The problem with financial advice

Andy, great summary of the existing financial advice world. I have no doubt that advisers and clients alike would embrace simplicity, cost effectiveness and compliant advice.
How do we achieve this in an advice world where trust is at an all time low and compliance has the stage with simplicity and cost-effectiveness lost?

Andy...this is the best summary of the present situation Ive seen. Well done.

Yep sure Andy sounds great in a mythical world.
Just wait for another round of massive red tape and compliance additions because as expected the banks / institutions flog 75% of their own in-house products to their advice clients.
And O'Dwyer will give them a little slap on the wrist and more red tape for all to try to fix an unfixable vertically integrated / conflicted system.

Good article Andy. The next biggest problem is that the tech build required by advisers to solve this problem is too big for an Australian player, and global techs don't care about Australian advice legislation or tax rules. Our market is too small...

As advisers at the coal face, we all get this. How to get the regulators to get it is the insurmountable problem.

Well written Andy, I agree with every word you say.

The problem is, that people who are not involved or understand our industry, 'stir the pot' which further adds to the cost of producing an SOA, and this in turn makes it more difficult for us to do what we do best, and that is protecting Australians through quality life insurance advice. They have no idea what we do for people, and how we help them in times of grief and trauma!
And so, we end up with the mess like we have now, where we see insurance companies, 'policy flogging' 24 hours a day on TV with little or no regulation. I think I know what area of insurance these supposed lapses are coming from!

And of course the resulting outcome has been, The Trowbridge Report! The major recommendations from this has been the 'slashing' of the Adviser's commission. Again, misinformed people who know little about what we do!

This morning, (Monday 29/01/18), I was paid an unexpected visit to my office by an existing client who informed me that his business partner had passed away over the weekend from cancer and other complications. Fortunately, he received professional advice from our office. That advice will allow his widow to clear both their business and personal debt, and will also provide an income for his wife, so she can maintain her lifestyle into the future. I wonder what she thinks about us being paid commission for the advice they initially received? We will now order the claim forms and help his widow complete them, through this difficult time. THAT'S WHAT WE DO!

Paul

Much like the rest of the government and so called 'authorities', the policy makers are so far out of touch with what we do and how hard they make it. Instead of trying to make the advice industry something that the country could class as an asset they would rather continue to try and tear it down all at the expense of just about everyone. Generalist comments about institutions flogging their own product doesn't help either. It's no wonder consumer level of trust is diminishing when in reality it shouldn't, as the vast majority of advisers do the right thing.

Thanks Andy for articulating the plight of our industry. My guess is that things are only going to get worse for consumers, as a mass exodus of experienced advisers (early retirements) ensues in the lead up to increased educational deadlines, a growing compliance burden and rapid technological change. Personalised advice will be placed further out of reach for the man in the street. Thanks to a sensation seeking media, an unfettered army of bumbling bureaucrats, years of anti-adviser politicking and scapegoating, it's no wonder Mums and Dads are sceptical about getting advice. The sad thing is that advice is sorely needed. A nation carrying one of the highest levels of household debt, where a high percentage of the aging population have not provided sufficient for their retirement and will fall back on a tax-payer funded safety net. This in the face of sky high and accelerating aged care costs. Many will be looking at working until they drop or an age of pensioner poverty. The gap between haves and have nots getting wider and wider and the establishment of a growing underclass. A financial caste system at work. That's what's at risk, if only those in power would realise and take steps to make advice more accessible.

Well articulated and spot on in terms of the bigger issues surrounding financial advice. I especially like the way that Andy Marshall has managed to avoid laying the blame here, there and everywhere - something I have enormous difficulty not doing. Well done!

More discussion of this type - focusing on the issues at hand rather than pointing at potential culprits to lynch - is desperately needed within and outside the financial planning industry.

I especially agree with the idea that there are bottle-necks in the advice delivery process.

Most attempts to resolve these bottlenecks result in tighter client selection (usually focused on high-net-worth folk); increased "pre-laid pathways" (fitting clients into business models); increased product bias (in-house products; badged products; tighter APL's) and more specialised advice (ie, focus on SMSF, TTR, this or that asset class/sector).

As the article suggests, the bulk of technology seeks to improve productivity by narrowing the advice process in some way. Technology should be helping diversify and expand the advice able to be provided quickly, compliantly and cost-effectively. We're not there yet but let's all hope the future will see improvements.

Spot on Andy. And like Sue Allen, we know this. But what can we do?

I have advised ASIC of the regulatory dysfunction due to our AFSLs creating and enforcing the settings based on FOS outcomes. The industry is now run by compliance officers and lawyers, hardly a promising outlook. And I am not sure how it will change without an increase in consumer needs.

A good clear summary of where we are.