Financial Planners

[Onlooker]

With regard to how good various professionals are, that really depends to a very large extent on the individuals themselves. I think we've all met good and bad doctors, good and bad lawyers, good and bad accountants, etc. Professional associations can only do so much and sometimes are little more than 'self-protection societies.' And as only the few bad ones usually make it into the news, a whole profession can get tarred with the same brush. As the saying goes, "99% of lawyers give the 1% a bad name"

 

[Julia]

The main reason I moved to SMSF, is because my fin planner would give me no advice whatsoever on sell strategies.

Having said that, it is still and awful lot of work managing your SMSF, in particular asst allocation and stock selection, you can spend endless time on, sometimes I wonder if I would have been better to just stay in a basic balanced strategy, and spend less time learning all that is required to manage my investments well, but a 1 to 2% fee is just a killer over 30yrs on a large account.

Stick with it, awg. You'll find it gets easier. I'm not sure why you find asset allocation difficult. It doesn't have to be complicated. It might not be, um, standard practice, but I allocate my funds to whatever is doing well at the time: i.e. when the market is rising, buy stocks in the sectors which are showing the most growth. That's the beauty of a SMSF - you can do whatever you want when you want.

The actual administrative stuff takes almost no time.

Good evening, everybody

(I'm trying to be very polite after having been booted out of another thread

I'm in here mainly to obtain different points of view and to follow some logical discussions and in the process learn something from it. As I am all for SMSFs and all against Financial Planners, this may be a suitable forum (although it would've been nice to have found a thread entirely devoted to SMSFs).

There are several threads discussing SMSF's.

The point I wish to make here at this moment is to suggest that it pays to learn as much as possible for yourself about the administration of a SMSF, to do all the bookwork yourself, and then have the obligatory reporting and audit work done by one of those "mail order shops" who charge you a fixed fee (often as low as $500) regardless of the number of investments and there number of transactions (well, almost, as there is a bit of a scale on really large portfolios).

I agree about doing the basic record keeping, but I like having an accountant.
I don't doubt that some of the mail order entities are OK, but I don't consider paying around $2000 p.a. for the tax return and audit plus any ongoing communications throughout the year with someone I like and trust to be unreasonable.
Just a matter of personal taste, I suppose.

I've also had the experience of a shonky accountant. She is about to appear before he Disciplinary Committee of CPA Australia as a result of a formal complaint I lodged.
This was something I'd never want to do again, and it would have been easier to walk away but there's just too much of this and consequently they keep up their dodgy behaviour.

 

[Onlooker]

I don't find my SMSF's administration excessive or demanding. I keep a minute book of all major decisions and reviews taken, and a spreadsheet of all transactions as I go along, and that's that. Come 30 June, I print the lot out for easy transcription into the requisite reports. And there's another thing that I have noticed is that psychologically I have developed quite a different attitude to the investments in my SMSF as opposed to those outside. I seem to apply a more disciplined and 'long-term' approach to those inside the SMSF. I took advantage of all the accelerated contributions in recent years, went into pension phase last financial year, and now enjoy not only tax freedom but also get all those beautiful franking credits back which is quite a nice feeling

There was quite a rush on in the accounting profession when this whole SMSF-business took off and many an inexperienced chap set himself up in this specialised field. I had to pull up my first accountant when he wanted to declare 15% contribution tax on all my contributions, not just the ones I had declared as concessional deductions in my personal return. It took me several emails before he came back with this reply
QUOTE
Thanks for that. I have read the legislation. I think you are right. Deepest apologies, my interpretation of the law was incorrect s274 which says that 15% but then there is this 82AAT which excludes it from being tax (only the deductible amount will be taxed) – the 82 AAT notice thing. Really appreciate that, now I have to go fix up a couple of returns. Really, thank you for this. Really appreciate it. Owe you one. I will forward you an amended return for your signature today.
UNQUOTE

 

[awg]

I'm not sure why you find asset allocation difficult. It doesn't have to be complicated. It might not be, um, standard practice, but I allocate my funds to whatever is doing well at the time: i.e. when the market is rising, buy stocks in the sectors which are showing the most growth.

So did you get a good piece of the 14% return on bonds this year?

What about your gold allocation?

30%+ on stocks last 3 months.

