETFs and LICs), Bonds, Cash. No mucking around. Have learned plenty, and also provides a great sounding board for general business and investment advice. Got to meet the CEO's of AFI and ARG at small meetings, bounce around value investing ideas regularly, and heading off to Berkshire Hathaway AGM with a bunch of blokes next year (everyone paying their own way obviously). 

Has been a very good experience, and fair value I would say....though I realise this is far from the typical experience.....having myself many years ago been stooged by PIS I have experienced both ends of the industry. Obviously, for most people this kind of service is not going to make financial sense, but its out there, all under the same "FA" banner. Worlds apart.


----------



## Vixs (25 November 2014)

The Falcon said:


> Obviously, for most people this kind of service is not going to make financial sense, but its out there, all under the same "FA" banner. Worlds apart.




I think this sums up a great deal of the thread. There are people in different leagues all running around with the same title.

If you have 25 clients with $150k as a bank planner, you have a book. If you have 25 clients with $150k as a planner in private practice, you're probably going backwards if you weren't being kept afloat by new business.


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## tech/a (25 November 2014)

Vixs said:


> I think this sums up a great deal of the thread. There are people in different leagues all running around with the same title.
> 
> If you have 25 clients with $150k as a bank planner, you have a book. If you have 25 clients with $150k as a planner in private practice, you're probably going backwards if you weren't being kept afloat by new business.




If you have low end clients you tend to be a Managed Fund ( place to park funds ) insurancel salesman
Life Insurance and Disability Insurance being the best paying.
These guys pose as F/A's ---- they're not in my book.


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## Garpal Gumnut (25 November 2014)

I still reckon Financial Planners pitching to either Mr. and Mrs. Shopping Trolley or to so called "Sophisticated Investors" are muppets.

One and all, bar none. 

gg


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## Vixs (25 November 2014)

Another note on how far removed from the average punter that we, people who voluntarily spend time on (and at least a good bit of the time enjoy...) a board about finance and investments, really are, I have a fun fact.

I spoke to 3 people today whose expectations of the kind of returns investing through an adviser would get them were 10-15% p.a. year on year, and that they would not tolerate any risk of capital loss. This is what you are up against when trying to give advice to the unwashed masses. Why do you think Australian's love property investment so much? Because real estate agents and property spruikers can promise whatever they like, and all the banks will let them borrow as much as they possibly can...


----------



## Garpal Gumnut (25 November 2014)

Vixs said:


> Another note on how far removed from the average punter that we, people who voluntarily spend time on (and at least a good bit of the time enjoy...) a board about finance and investments, really are, I have a fun fact.
> 
> I spoke to 3 people today whose expectations of the kind of returns investing through an adviser would get them were 10-15% p.a. year on year, and that they would not tolerate any risk of capital loss. This is what you are up against when trying to give advice to the unwashed masses. Why do you think Australian's love property investment so much? Because real estate agents and property spruikers can promise whatever they like, and all the banks will let them borrow as much as they possibly can...




It does take 2 to tango.

I think Storm Financial proved that.

gg


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## sptrawler (25 November 2014)

Vixs said:


> Another note on how far removed from the average punter that we, people who voluntarily spend time on (and at least a good bit of the time enjoy...) a board about finance and investments, really are, I have a fun fact.
> 
> I spoke to 3 people today whose expectations of the kind of returns investing through an adviser would get them were 10-15% p.a. year on year, and that they would not tolerate any risk of capital loss. This is what you are up against when trying to give advice to the unwashed masses. Why do you think Australian's love property investment so much? Because real estate agents and property spruikers can promise whatever they like, and all the banks will let them borrow as much as they possibly can...




It's no different on here, people saying $600k will give you a reasonable retirement, Live the dream.


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## Vixs (25 November 2014)

Garpal Gumnut said:


> I still reckon Financial Planners pitching to either Mr. and Mrs. Shopping Trolley or to so called "Sophisticated Investors" are muppets.
> 
> One and all, bar none.
> 
> gg




I've found dealing with Mr and Mrs Shopping Trolley (I assume you mean the average Australian?) to be a much more enjoyable experience so far than helping rich people buy boats, holiday homes and sports cars. Might not be as much money in it, but I'll never have to kiss a client's ass over a game of golf or a long lunch.


