Financial Planners

[Julia]

The following extract from Crikey.com (beginning "The Westpoint saga.....") caught my eye. The sad irony about those seeking financial planning advice is that often they are doing so because they are - as mentioned in the Crikey article - financially unsophisticated and therefore have no way of knowing how to evaluate the "advice" they are being given.

I can't think of any way round this but suppose the best protection would be to (a) go to someone who has been personally recommended by a trusted friend/colleague, or (b) interview several and form an opinion based on common suggestions by all of them, and then go with the person with whom you feel most comfortable.

And probably most of all, avoid anyone with an association with a parent company, or bank etc., and who is paid via commission. Much better to pay a fee for service for independent advice.

If anyone else has some wisdom to offer on this question, I think it would be helpful to some of our newer members who are feeling a bit anxious about where to go to seek advice on setting up a SMSF etc.



Following is the quote from Crikey.
The Westpoint saga's latest twist raises some big questions concerning the way the Financial Planning Association (FPA) regulates its members' activities and how the financial services regulator (ASIC) fails to adequately protect the consumers it is meant to serve. ASIC now needs help from those of us who do know how the money business works and it might come as a surprise to some that it also needs protection from those in the money business who prefer it to be the toothless tiger that it is currently. I propose that ASIC have a board that consists of a mix of consumers, industry players and legal types who then bear some responsibility for making the necessary changes to a body that when it fails in its work, threatens to undermine confidence in the whole of the financial system. I for one would be prepared to put forward my 25 years experience in financial services as a resource. I'm sure some other like-minded, ethical and intelligent members of the financial services and legal community might do likewise, in order to promote genuine transparency and remove the stink that threatens to taint us all.

An accountant writes:
Re: Financial planners. As accountants the Government excluded us from providing financial advice, where beforehand we were able to provide general advice but not detailed specifics. As the accountant and tax agent for a client we were able to review and comment on a financial planners action plan, but the financial planners wanted us accountants cut out of this (they did a good job and the Govt agreed). The ASIC regulations are so tight now that we as the tax agents and accountants to the client – and having looked after their tax and accounts for many years – cannot comment. The financial planners are in fear of us affecting their "gravy train" of commissions. This is where the spin is and where ASIC and the Govt have got it wrong. The regulations favour the financial planners to protect their commissions, fearing we will advise the client of different products and therefore preclude their earn. BUT what if I read the plan and it is so obvious that the investments are not suitable, risky and pay big commissions? As the legislation stands I cannot give advice. Everyone has been focusing on "positive" advice (ie accountants suggest something else to the client and take the earn away from the financial planner), no one has thought, nor does the legislation allow us to provide the negative advice, and thus protect the client. This negative advice (to protect the client) is deemed to be "financial advice" as I see it and I have to keep my mouth shut for fear of being sued by the hungry financial planners.

Simon Drimer writes:
Re: Financial planners. Spot on Peter Mair (yesterday, item 3). Low-rent thieves in suits, most of them. Many people who visit financial planners are simply not financially sophisticated enough to make sensible judgements about the advice they are being given.


Julia

 

[visual]

Julia,
Unfortunately I`ve learned the hard way that when it comes to money you really cant trust anyone. Our accountant also a friend recommended a financial planner when we started on the road to looking out for our own future and that of our children, no matter of how many times we queried his advice, we relied on the accountant who kept on saying that what the financial planner was saying was right, after all the same person had sold him the same products and he was happy.
Of course he forgot to mention the financial gain he was making by keeping us customers of this wretched company and in the grasp of the financial planner. By the time we become sufficiently wise to take matters in our own hands the kids education or our aims for that had been trashed, our own future has been distrupted, and left me with an absolute contempt for anyone who offers advice and into information.

 

[tech/a]

My contempt for Financial Advisers is well known.

I have one rule.

If I cant control my money then I dont use it or invest it in whatever it is that I cant control no matter how good it's supposed to be.

That includes Brokers trust accounts. The only time my $$s go into a trust account is if I owe it to someone else.


90%+ of Financial Advisors are seeking Financial security themselves,if they havent achieved it,why on earth expect them to put you in a position they themselves are seeking????