Cash rates low

Depends where you had the assets allocated, if you make those decisions well, then you can outperform, depending upon your benchmarks

 

[Julia]

So did you get a good piece of the 14% return on bonds this year?

What about your gold allocation?

30%+ on stocks last 3 months.

Cash rates low

Depends where you had the assets allocated, if you make those decisions well, then you can outperform, depending upon your benchmarks

awg, what I said was:

It might not be, um, standard practice, but I allocate my funds to whatever is doing well at the time: i.e. when the market is rising, buy stocks in the sectors which are showing the most growth

i.e. I buy shares in what sectors of the share market are rising.

I don't want bonds and I don't want gold.
That's why I suggested I didn't subscribe for myself to 'standard practice' of always being diversified across every asset class.
If you do want to do that, then I wish you every success. I prefer to stick to what I know well and understand.

 

[wayneL]

An interesting development over here in The Old Dart:

http://www.timesonline.co.uk/tol/money/investment/article6576639.ece

The chief City watchdog today confirmed it was set to ban all commission-based advice in a move that will sound the death-knell for the old style adviser industry.

The proposals will result in dramatic changes for both advisers and product providers as the Financial Services Authority (FSA) attempts to repair the damage caused to the industry by successive episodes of commission-driven mis-selling..............

 

[tech/a]

The chief City watchdog today confirmed it was set to ban all commission-based advice in a move that will sound the death-knell for the old style adviser industry.

The proposals will result in dramatic changes for both advisers and product providers as the Financial Services Authority (FSA) attempts to repair the damage caused to the industry by successive episodes of commission-driven mis-selling..............

Now that would alter the face of the industry.
Would cut down the number of "Advisors" dramatically.

 

[Krusty the Klown]

Now that would alter the face of the industry.
Would cut down the number of "Advisors" dramatically.

Do you really think so?

Won't they all just change to fee for service for the same amount as the lost commission?

 

[Julia]

I think there will be resistance from many people to paying that upfront fee.

That's why there has been the predominance of clients going for the commission based fees to date, rather than being prepared to pay upfront for so called unbiased advice.

 

[Krusty the Klown]

Yes, I suppose if people don't want to pay upfront, or can't afford to, it will impact on advisers revenue, therefore less advisers.

 

[Temjin]

I thought I would update this thread with this latest development. (from tech/a last post)

http://www.fpa.asn.au/FPA_LatestNews.aspx?EventGroup=1&EventItem=268

FPA Board approves remuneration policy

23 Oct 2009

The Financial Planning Association (FPA) Board has approved the FPA’s remuneration policy to move away from commission-based fees for financial planning advice, by July 1, 2012.

FPA CEO, Jo-Anne Bloch, said that in approving the remuneration policy, the FPA Board applauded the members and the community for their participation in a robust debate about the issues.

“The FPA is committed to transparency and robust consumer protection and we are now looking forward to the implementation,” Ms Bloch said.

“This is an historic decision by the FPA, and shows how our members lead the way in the financial services sector,” Ms Bloch said.

“Our job is to ensure our members continue to put the interests of their clients first and by putting this remuneration policy in place, the FPA is insuring consumers receive advice that is free from real or perceived conflict, as well as ensuring the long term viability of the profession.”

The FPA received over 250 responses to its consultation paper “Financial Planner Remuneration” released in May this year, which assisted the Board in developing the revised policy.

“Members on both sides of the debate have made substantive contributions that have enabled the FPA to finalise the policy and ensure efficient implementation of these principles,” Ms Bloch said.

The FPA said that risk products are not within the ambit of this policy at this point in time, and neither are rebates and related payments, which are product directed payments to Australian Financial Services Licensees.

However, it needs to be clearly stated that the FPA wants to encourage the entire Financial Services industry, product providers and financial planners alike, to progress towards a transparent and appropriately labelled environment where clients can benefit from professional and unbiased advice.

The FPA has therefore established a member working group to progress appropriate remuneration principles for risk products, and a working group to determine how corporate superannuation will be implemented. Both will report to the FPA by early 2010.

Whilst many FPA members already have transitioned to client directed fee payments, the FPA has also established a transition committee to assist members with guidelines, tools and information to ensure a smooth transition for every practice.

“FPA members will be required to transition away from commission-based remuneration by 2012 but the FPA wants to encourage members to adopt these remuneration practices as soon as their business is ready,” Ms Bloch said.