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## 7mountstreet7 (29 November 2014)

The scandal of fraudulent investment schemes and investment advisors is not new. The 2008 crisis saw hundreds of Ponzi schemes being identified, most notable the Bernie Madoff scandal. 

The interesting development around the world is that cases of investors receiving poor or fraudulent advice continue unabated. So, how qualified should your investment advisor be? Surely they must have studied investments in great detail to be in a position to be able to understand the options they should pass on to their clients. Should you be recommended product A over product B because your advisor earns more money by recommending product A when in effect they are identical investments? Should they not be acting in your best interest?

Sadly it seems, no.

It has been revealed that in some countries, financial advisors can be qualified to give you investment advice after an 8 day course. An 8 day course? Surely not. Yup. What, no need to study investments to a degree standard? Nope.

Without beating these guys up too much, we just find this ridiculous. Just so you know, the best investment degree you can have is the Chartered Financial Analyst (CFA) qualification offered by the Association of Investment Management and Research. 

One of the main elements of the CFA qualification is ethics. Ethics is “a branch of philosophy that involves systematizing, defending and recommending concepts of right and wrong conduct”. In English, this means DO THE RIGHT THING.

Make sure you know your investment advisor has the qualifications and experience required to help you achieve your financial goals and be sure they have no misaligned interests when dealing with you. Above all, they should have a strong moral character and strong ethics.


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## tech/a (29 November 2014)

Vixs said:


> I've found dealing with Mr and Mrs Shopping Trolley (I assume you mean the average Australian?) to be a much more enjoyable experience so far than helping rich people buy boats, holiday homes and sports cars. Might not be as much money in it, but I'll never have to kiss a client's ass over a game of golf or a long lunch.




A personal choice.

Fortunately negotiators aren't all tared with the same brush.
When your trying to secure any business it's a negotiation.
Even Mr and Mrs Shopping Trolley like to be treated like
Their business is valued.
A long lunch---Game of golf would be something special
In their lives----particularly if YOUR PAYING.

I've not yet met a client who doesn't appreciate being
Made a big deal of. They are a big deal they contribute
To my lifestyle. I can be respectful and accommodating 
Without being sub serviant 

In my book if you want the business from a $1000 client 
He should be treated as well as a $ 1 million client.

That's how you get customer loyalty 
Could be the difference between you and your competitors.


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## luutzu (3 December 2014)

Financial Planners breaking ASIC Chairman's heart.



> .....
> “It has absolutely broken my heart to see what financial advisers have done and what they continue to do to people.”
> 
> Mr Medcraft said the financial planning sector ”” which has been closely involved in the vast majority of major company collapses over the past decade ”” had repeatedly ignored pressure from ASIC to lift its standard.
> ...





http://www.theaustralian.com.au/business/financial-services/asic-absolutely-appalled-by-state-of-financial-planning-industry/story-fn91wd6x-1227143438109


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## Garpal Gumnut (3 December 2014)

Financial Planners are a bit like bed bugs.

They travel about and infect the pure and unsuspecting.

May I ask lurkers who happen upon this site to register and do a search on their investment goals.

Avoid Financial Planners.

gg


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## pixel (3 December 2014)

luutzu said:


> Financial Planners breaking ASIC Chairman's heart.
> 
> http://www.theaustralian.com.au/business/financial-services/asic-absolutely-appalled-by-state-of-financial-planning-industry/story-fn91wd6x-1227143438109




Oh Emm Gee!
Has he ever read his job description?
I'm pretty sure there is a passage hidden in there that it's ASIC's mission to "keep the barstuds honest" and toss the bad apples out.
(If it isn't, it ought to be!) 

I'd also suggest that a broken heart is no real help when it comes to doing his job. How about setting proper standards, educating any would-be adviser properly, and ensuring that the rules are followed *in the clients' best interest* - not to rake in best bonuses. But maybe that's expecting too much.


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## sptrawler (3 December 2014)

Vixs said:


> I spoke to 3 people today whose expectations of the kind of returns investing through an adviser would get them were 10-15% p.a. year on year, and that they would not tolerate any risk of capital loss. This is what you are up against when trying to give advice to the unwashed masses.




Do people really expect that sort of outcome? They obviously have no concept of reality.