One of my Finacial Advisor mates has a Porsche he's had 4 of them in the time I've known him.Wont buy anything else. Leases it of course (good business),but thats it----other than his family home heavily mortgaged in One of Adelaides Premier suburbs----illusion is not exclusive to magicians.
He once commented "Clients want to see the Porsche they expect it of Financial Advisors"

What is lacking is Public education there should be courses on RISK.

What it is
How to recognise it
How to quantify it.
How to negate or avoid it.

Peoples apathy "She'll be right mate" and lazyness are also issues that appear to cause stupid decisions.

Gullability and Greed however are things I have no idea how to overcome.

 

[Duckman#72]

And probably most of all, avoid anyone with an association with a parent company, or bank etc., and who is paid via commission. Much better to pay a fee for service for independent advice.

If anyone else has some wisdom to offer on this question, I think it would be helpful to some of our newer members who are feeling a bit anxious about where to go to seek advice on setting up a SMSF etc.

An accountant writes:
Re: Financial planners. As accountants the Government excluded us from providing financial advice, where beforehand we were able to provide general advice but not detailed specifics.

Julia

Julia

The accountant is spot on. It is a bit rich for ASIC and the Government to start pointing the finger at Financial Planners and the way they do business when they originally set them up on this current system.

But I would say that generally those posting on ASF have a very cynical view of financial planners anyway. Particularly Tech. The view taken seems a very simplistic one. "I had a bad experience with a financial planner so they are all bad". That's crap. Would you suggest to the person who's previous sharemarket experience was Telstra 2 and Pasminco never to invest in the sharemarket again. Of course not.

Tech - it seems the basis for your argument is that "'I can do a better job than a financial planner - I want to be in control of my funds". That's great for you - and I bet you can get a better result, but it doesn't mean that someone else can't develop and implement a good wealth creation strategy through the use of a financial planner.

I have no love of the financial planning industry. I hate the concept of trailing commissions and up front fees which may not have correlation with time spent on an investment plan. They swan around attending seminars for a lot of the year. BUT....it is irresponsible to be telling people all financial planners are rip off artists and they can do a better job themselves. Tech - the argument that if they were any good they wouldn't be working is very simplistic in my opinion. The world is full of examples where you could apply that rule.

A tennis coach - if he was any good he'd be playing on the ATP tour. Won't go to him. A stock broker - if he was any good he'd be retired himself. Won't use him.

Regards

Duckman

 

[tech/a]

Tech - it seems the basis for your argument is that "'I can do a better job than a financial planner - I want to be in control of my funds". That's great for you - and I bet you can get a better result, but it doesn't mean that someone else can't develop and implement a good wealth creation strategy through the use of a financial planner.

Well no thats not my basis for argument.
My basis is that most financial planners are salesmen and wouldnt know a financial plan if they fell over it.Talk to them on any topic other than superanuation,succession stratagy,loss of income and life insurance,and you'll get either a complete blank stare,or what the hell would you know about wealth creation---without one ounce of meaningfull discussion on topics outside of their commissions table!!! All they have are opinions and as we know they are like armpits we all have them and many stink!

I have no love of the financial planning industry. I hate the concept of trailing commissions and up front fees which may not have correlation with time spent on an investment plan.

Actually I love the concept from a reward concept,just ask Crazy John---his money didnt come from selling Mobiles! Its use in the Financial industry is such that it breeds salesmen not financial planners!!

They swan around attending seminars for a lot of the year.

They sure do and so would you if the company paid for it.

BUT....it is irresponsible to be telling people all financial planners are rip off artists and they can do a better job themselves. Tech - the argument that if they were any good they wouldn't be working is very simplistic in my opinion. The world is full of examples where you could apply that rule.

Thats again is not my arguement and not what I'm advocating.

A tennis coach - if he was any good he'd be playing on the ATP tour. Won't go to him. A stock broker - if he was any good he'd be retired himself. Won't use him.

If I was having my kids taught how to hit a ball then most any "Tennis Coaches" would be sufficient. If I or one of the kids showed enough promise to win a few tournements then you can be any parent would be searching out a "More Qualified" Tennis Coach that could introduce aspects of playing the game well beyond that of hitting a tennis ball.