‘AMP has told fund managers if they want to be on the group's 1,600-strong financial planning network's approved product list (APL), their products must not include any commissions.’
Financial Standard, 27 October 2009

This is a quite a major shift from the traditional remuneration structure of financial planners, in which the majority are still on commission based.

Perhaps this will bring back some confidence from the consumers on receiving unbiased advises.

The next thing is to get rid of those "approved product list" and move toward no-limitation on what financial planners can or cannot recommend.

http://www.finsia.com/eventPDF/PD1_Financial Planning_Q27_Bris.pdf

for a seminar on this latest event.

Take part in a discussion on putting value on advice and creating your worth, taking responsibility for raising standards and avoiding further disasters such as the collapse of Storm and Great Southern.

Maybe it will or maybe it wouldn't as mistakes would continue to be made and greed would continue to exist, but certainly it is a step toward the right way.

 

[Julia]

One of The Australian's journalists has, in four days, become a 'Government certified, nationally accredited' financial adviser with a 'diploma of financial planning'.

"No exams, the course completed entirely online and 'open book' - and with no requirement for a high school certificate (or even a passing grade in primary school for that matter) - and I'm a fully certified financial planner."

Anthony Klan, government-certified, ‘nationally accredited’, financial adviser. Source: TheAustralian

HAVE a spare few thousand to *invest? Better yet, $10,000, $100,000 — more?

Need your financial future mapped out and advice on where to invest your nest egg (plus all the fees I can extract along the way of course)? Roll up, roll up. I’m a *government-certified, “nationally accredited”, financial adviser with a “diploma of financial planning”.

No exams, the course completed entirely online and “open-book” — and with no requirement for a high school certificate (or even a passing grade in primary school for that matter) — and I’m a fully certified financial planner.

I have met all the education *requirements set by corporate watchdog the Australian Securities & Investments Commission to steer the fortunes of Australians seeking professional help. And all in the equivalent of four days’ work.

The diploma cost $1425 (more than double, $2950, if you sign up to a handful of face-to-face workshops). The $1425 includes “both personal and general advice”, a distinction that has chewed up its fair share of parliamentary and media time this year.

But wait, there’s more.

For an extra $175 — and “an extra 30-40 minutes of reading time”, I am told by the education provider — I could also become a provider of self-managed super*annuation fund advice.

The government and ASIC have long expressed concerns about widespread future problems with the rapidly growing SMSF sector.

I’m now also a fully certified provider of SMSF advice.

QUIZ: Can you answer questions from the Diploma of Financial Planning Course?

Both the financial planning and SMSF education requirements are set by ASIC under its so-called “RG146” guidelines — the providers follow suit and create courses to meet the requirements.

ASIC has been well aware of the woeful standards set by it under RG146 for many years — and has been promising an *improvement for almost as long, but still nothing concrete has *happened.

This week, in its second submission to the financial services inquiry, the regulator suggested improving the training of financial planners.

But it has made no suggestions as to how it will improve its own embarrassingly inadequate requirements, only suggesting a *“national exam be set”.

After many years of intense pressure from consumer advocates, ASIC this week recommended advisers be required to hold a university degree.

But it has conspicuously fallen short of calls for financial planners to at least hold “relevant” degrees, such as in law, accounting or *economics, or to state what type of degree be required, or how it will handle the many thousands of *financial planners operating *nationwide without degrees.

Financial planners/advisers (the terms are interchangeable) have been involved in almost every major corporate collapse of the past decade.

Westpoint, Storm Financial, Fincorp, Australian Capital Reserve, Banksia Securities, MFS, City Pacific, Prime Trust, Great Southern, Timbercorp and scores of other collapsed companies all relied heavily on raising money via financial *planners.

The Association of Independently Owned Financial Professionals estimates “product failure, impaired structures and frozen funds” have exceeded $37 billion since 2005.

There have been countless hours of hearings, investigations and Senate inquiries with thousands of submissions, the most *recent the Senate inquiry into ASIC over the Commonwealth Bank financial planning debacle.

Having covered collapsed and collapsing companies for most of the past 10 years, I have interviewed dozens (probably hundreds) of heartbroken investors and retirees who have lost most or all of their life savings — all *because of advice they received from their financial planner.