Some of my friends are nearing retirement, go to see a financial planner, are told all is good as long as you don't want a house.


----------



## pixel (3 December 2014)

sptrawler said:


> Do people really expect that sort of outcome? They obviously have no concept of reality.
> 
> Some of my friends are nearing retirement, go to see a financial planner, are told all is good as long as you don't want a house.




Question: Where do the "unwashed masses" get their expectations?
Answer: From the very same advisers that should know better.

Just read through the advertising brochures; or, closer still, read the kind of promises that we (ASF membership) are warning about in those abundantly popular threads on investment scams.

How can we expect Mum and Pop Shopping-Trolley to identify realistic and exaggerated expectations? They are bombarded with promises of double and triple digit profits without risk!


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## luutzu (4 December 2014)

pixel said:


> Oh Emm Gee!
> Has he ever read his job description?
> I'm pretty sure there is a passage hidden in there that it's ASIC's mission to "keep the barstuds honest" and toss the bad apples out.
> (If it isn't, it ought to be!)
> ...




Exactly.

But then on the bright side, at least he passed the Denial Stage. Maybe next stage will be Anger and then Doing-something-about-it Stage.

Quite funny, in a bad way, to hear a regulator asking their subject to pretty please raise their heart-breaking, appalling, standards. Pretty please.

All you need to do is asked I guess.


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## Garpal Gumnut (4 December 2014)

I do see some high class people excoriating Financial Planners.

Good on them. 

Seeing a Financial Planner is somewhat like seeing a Chook Farm Manager about Eggs. It depends.

Herewith more "News" on Financial Planners.

Even if you have slow bandwith it is worth a read.

https://au.news.yahoo.com/thewest/business/a/25678465/asic-lashes-appaling-financial-advisers/

gg


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## Garpal Gumnut (4 December 2014)

It is extremely important that every member of ASF reads this article very carefully.

It may save you Hundreds of Thousands of dollars

http://www.theaustralian.com.au/bus...143438109?nk=21203f55534c7aadcfc17e1795d7d5ef

gg


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## Hodgie (9 December 2014)

A case of client's taking things into their own hands. Not the best method of bringing a financial planner to account I might add.

http://www.ifa.com.au/news/14029-fi...aign=IFA_Newsflash09_12_2014&utm_medium=email


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## Garpal Gumnut (9 December 2014)

Garpal Gumnut said:


> It is not often that I disagree with LNP Policy, but tonight's Senate vote putting the screws on Financial Planners and the Banks, will benefit every Investor in Australia.
> 
> Storm and Timbercorp should never be allowed happen again.
> 
> gg





From David Murray , Head of the Financial System Inquiry.



> Rip-offs:
> The inquiry wants to ensure people aren’t sold financial services, including insurance and financial planning products, they don’t need, don’t understand or don’t do what they are meant to.
> 
> Currently ASIC can only take action after a breach of the law. Murray wants ASIC to have new power to intervene earlier in the creation of financial productions, before potential damage to those sold the products. Part of this should be to require minimum education standards of financial advisers.




Beware of Financial Advisers. 

Glossy Brochures, Fancy Offices and Advertisements on TV do not necessarily indicate that a Financial Adviser will be qualified or educated to a level to give appropriate Financial Advice. 

gg


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## sptrawler (13 June 2019)

Well the new rules that will be applied to financial planners, should bring about some positive changes, but it will be tough on some of them. 
Still that is the way the World is now, adapt or perish.

https://thewest.com.au/business/you...ur-financial-planner-will-face-ng-b881223334z


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## tech/a (13 June 2019)

sptrawler said:


> Well the new rules that will be applied to financial planners, should bring about some positive changes, but it will be tough on some of them.
> Still that is the way the World is now, adapt or perish.
> 
> https://thewest.com.au/business/you...ur-financial-planner-will-face-ng-b881223334z




Not before time.

*Even so.*
Can someone tell me why I should be taking advice on what to do with my Finances
from someone who is striving to be in my financial position.

On the other end of the scale 
Why would someone who is trying to increase his financial position 
Take advice from someone trying to increase his financial position?

I know 3 Financial advisers and have met with 2 others.
Not one has given me any useful financial advice. I hear lots of
Rhetoric about how it all works (Economics) but nothing that would benefit me.

