The new era of advice
Graeme Collins has been an advisor for 35 years. He says while the industry is moving in the right direction, the new regulation doesn't necessarily mean the advice is any better delivered or received.
Does the Better Advice Bill start a new era in the regulatory oversight of financial advisers? What do you think about peer review becoming the way misconduct is assessed?
After years of regulatory change, the Bill provides clarity for the industry allowing financial planners to get on with the real job of providing financial advice to clients.
I'm not sure whether peer review is the way to go. Essentially we have that already. The bad apples have always been identified one way or another. For 35 years, I've always been part of a large Licensee and my peers would point out any rogue element if visible. The group would want them out.
There are always bad apples in every industry. Is this Bill going to get rid of then? Probably not, because we don't live in a utopia.
There will always be someone who slips under the radar.
The Bill assures consumers that rules have been tidied up which is a positive for people who haven't engaged with a financial planner and may help to remove doubt about the profession. In the main, I believe that clients who have already engaged with a financial planner would see them as a trusted and professional person.
Are the advisors happy with the Bill?
I'm getting positive feedback from many advisors who appreciate the new world we live in and the hope that much is now behind us. So much has happened in the last three years. We've had constant audits, new regulations, new education standards, and the look back from the Hayne royal commission.
But whether advisors are happy probably depends on their age. The younger advisors only know this new world; they don't know the old one. They know how to dot the 'i's and cross the 't's, what to put in the file notes, and how to ensure that everything is correct for the Licensee. However, that doesn't mean the advice and client engagement are any better.
A common refrain is that the fun has gone out of the industry. It has been hit hard in the last three years. Everyone has gotten bogged down with audits, compliance, CPD points, exams, and a royal commission.
That said, advisors are more qualified, more regulated, and more educated from a technical point of view. However, the question is whether they have the life skills and can engage to help their clients. And this is what the legislators don't get.
Advice is not about investing money and writing SOAs. Advice is about having robust discussions with your clients about the correct strategies. Is it better to pay off your mortgage or to salary sacrifice? Is it better to give money to your children now, or keep it in a super fund because of the lower tax advantages? And what are the correct tax structures?
The advisers who have hung in there for many years during recent years and the turbulent times have become very resilient. Most understand that this is a new world, and you either get on with it or ship out. It is what it is!
I also think advisor numbers will start rising again as graduates and people start to understand what financial planning is all about. There continues to be an increase in the demand for advice with the Retirement Income Review. People view finance as a complex and scary area, and we can put the puzzle together for them.
However, in a fee-for-service world, many advisors don't want to take on clients if the compliance costs continue to escalate. It can take a team up to 20 hours to complete tasks that will satisfy the regulators. Which at the end of the day, the consumers will pay.
How has the industry changed?
I used to say 70 percent of an advisor's time is spent with the client, 20 percent on getting the tax structures correct and report writing, and 10 percent on whether you use a product platform, an administrator, or choose to do the work yourself.
Now as a team, we spend 10 percent of our time with the client, 20 percent on administration, and 70 percent on documentation that must be right for the regulators and compliance.
Giving advice hasn't changed in 35 years. It is still all about the clients' needs, goals, and aspirations. What are their cashflow needs, liquidity requirements, future capital expenditure needs, attitude to risk, longevity risk, emotional risk?
People starting up are now are part of a larger team. Thirty-five years ago, you could be a one-man band. You didn't have all the associated requirements. To me though, this is simply the evolution of the profession. I'm not saying it's a bad thing it's just the cost of giving advice has skyrocketed.
The good news is that every adviser now has had three or four people working with them which frees them up to just advise. They don't need to worry about the fee disclosure statements, SOAs, or agreements, etc. In that way, advice has become similar to the legal profession - we need a good team around us.
What would you say to those planning a career in financial planning?
It's a great profession if you like helping people and putting the pieces together so people understand the complexities of superannuation and retirement. What their life journey can look like. All we do is remove the complexity and take the worry away.
Consumers don't understand the super rules and they don't need to. They just need someone they can have a rapport with and who can help them understand the path forward.
If there is a downside, it's that you don't see the rewards for your labour in the short term. So younger advisers need to hang in there, and eventually, they will see the strategies they have put in place for their clients come to fruition.
I know that I put people in a better lifestyle and financial position, but it doesn't happen overnight. There's no instant gratification as with other careers.
Helping clients understand that they won't run out of money and can achieve their goals and objectives is rewarding.
As an advisor, you will lose battles along the way with some clients, but you will win the war if you can hang in there for clients in the tough times and hold their hands when everything in their world seems irrational.
There will always be a place for advisers who like helping people and developing long-term relationships. Anyone can invest money that's the easy part. Financial planning is about being a psychologist and understanding your clients, their needs, and their goals.
A solid 80 percent of success in financial planning comes from just turning up and just getting on and doing the job.
The Bill's passing also allows the extension of the cut-off date for advisers who have had at least two unsuccessful attempts to pass the FASEA adviser exam out to September next year. Is this a good idea?
The exams are hardest on people who are 50 years or older. I'm a certified financial planner, have passed the FASEA exam, and have my ticket now until 2026. Does that make me a better planner than the person next door that has done the job for 30 years and failed the exam? Not necessarily.
However, if people keep failing an exam, maybe they should ask themselves if they are in the right industry.
Emotional intelligence goes a long way in most things in life, and a large part of the exam asks ethical and moral questions. And, what's morally right can be different for different people.
The exam has multiple choice questions with four options. Two are easy to pick as incorrect, but the other two can be similar, and there is a fine line between the two. A 60 percent pass rate is probably okay - I suppose they have to have a benchmark.