ASIC chairman Greg Medcraft says one in five Australians visit fin*ancial planners and that he is surprised the figure is so low. He should be amazed it remains so high.

At the heart of the problem is the chasm between what the public expects when they visit a financial planner and what they get.

A devastated elderly couple I interviewed, both retired doctors, had lost most of their life savings after being advised to use products, which have since failed, by their Brisbane *financial adviser.

“We’re both professionals. When you need health advice you see a doctor, when you need legal advice you see a lawyer, when we needed investment advice (we) went to a financial planner,” said the wife, who now suffers severe depression.

“We had no idea, it’s been devastating.” Or Christopher Cole, who sold his New Zealand home and immigrated to Australia. He sought advice from a Gold Coast-based financial planner on where to park the $600,000 proceeds from the sale of his house while he looked for a new home to buy. The adviser placed the whole amount in the MFS Prime Income Fund, which collapsed months later.

“I was going to buy a house with it but now I can’t afford to and I’m living in a caravan,’’ Mr Cole said. “I did exactly what you’re not supposed to do and invested it all in the one place, but the planner said it was a good idea.”

Lawyers and accountants require solid university degrees, which are difficult, comprehensive and take years to complete — in additional to further qualifications regularly required.

By contrast, the barriers to entry for financial planners are comparatively non-existent. The costs of ruining a reputation in *either the law or accounting sector are generally huge. But in financial planning, where obtaining a licence can be done with a week or two’s work, the costs of walking away if things go awry are minimal. Not that crooked planners regularly do.

This week in its submission ASIC again raised concerns over its lack of adequate powers to ban financial planners, which led to “phoenixing” problems, where *financial adviser companies were banned only to reappear under a new name.

I have been attacked by sections of the industry — in some cases with legal threats flying — for suggesting the nation’s financial planning education standards were sub-par. There was only one definitive way to prove it.

I Google financial planning education. I decide to give Integrity Education Group a miss — its website told me its Diploma of *Financial planning “provides anyone” seeking to become an adviser with the necessary compliance “to beomce (sic) ASIC registered as an Authoprised (sic) Represetnative (sic)”.

Instead, I approach the Monarch Institute.

I’m told of the price of the *diploma of financial planning — and the $175 SMSF offer.

I initially declined the SMSF component thinking I may be overreaching — I’m still not certain as to exactly how much work the planning course will take. Most of the websites I visit avoid the issue of completion time required, but most of those that do say the course should take *between six and 12 months. One site that does mention time states: “Course Duration: 12 months *(earlier completion is possible based on individual student capabilities)”.

It’s suggested by a Monarch *Institute representative, via email, I should take up the SMSF offer.

“I want to let you know that the inclusion of the SMSF to your *diploma of financial planning will only be an extra 5 units of competency that goes hand in hand with module 3 of superannuation, which is around 30-40 minutes of reading time,” the representative tells me.

The course reading materials come in four modules: foundations of financial planning; investments; superannuation & retire*-ment planning (including SMSF); and insurance. I’m provided with an online assessment portal. My assessment is to comprise four sets of multiple choice questions (one for each module, with the number of questions ranging from 18 to 46) and a series of short-answer questions for each of the four modules.

I’m told all assessment is “open book”, there are no time limits. I can sit the assessment wherever I like. I can have three attempts at each of the multiple choice sets (with a pass mark of 70 per cent). If I require more attempts I can contact the institute.

I cut no corners; I diligently read all the materials, fill out the multiple choice questions and the short answer questions.

During 34 hours of work I complete all the requirements of the course. This did not occur in one sitting, it was several months between signing up for the course and submitting all my assessment materials. As a working journalist I had other duties and the prospect of taking a week’s annual leave to conduct the course was too grim.

But regardless, I keep records of all my time working on the course. A few part days here and there and the odd full day takes me to nine days reading the material and answering questions. In total, and conservatively, 34 hours’ work. Four full days.

(A well known and very well qualified Sydney financier is known for stating he could knock off the course in a “lunch time”. While he’s very much on the right track I challenge him to this, though I am unaware of the length of his lunches.)

I score between 90 per cent and 100 per cent for the four series of multiple choice tests and 100 per cent (they are either pass or fail) for each of the four sets of short answer questions.