But this is what I hear most

*"So Tell me your story----how did you get to where you are today."
By this point they know where I'm at.*


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## Junior (13 June 2019)

tech/a said:


> Not before time.
> 
> *Even so.*
> Can someone tell me why I should be taking advice on what to do with my Finances
> ...




From what I know about you on this forum, you would yield little to no benefit from seeing a financial adviser.

However, there are many out there who derive substantial benefit, for a variety of reasons and under a variety of circumstances.


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## tech/a (13 June 2019)

Junior said:


> From what I know about you on this forum, you would yield little to no benefit from seeing a financial adviser.
> 
> However, there are many out there who derive substantial benefit, for a variety of reasons and under a variety of circumstances.




*Junior *
I get that and I know you are in the industry.

I also get that everyone has different circumstances 
But My view is that they are *basically* very similar.
The above is the F/A F/P mantra we have to assess
where your at but you'll be where 90% of every other 
working Australian is!

Very little savings and very little disposable income
regardless of how that is derived.

But in all seriousness lets say I'm 30
Saving for a home and have $50K put aside
I have a disposable residue income of $1000 a month.
I have no clue on finance.

What can you do to help me that *COMMON* sense
wont buy me?

(1) Increase my income to well over what I need.
(2) Where do I put it other than a Managed Fund.

I've never heard anything of value 
I've sat in with my kids who are in the 95% similar
situation when they have had a consult.

No one has EVER answered directly these questions
(Which I asked by the way---got crickets and the standard
we don't have a crystal ball---Confidentiality ---line).

Should I buy my own home and why now or why not now?
How will I know when is good? Why own my home--why not
How would I handle finances going forward in each case?
How would it differ one to the other?

Should I buy a few Stocks or even A stock or A commodity.
Why/Why not? When *WHICH ONE/S*
Lots of babble about beating markets and risk but
*NO ANSWER
*
Can you supply me with a few Clients names that I 
can contact who have increased their net worth over
the last 5 years with you by 25% or more
*
That of course gets shut down with confidentiality
yet if I'm talking to a trade who I'm investing $1000s
with that's a fair call!! Or a Solicitor or a Dentist or
a Pilot.

Financial Advisers DON'T ADVISE they sell themselves and
product.
*


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## tech/a (14 June 2019)

Hahahaha.

I have to laugh
The response here to the questions above is the
same as I get in F/P offices.

Crickets!

The Financial Industry in my view is based around Smoke and Mirrors.
Lots of *smoke* to cloak an in ability to discover opportunity and not only
alert clients but THEMSELVES.
Inability to advise clients how to be prepared and what to do to take
advantage of opportunity.
*Mirrors* because they are forever looking back at the same old same old.

*Fear of litigation*---you'll *NEVER* get the advice for the opportunity you
need to find and act on.


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## Junior (14 June 2019)

tech/a said:


> *Junior*
> Very little savings and very little disposable income
> regardless of how that is derived.
> 
> ...




Your idea of what a financial adviser can achieve is completely unrealistic.  In fact, I've never known of anyone who can do what you have described....take someone with little savings, and little to no disposable income and make them wealthy in 5 years, or achieve a year in, year out return of 25% per annum, based on setting aside $1,000 per month.  If you know anyone who can teach or advise others to do this, I'd love to meet them!

Common sense, and 'babble' about markets and risk might be a waste of time for you.  But the vast majority of the population know next to *nothing *about investing, or superannuation, taking out a mortgage, personal insurance, cash flow management etc. etc.

Your point about oil....are you suggesting that a financial adviser should know that two tankers were about to blow up in Hormuz?


----------



## Junior (14 June 2019)

To respond further.

A 30 year old, saving for a home, does require simple common sense.  I agree with you absolutely on that point.  For the most part, that isn't someone who would derive significant benefit from an adviser...unless they were really clueless on the basics of personal cash flow management and how much they can/should borrow.

An example of a client who will benefit, are those 50+ who have accumulated some assets, as this is where rules pertaining to super & retirement become more complex.  For most people the idea of retirement brings on anxiety.  They don't know how much they spend, how much they need, how they should invest the assets they have accumulated and how long it will all last.