Financial Planners.If I'm/or anyone is going to invest my lifes savings its pretty dumb not to investigate fully the person your going to hand over 40-50 yrs of hard earned blood sweat and tears. Its also irresponsible to give it ALL to anyone--Mother/Brother/Sister whoever.
Due diligence must be taught and even when all possible precautions are taken still there are rare cases of catastrophic failure so see that in RED above.

My suggested solution.

Seek out and or take the opportunity to speak to people who you KNOW are highly successful in Wealth creation---even if you think what they do or have done is way way out of your league. One snippet could be worth 1000s when the time is right in your life to introduce.
One comment may stick in your mind and ring ALARM bells when someone who doesnt know better espouses a "truth" you are being asked to believe and worse place your money in/with.

If possible turn them into MENTORS,they have no agenda they dont want your $$s they have their own.How fantastic to be able to run anything concerning you past them!

I've just completed a project for a developer in Mt Gambier,a guy my age who loves fishing,his kids,his business and his clients.Throws a great BBQ which my staff enjoyed on friday nights,particularly the Lobster on the Barbie!! Hes a normal pretty rough around the edges JOE. But he is worth $60 mill.
I've sat listened and questioned this guy for 4 hrs on 3 occasions---pieces of priceless information has come from him often. Information,Ideas and wisdom you simply wont and could never find from any financial advisor.If anyone ever finds a good one,Id love to meet them as a good one with practical knowledge along with industry knowledge would be worth their weight in Gold Bullion.

 

[TheAnalyst]

What really surprises me with the Westpoint saga and the Financial Planners and especially from the FPA is the golden rule diversify and why werent the clients diversified??? I know why. Because the commissions were so good who would want the clients diversified??

The only question why accountants wont or are not allowed to do planning is simple?? All they have to do is 4 subjects via distant education and they can offer advice but the problem is a lot of accountants have trouble doing the courses as they can be very difficult.

 

[Prospector]

I think maybe TechA and Duckman are arguing about semantics really.

I agree Tech that a mentor is the most powerful way of learning from other's experiences. The trouble is, where do you find them? So therefore people go to Financial Planners who are supposed to be the experts.

Sadly we have had a bad experience with a Financial Planner, although we knew enough not to follow his advice. Thank god we didnt see him when we were in our thirties when we were a bit more wide-eyed and trusting. He wasnt just unhelpful - some of the things he was suggesting were plain wrong from a Tax perspective. Visual - I am sad to hear that your experience had such a negative impact on your life.

Our accountant was also clear that he could not offer financial advice, however he would share gems with us that because of his upfront stance, we felt we could listen too! He also listened to us, because we asked him about buying shares in one of Kerry Packer's ventures (cant think of the name now - just remembered - ECorp) and we did, at a few cents each. The accountant bought some too because he thought we were on to a good thing. They rose to $8 before crashing then being liquidated. We sold at around $6, but the accountant hung on (we hadnt spoken for a while) until the bitter end. When he did our books that year he was a tad peeved because we hadnt told him we were selling

 

[pch]

The only way to have a financial planner who work in your interest is fee for service and rebates *all* trails. Another good test of your FP is to ask them if they recommend index funds. If they say no, then do not use them...

A friend of mine is a fee for service FP and does this and he is relatively well known and generally loathed by his fellow financial planners. He has taught me a hell of a lot to the point now where I really don't need him for 90% of things (although I still seek his advice a lot).

An old high school buddy of mine is also a FP and I asked him about my fee for service mate. His answer was that he was the 'Neil Jenman' of the FP industry and generally not liked.

But this high school buddy of mine is addicted to comissions and only went into FP because the mortgage broking business dried up as property lost favour..

 

[crackaton]

What really surprises me with the Westpoint saga and the Financial Planners and especially from the FPA is the golden rule diversify and why werent the clients diversified??? I know why. Because the commissions were so good who would want the clients diversified??

The only question why accountants wont or are not allowed to do planning is simple?? All they have to do is 4 subjects via distant education and they can offer advice but the problem is a lot of accountants have trouble doing the courses as they can be very difficult.

Financial planners can do only one thing. Sell advice to clients. CPAs can run whole companies.

 

[Julia]

Interesting responses. I agree essentially with Duckman in that a bad experience with a shonky operator shouldn't colour our views about the whole industry.