“Sensational! — You have shown an in-depth understanding of this material, and have achieved an excellent result,” I am told. To be fair, I hold a university degree in commerce and have been writing about financial matters for years, so I should score well. But regardless, anyone failing this *diploma should not receive a *licence to handle stationery, much less someone’s financial future.

For comparison, the course requires roughly the same amount of work as half, or less, of a first-year economics 101 subject, but without all the nasty assessments and studying. (It is also fair to note the issue here is not with Monarch itself. For what it was, the information was well presented. But the key issue is in the “for what it was”; the content required — or desperate lack thereof — to meet the RG146 compliance set by ASIC.) “Monarch supports higher education requirements to meet RG146 guidelines and supports the idea of mandating degree qualifications in preference to *diploma or advanced diploma courses,” a Monarch spokesman said.

My certificates (I’m now also qualified to provide SMSF advice after all) arrive in the mail. I have completed a full 22 “units of competency”, my certificates beam.

The only thing between me and setting up shop to the general public now is that under ASIC regulations, financial planners must operate as “authorised representatives” under an Australian *Financial Services Licence holder.

Re-enter Google.

Scores of providers show up.

I contact InterPrac. I’m told the process of becoming an authorised representative is relatively simple. I need to have completed my diploma of financial planning and have a police check run. The whole process should take less than two weeks, I’m told.

I am to receive 85 per cent of all income I make, with InterPrac receiving the rest, subject to InterPrac receiving a minimum fee of $375 a fortnight. (At the risk of running up more costs, potentially — and still having not been brave enough to hand in an expense claim for my diploma — I skip this final stage).

Under the arrangement the proportion of income kept by the financial planner gradually steps up to 95 per cent of all income made by the planner once they are earning $600,000 a year or more.

An InterPrac manager tells me I will be able to recommend about 90 per cent of the investment products in the nation. All products that InterPrac authorised representatives are allowed to sell must be given a tick of approval by a research house.

While this adds a gatekeeping layer, the data provided by many research houses has been criticised by sectors of the industry.

The chief executive of the *Association of Independently Owned Financial Professionals, Peter Johnston, said he believed the conflict of interest of product providers funding research was the “No 1” problem facing the *financial planning industry.

“Conflicted research is one of the key reasons we have $37.3bn in frozen, impaired or lost funds,” Mr Johnston says.

Regarding the RG146 requirements for the diploma of financial planning, Mr Johnston was concise: “We think they are pathetic”.

Mark Rantall, chief executive of the Financial Planning Association of Australia — which has long been pushing for better education in the sector — is equally dismissive of my new pieces of paper. Of the 34 hours spent *acquiring them?

“That long? You must have failed a few,” he jokes.

And as for ASIC’s mooted *financial planners’ “national exam”: I look forward to sitting it and letting you know how it all goes.

Do you know more? klana@theaustralian.com.au

Hope this isn't a copyright problem.
(The Weekend Australian, August 30 - 31 2014)

 

[tech/a]

This is absolutely disgusting

What a joke the financial planning fraternity is.

I have one rule and I think it's one of yours Julia

If I can't control it I won't do it!

Doesn't mean I'll eliminate risk but I won't place myself in a situation where I could face ruin.

How totally devastating for those who lose everything through commission based novices.

 

[Julia]

The general public have absolutely no idea.
And what is ASIC doing about it? Nothing at all, it appears.

Some sample questions which I'm sure anyone here could answer without even seeing the 'education' material.

 

[Panaman]

Little surprise that so many ordinary people take charge of there own investment and Superannuation these days, takes time and effort but the longer I do it and the more I read and learn about the financial advisory industry the more im relieved and happy I went out on my own.

It really is a mine field out there, even the big banks cannot be trusted if recent reports about CBA and Macquarie are true.

 

[tech/a]

And correct answers to these questions will put you in a position to increase a clients funds.

Every financial advisor I've met needs all the help I can give them.
3 of the five I know are living in oceans of debt!

More interested in portraying an image than delivering content.

 

[PinguPingu]

Gee, wish I had known about this education provider before I started my DFP! (kidding) I'm doing it through Kaplan and I need to do both a 60 question exam and a statement of advice assignment for each module (4 in total to meet minimum for RG146), the damn assignment thing is 60 pages long. Amazingly, my econ major didn't count according to ASIC but crap providers like the one the journalists completed actually do - who's protecting who here?