Another typical client who really needs guidance are women who have just been through divorce.  Often, the husband controlled the family finances, and they have NO IDEA how to handle a lump sum settlement.  They have teenage kids, are renting and often just trying to re-enter the workforce.  They need a plan to make the money last and grow.

You can denigrate what I've said here if you like, but this is what I see every day at work.

wrt to picking stocks or commodities, financial advisers are not traders, and shouldn't represent themselves as such.  We build portfolios based on requirements & client goals:  timeframe, risk appetite, income or growth requirements, tax structure and then advise accordingly.  Yes, we primarily use managed funds to achieve this.  We aren't traders.


----------



## tech/a (14 June 2019)

Thanks for your reply J



Junior said:


> Your idea of what a financial adviser can achieve is completely unrealistic.  In fact, I've never known of anyone who can do what you have described....take someone with little savings, and little to no disposable income and make them wealthy in 5 years, or achieve a year in, year out return of 25% per annum, based on setting aside $1,000 per month.  If you know anyone who can teach or advise others to do this, I'd love to meet them!




Have another read I suggested a mere 5% a year.



> Common sense, and 'babble' about markets and risk might be a waste of time for you.  But the vast majority of the population know next to *nothing *about investing, or superannuation, taking out a mortgage, personal insurance, cash flow management etc. etc.




Junior This is exactly my point---it all sounds impressive but Average Joe has to pay often $100s to
listen to rhetoric and then be shoved into a managed Fund. Because Joe Average knows *NOTHING *
and F/P knows that---smoke and Mirrors.



> Your point about oil....are you suggesting that a financial adviser should know that two tankers were about to blow up in Hormuz?




It should be a topic of conversation which at the very least is out on a mail out explaining possible opportunities.

Under the pump right now (beer O clock back later for part 2)


----------



## Junior (14 June 2019)

tech/a said:


> Thanks for your reply J
> 
> 
> 
> ...




5% is far more reasonable.

Beer o'clock here too.


----------



## willy1111 (14 June 2019)

Perhaps a misconception many have is that financial planners are investment experts.

They are not.

I've come to learn they are more wholostic, knowing the rules pertaining to minimising tax with the use of super/structures, maximising well fare benefits, looking at risk to ensure adequate insurance, estate planning and the like.

Even for wealthy people who pick their own investments, they may get value in a financial advisor understanding their position so that if they were suddenly no longer here, the spouse who has no interest in investing will have someone they can trust to turn to.


----------



## tech/a (15 June 2019)

willy1111 said:


> Perhaps a misconception many have is that financial planners are investment experts.
> 
> They are not.




Absolutely right they aren't.
Why then do they portray the image that they are.
Just place your total retirement funds in X because your a little younger and have ticked the 
happy with more risk box or Fund Y which is more conservative because you've ticked that box 
Which of course I ascertained in my extensive questionnaire related to you and your needs that
has set you back between $500 and $1000  



> I've come to learn they are more wholostic, knowing the rules pertaining to minimising tax with the use of super/structures, maximising well fare benefits, looking at risk to ensure adequate insurance, estate planning and the like.




That's what Accountants do.
Would you really go to an F/P for estate planning that's what Estate Solicitors are for.
In both cases *BETTER QUALIFIED* advice and they can actually put things in place!!!



> Even for wealthy people who pick their own investments, they may get value in a financial advisor understanding their position so that if they were suddenly no longer here, the spouse who has no interest in investing will have someone they can trust to turn to.




Wealthy people understand their position and how to look after their families financial future.
Through Accountants and Solicitors who in many cases are FRIENDS.
They would also educate their spouse and family on what to do who to trust and how to do it.
By the way
Not so wealthy people can do exactly the same thing without involving the smoke and Mirror
Wanna be's.


----------



## Junior (15 June 2019)

tech/a said:


> Absolutely right they aren't.
> Why then do they portray the image that they are.
> Just place your total retirement funds in X because your a little younger and have ticked the
> happy with more risk box or Fund Y which is more conservative because you've ticked that box
> ...




I comprehensively disagree that accountants are qualified in the areas you have stated.  They are qualified to give TAX advice.....that's about it.  I've experienced accountants who delve into those other areas, and for the most part it is a bad idea.