I've experienced the good and the bad. When I first had some money to invest and was extremely naive, I was really impressed by the beautifully presented "financial plan" which was, whoop de do, given to me free of charge! Did I think to ask how this expert was being paid? No, too busy being happy with his promises of megabucks to come from the variety of managed funds he had recommended. A year later, I'd learned the megabucks just didn't happen (partly because he had put the majority of the funds into overseas shares when they were declining big time while Oz shares were still doing quite well), and I'd had the unhappy realisation about trailing commissions. Some investigations indicated that my supa dupa funds were those which paid the "adviser" the best trailing commission.

However, when I was thinking about setting up a SMSF I found a planner who had no interest in directing where I should invest, but who was able to make several really useful suggestions about how to structure my whole financial situation to the best advantage.

These days I pay a very small annual retainer to a licensed planner whom I trust for the necessary details to ensure I am complying with all the regulations attached to the running of a SMSF. This includes her doing all the paperwork for, e.g., making a lumpsum withdrawal which requires preparation of EFT statement etc. Money well spent imo so that I don't worry about that stuff.

Do agree about lack of basic education regarding investing and risk.
If I were a teacher, however, I'd be heaving a sigh of frustration at thinking of yet another subject to cover. Suppose it could be outsourced. People like Noel Whittaker or Daryl Dixon would probably be up for doing talks at high schools.

Julia

 

[Odduna]

Although the Westpoint saga is sad, i am fed up with these people chasing higher returns complaining when their investment fails, with or without advice.

Westpoint reminds me of Pyrmaid building society. People investing in a group cause they were getting a larger return. When it fails, blame everyone except themselves for their greed.

Even a normal lay person should know that if a 'safe' term deposit with a bank is 5% and another group is offering 10%, surely you use common sense and think that something maybe different in the product???

Yes its a sad case, yes some individual planners probably did do the wrong thing, but in the end, these investors would have been looking at the possible returns and thought what the hell.

PS i do not see accountant as a higher order than planners, you have your good ones and bad ones. But as stated with the post, yes a CPA can run the whole company, they can run it well or run it into the ground.

Just my opinion.

 

[crackaton]

Although the Westpoint saga is sad, i am fed up with these people chasing higher returns complaining when their investment fails, with or without advice.

Westpoint reminds me of Pyrmaid building society. People investing in a group cause they were getting a larger return. When it fails, blame everyone except themselves for their greed.

Even a normal lay person should know that if a 'safe' term deposit with a bank is 5% and another group is offering 10%, surely you use common sense and think that something maybe different in the product???

Yes its a sad case, yes some individual planners probably did do the wrong thing, but in the end, these investors would have been looking at the possible returns and thought what the hell.

PS i do not see accountant as a higher order than planners, you have your good ones and bad ones. But as stated with the post, yes a CPA can run the whole company, they can run it well or run it into the ground.

Just my opinion.

Very true. But generally CPA's are fairly knowledgable and have some degree of integrity. There are always exceptions!!

 

[tech/a]

CPA's Manage Money.

Good F/Ps should help your money create more money,without excessive risk.

Agree that people look for the best returns but cant agree that thats necessarily greed! Rip offs arent the fault of the investor,and not the fault of the F/P recommending them---both are after maximum return.

Wonder what service youd get from F/Ps if they had to guarentee your initial capital.'or have indemnity insurance which clients could claim against in cases like west.

 

[Duckman#72]

My suggested solution.

Seek out and or take the opportunity to speak to people who you KNOW are highly successful in Wealth creation---even if you think what they do or have done is way way out of your league. One snippet could be worth 1000s when the time is right in your life to introduce.
One comment may stick in your mind and ring ALARM bells when someone who doesnt know better espouses a "truth" you are being asked to believe and worse place your money in/with.

If possible turn them into MENTORS,they have no agenda they dont want your $$s they have their own.How fantastic to be able to run anything concerning you past them!

I've just completed a project for a developer in Mt Gambier,a guy my age who loves fishing,his kids,his business and his clients.Throws a great BBQ which my staff enjoyed on friday nights,particularly the Lobster on the Barbie!! Hes a normal pretty rough around the edges JOE. But he is worth $60 mill.
I've sat listened and questioned this guy for 4 hrs on 3 occasions---pieces of priceless information has come from him often. Information,Ideas and wisdom you simply wont and could never find from any financial advisor.If anyone ever finds a good one,Id love to meet them as a good one with practical knowledge along with industry knowledge would be worth their weight in Gold Bullion.