 

[Hodgie]

I do not disagree that the requirement to become RG146 compliant is too easy.

However, this journalist already completed a commerce degree, I would say that most of the content in the diploma material would have already been known to him so the time taken is no surprise whatsoever. I was in the exact same boat.

I did it through Kaplan like Reaperman has mentioned, admittedly it took a little longer than 34 hours but as he has said we had to prepare several advice documents which were quite lengthy and time consuming. In terms of actual study though, the time spent was very minimal because most of what I needed to know was known from the Commerce degree (same as this journalist).

It really is up to the dealer group to screen the planners they are allowing to provide advice under their license. I know that dealer groups will not accept qualifications from certain organisations.

If they want to let any joker off the street come into their business with zero practical experience than they will get destroyed with complaints, FOS (Financial Ombudsmen Service) will make them compensate the clients they have lost money for (if in fact the advice was inappropriate) and the company will not survive. These types of business models are not sustainable.

When a client has clearly been mislead or provided with inappropriate advice for their circumstances and they can show this to the financial Ombudsmen, than they will have to compensate the clients for their loss as long as the dealer group is solvent. This is why dealer groups full of bad planners will go insolvent.

It's like in any job, just because someone has a qualification you don't just let them start running a muck on their own. If you respect your own business and your clients they should undergo extensive training before you let them face to face with anyone. They should be mentored for a period, sit in on meeting, learn the business. Than when they do start providing advice the dealer group should be pre vetting everything they do until they are happy that what they are doing is right for the client. It's the licensee's own fault if they let someone provide advice to clients straight after getting the diploma.

I do understand that there are a lot of rogue advisers out there which have caused a lot of heartache and the government is doing less than it could to stop it. This is why as a holder of an Australian Financial Services License the dealer groups need to monitor their own advisers closely if they want to remain profitable. They are heavily in the spotlight now, if they do not do the right thing they will lose their license.

That's my opinion of the industry anyway.

 

[VSntchr]

The general public have absolutely no idea.
And what is ASIC doing about it? Nothing at all, it appears.

Some sample questions which I'm sure anyone here could answer without even seeing the 'education' material.

If you think this is the reality then I am afraid you've been swept up in media hype. Not that I am here to bat for advisers, I certainly have major issues with the industry - but that picture does not portray anything close to the reality for what it takes to become a qualified advisor...at least in my experience.

 

[tech/a]

If you think this is the reality then I am afraid you've been swept up in media hype. Not that I am here to bat for advisers, I certainly have major issues with the industry - but that picture does not portray anything close to the reality for what it takes to become a qualified advisor...at least in my experience.

Most are not qualified they hide behind licencing given to their dealer principals --- and as such are only able to sell their products and remain compliant to the conditions of coming under the umbrella of that licence.

They do these risk evaluation models which are just plane rubbish and charge $500-$1000 for the privilege. Its nothing more than you disclosing your financial position now and where you'd like to be---you can do that over coffee for $7

Then your shoveled into a fund which gives them the best return on commission and once a year your charged $500- $1000 to get the results and be advised if there is a more highly paid commissioned fund you should be transferred into.

Ask about Property and you get a blank look---No commission.
Ask about investing in a few stocks and Blank looks -- no commission.
Ask about Life insurance and Wage protection and you'll have to sit through the spiel at $500 a shot.
Most everything else your going to have to pay to sit and listen to industry jargon while they try and fit you into a commissioned product of some sort which will answer your question.

One year I tried 3 of these guys out
2 I knew and 1 I didn't I paid $1000 + GST each for them to advise me on how I should set myself up for retirement.---Perhaps they knew something I didn't or I wasn't doing things as efficiently as perhaps I could.

Not 1
Talked about passive income (I have 2 streams not fully utilized and one in the wings ready to be un leashed when I retire/semi retire).

Everyone of them wanted me with (at that time 4 yrs ago) $50K in a managed super fund and the same for my Paid wife.(from the Company). Happy days they had commission cheques well spent.

My response was to continue with my own SMSF.---Couldn't see and still cant see any benefit what so ever.
Plus I'm not going to place my eggs in a fund that has a even a slight chance of going broke.
I can do that myself!