Personal Insurance - a financial adviser is by far the most qualified person to advise in this area.  Most accountants have little clue around this.  It's not just knowing what they types of cover are.  It's structuring, needs analysis, knowing what features are worth paying for, and knowing how the underwriting process works, and then reviewing regularly to make sure you aren't over or under-insured.  Even more critical are for small business owners...key person cover and insurance pertaining to buy/sell agreements.

Estate planning - I agree a solicitor is best.  An adviser should flag areas to be addressed and then refer to a solicitor.

Super & investing - a good adviser will build a portfolio in the manner I've previously stated.  Not day trading or playing in stocks and commodities, but allocating a pool of money or assets in the appropriate mix of asset classes.  I do agree however, for the average person who's only invest-able assets are a modest super balance, they generally shouldn't take advice on how this should be invested....just select the growth option and move on.

Retirement planning - you haven't mentioned this, this is where an adviser can add massive value.  Most accountants in my experience don't think ahead any further than the next financial year.  It's all about tax, not a long term strategy.

Tax and structures - yes accountants are the best to take advice on this.  Having said that, a properly qualified adviser will have strong knowledge in this area.


----------



## tech/a (15 June 2019)

Junior said:


> I comprehensively disagree that accountants are qualified in the areas you have stated. They are qualified to give TAX advice.....that's about it. I've experienced accountants who delve into those other areas, and for the most part it is a bad idea.




Not talking about your H.R Block type of accountant. I'm talking of a CPA. Comparing a CPA to a F/P is like a Street fighter meeting McGregor. 



> Personal Insurance - a financial adviser is by far the most qualified person to advise in this area. Most accountants have little clue around this. It's not just knowing what they types of cover are. It's structuring, needs analysis, knowing what features are worth paying for, and knowing how the underwriting process works, and then reviewing regularly to make sure you aren't over or under-insured. Even more critical are for small business owners...key person cover and insurance pertaining to buy/sell agreements.




You've hit it on the head this is all they can do --- mind you most insurance agents are just as good with no fee!




> Estate planning - I agree a solicitor is best. An adviser should flag areas to be addressed and then refer to a solicitor.




Tick.



> Super & investing - a good adviser will build a portfolio in the manner I've previously stated. Not day trading or playing in stocks and commodities, but allocating a pool of money or assets in the appropriate mix of asset classes. I do agree however, for the average person who's only invest-able assets are a modest super balance, they generally shouldn't take advice on how this should be invested....just select the growth option and move on.




Well healed can sort out their own Annuities.
Joe Average is best suited to most Industry Funds.--No charge



> Retirement planning - you haven't mentioned this, this is where an adviser can add massive value. Most accountants in my experience don't think ahead any further than the next financial year. It's all about tax, not a long term strategy.




Do you speak of Joe Average or the well healed business owner? Again CPA's are all over it.



> Tax and structures - yes accountants are the best to take advice on this. Having said that, a properly qualified adviser will have strong knowledge in this area.




Well in 2024 perhaps there will be some Properly Qualified F/A's to give HR Block a Run for their tax money.


----------



## Junior (15 June 2019)

tech/a said:


> Not talking about your H.R Block type of accountant. I'm talking of a CPA. Comparing a CPA to a F/P is like a Street fighter meeting McGregor.
> 
> 
> 
> ...




I think you are comparing the worst FPs with the best accountants. I have yet to meet any of these accountants who are qualified and skilled across those areas you've specified. 

We have CPAs from mid tier accounting firms here in melbourne, regularly referring their clients to us for investment & retirement planning advice, so clearly they know their limitations.


----------



## tech/a (15 June 2019)

Junior said:


> I think you are comparing the worst FPs with the best accountants. I have yet to meet any of these accountants who are qualified and skilled across those areas you've specified.
> 
> We have CPAs from mid tier accounting firms here in melbourne, regularly referring their clients to us for investment & retirement planning advice, so clearly they know their limitations.




I think you have read that incorrectly.

I would suggest they refer the Mundane to those best qualified to handle it 
while they look after the important stuff that you need to be qualified for.
It leaves them free to do better paid work.

It happens in all industries.

we dont handle projects under 20K---doesn't mean we cant do them
Id rather my guys tied up doing a 50K project than a 20K project that 
takes almost as long as the 20K project to produce.

CPA's no different.
Do you seriously think that CPA's are only qualified for Tax advice?