That's better Tech.

 

[Duckman#72]

He wasnt just unhelpful - some of the things he was suggesting were plain wrong from a Tax perspective. Visual - I am sad to hear that your experience had such a negative impact on your life.

Our accountant was also clear that he could not offer financial advice, however he would share gems with us that because of his upfront stance, we felt we could listen too!

Hi Prospector

I agree - Tech and I are probably on the same page.

It is very important that you work closely with your accountant/financial planner and solicitor(if needed). Looking for a "one stop shop" can lead to disaster.

As for your accountant. You are lovely clients as - sadly - under the current legislation he broke the law and you could sue.

Duckman

 

[Odysseus]

There is a world of difference between a planner and an adviser. It should be possible to find a planner of some competence and integrity who can help one to do some strategic thinking, especially with regard to such a matter as to how to set up your own super fund. But ADVICE requires far more skill and knowledge than most of the so-called advisers have, independently even of the question of their integrity. Ultimately, in any case, if you invest in an adviser, that is a very major investment by itself, and the results will only be as good as that adviser. Most people who are really interested in investing in my experience do a lot better than the average adviser or broker: but you need to be prepared to LEARN, LEAR, LEARN. It's a matter of reading an awful lot, thinking an awful lot, trying out your own ideas, and finding out the hard way what does work to help you realise your goals and what doesn't. Start in a small and modest way, and work towards more skill as you go along. QUIT LOSSES as soon as a company shows it's in trouble, and before a bear period occurs, but BUY during corrections. Let profits run rather than selling too quickly. Concentrate on companies with sound earnings and good prospects, with not too much gearing. DON'T SET YOUR SIGHTS TOO HIGH. Good investments will perform better than a modest person thinks, but someone over-ambitious soon comes a cropper.

 

[Julia]

More confirmation on the role of financial planners:

--------------------------------------------------------------------------------
http://www.smh.com.au/articles/2006...4198138395.html

Julia

 

[Realist]

Asking a Financial advisor for information on what to do with your money is like asking a Real Estate Agent what house to buy, or a Recruitment Agent what job to take.

For those that do not get that, it is like asking a used car salesman what car to buy.

By all means ask them, but as Joe Blow always says - DO YOUR OWN RESEARCH!

 

[money tree]

Firstly, there are Financial PLANNERS employed by companies who market only their own financial products. A Planner needs no more knowledge than you or I in order to enter details into a spreadsheet. There is a major conflict of interest here, as the client is not recommended the best product available, but the best product that company offers (or the product giving the best commission).

Secondly, there are Financial ADVISORS employed by companies who market only their own financial products. These people at least have some sort of qualification and are experienced & knowledgeable enough to offer the right advice. Again, there is a conflict of interest because they are paid to market their own companies products.

Lastly, there are independant Financial ADVISORS. These people often have high qualifications, and are not restricted to offering only a few products. Here is where you will get the right advice. They often charge "fee for service" which means they dont get commission. This is the only way to guarantee the advice is unbiased.

Unfortunately, these Planners have given the whole industry a bad name. Then, people like Realist come along and offer their 2c when they dont have a clue what they are talking about. Its pure arrogance to believe you know as much as a qualified advisor. Unfortunately, these people have no idea how much they dont know. There will be some people here who really need advice but are put off seeking it because of the opinion of uneducated know-it-alls.

As many of you know, I am a qualified advisor. Im quite certain I have made more money in the last year than 99% of people here. Im also quite certain that nobody else can match my percentage return. So just keep bagging out those "used car salesmen" and pretending you know as much as them.

They say success is the best revenge.....how sweet it is

 

[RodC]

Lastly, there are independant Financial ADVISORS. These people often have high qualifications, and are not restricted to offering only a few products. Here is where you will get the right advice. They often charge "fee for service" which means they dont get commission. This is the only way to guarantee the advice is unbiased.

Unfortunately these are the ones who have caused many of the problems over the years by appearing to be independent whilst really not always providing independent advice. Due often in part to inadequately disclosed trailing commissions.

Rod.