----------



## willy1111 (15 June 2019)

tech/a said:


> Absolutely right they aren't.
> Why then do they portray the image that they are.
> Just place your total retirement funds in X because your a little younger and have ticked the
> happy with more risk box or Fund Y which is more conservative because you've ticked that box
> ...




Yeah and most people can mow their own lawns, do their own landscaping and build their own retaining walls....doesn't mean they want to or should...and so an opportunity exists for businesses that can fill that gap.

I don't see it as any different to FP's, one just needs to understand what their role is and it ain't investment experts.


----------



## tech/a (15 June 2019)

And if it’s small enough we would encourage that
In fact we will supply the materials.

F/Ps aren’t CPA’s currently few are qualified to do much at all
General Solicitors aren’t Barristers.

So they basically sell basic things like insurances and give basic advice
Which you need to see experts for if you need anything more than basic.
In that case I agree.


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## Junior (15 June 2019)

tech/a said:


> I think you have read that incorrectly.
> 
> I would suggest they refer the Mundane to those best qualified to handle it
> while they look after the important stuff that you need to be qualified for.
> It leaves them free to do better paid work.




Refer the mundane?

CPAs aren't legally authorised or qualified to provide investment advice or financial advice in Australia.  

If you go to a CPA with $1mill to invest, they can't tell you where to invest it. Hence many will refer you on to a FP. 

Furthermore you talk of wealthy people and their solicitors giving advice.... Solicitors are notoriously terrible with financial matters and generally unsophisticated in this area.  Perhaps you have some savvy CPA and solicitor mates, and if so they are the exception not the norm.


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## Dark Knight 2.0 (15 June 2019)

CFPs (certified financial planners) are required to do a full University degree in Financial Planning. CPAs do an Accounting degree then the CPA program - BIG difference nowadays.

Gone are the days of Accountants doing the PS146 then calling themselves Fin Planners, although some may still exist.


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## tech/a (16 June 2019)

I’m sure there are some very handy F/Ps 
They will have earnt a position.
Morgan Stanley 
BT 
Macquarie 

If I went searching I’d be looking for degrees coupled with practical experience
Over 20 yrs +.
Even so happy to look after myself with specific help in areas where expertise is required
Trusts ,Wills, etc


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## Dark Knight 2.0 (16 June 2019)

How many people here other than Junior are actually legally qualified to give financial advise? My degree makes me PS146 qualified, meaning I'm legally allowed to offer you financial advise @tech/a . Let me know your situation and problems. You're in good hands


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## Smurf1976 (16 June 2019)

tech/a said:


> I’m sure there are some very handy F/Ps



Same in any occupation.

Some are outright brilliant but they're a small minority - 1% or so.

Some are very good and always worthwhile. They're not in the genius category but they know far more than most.

Most are somewhere in the middle. They get the job done but the results are nothing special. 

Some are basically useless.

Same with anything and in most industries there's a few niches where those at both extremes tend to end up.


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## Kryzz (16 June 2019)

I work for an industry fund and regularly refer members to our planners, being profit to members the SOA charge is cost recovery. Comparing this to where I used to work (BT), some of the fees I would see would make you sick, chalk and cheese. 

Most of the people I refer have little to no understanding of super or finance and the advice they receive may appear basic (i.e. establishing a TTR pension + downsizer contributions and shifting some assets to a younger spouse to assist with pension eligibility), very few members would be proactive to enough to establish this themselves. 

Paying a couple of grand to a planner would pay for itself in a relatively short time-frame IMO.


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## sptrawler (10 July 2019)

Garpal Gumnut said:


> From David Murray , Head of the Financial System Inquiry.
> Beware of Financial Advisers.
> Glossy Brochures, Fancy Offices and Advertisements on TV do not necessarily indicate that a Financial Adviser will be qualified or educated to a level to give appropriate Financial Advice.
> 
> gg




Or look after your money, things aren't always what they appear.
https://www.theage.com.au/business/...10-years-for-stealing-5m-20190710-p525y4.html
From the article:
"_He used to mock up all sorts of statements which weren't true at all and naturally how did we not know they weren't true. He was frightfully clever in that manipulatively sly horrible way_."

As I've said before, these are the very reasons, I started a SMSF.


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