Media Release: New rules on intra-fund advice set to provide more accessible and affordable financial advice to all Australians

Media Release by ISN  shows the new rules issued by the Government on the delivery of ‘intra-fund’ advice will make financial advice more accessible and more affordable for ordinary Australians.

Read the Media Release here.

New rules on intra-fund advice set to provide more accessible and affordable financial advice to all Australians

Media Release by ISN  shows the new rules issued by the Government on the delivery of ‘intra-fund’ advice will make financial advice more accessible and more affordable for ordinary Australians.

Read the Media Release here.

Media Release: ISN applauds new ASIC financial planning tools

In a media release today, Industry Super Network congratulates the Australian Securities and Investments Commission (ASIC) on the launch of its new Financial Decisions at Retirement guide and improved online calculator, MoneySmart Retirement Planner. ISN believes the tools will greatly increase Australians’ access to financial information and education on superannuation and how they can best save for their retirement.

Read the Media Release here.

ISN applauds new ASIC financial planning tools

In a media release today, Industry Super Network congratulates the Australian Securities and Investments Commission (ASIC) on the launch of its new Financial Decisions at Retirement guide and improved online calculator, MoneySmart Retirement Planner. ISN believes the tools will greatly increase Australians’ access to financial information and education on superannuation and how they can best save for their retirement.

Read the Media Release here.

Will financial planners put up a “Not for Sale” sign?

Last month, a number of Australian pharmacists fought hard for the integrity of their profession by rejecting a deal that would compel them to recommend particular Blackmore’s products. In this opinion piece, ISN Chief Executive, David Whiteley asks why the financial planning industry can’t do the same.

Last month, the Pharmacy Guild of Australia struck a deal with Blackmores that would allow Guild members’ computer systems to prompt pharmacists to recommend Blackmores dietary supplements with specific prescription medications.

The Australian Medical Association (AMA) and doctors quickly voiced their opposition to the deal, saying that it was simply an opportunity for up-selling and that the products being promoted as a complement to the prescription drugs were not supported by any scientific evidence. They also argued that there was no place for commercial interference in the clinical decision making of pharmacists and that the deal would compromise the current independence of the system.

Many pharmacists also resisted the deal, saying that their advice was “not for sale” (despite the fact that they could have benefited from the deal). In terms of standing up for the integrity of one’s profession, this is laudable. And in the face of such fierce opposition, guess what? The Guild rescinded on the deal a few weeks later.

What a stark contrast with the lobbying of the financial planning industry.

Financial planners face an uphill battle convincing the community that they are a genuine profession, one to be compared to the medical and legal professions. The difference in their approach to perceived or actual conflicts of interest is the reason why.

While doctors and pharmacists campaigned against a proposal that could create a real or perceived conflict of interest, financial planners have lobbied to retain conflicted forms of remuneration, such as sales commissions on insurance and sales commission-like ongoing asset-based fees for advice. They also lobbied against the proposed opt-in reforms that will require them to get permission from clients every two years to continue to charge fees for ongoing financial advice.

In fact, the financial planning industry even rejects the Government’s proposal that financial planners be required to disclose the fees they are charging clients. For an industry that claims it has the same level of integrity and professionalism as doctors, pilots and lawyers, this is extraordinary.

A report released by the Australian Securities & Investments Commission in September, Report 251: Review of financial advice industry practice, revealed that the advice provided by financial planners is tainted with conflicts of interest. The regulator concluded that nearly 90% of licensee (i.e. dealer group) remuneration is paid by product providers in the form of ongoing commissions, up-front commissions, and volume rebates or manager fee rebates. Only 10% is received in the form of client fees. (The report regards asset based fees for advice as conflicted remuneration).

The report also found that 3.1 million Australians, or two thirds of all of the clients of the largest 20 financial planning firms, are not ‘active’ clients. The inference here is that these clients are continuing to pay ongoing advice fees but are not actively engaged with their planner. This inference is backed up by data from Roy Morgan and a survey by Radar Results. What is interesting is that when research houses survey financial planners, institutions or consumers, eerily similar results come through. Between two thirds and three quarters of Australians who are paying for ongoing financial advice are not receiving it.

The facts set forth in the report support the position long held by ISN that ongoing asset-based fees enable planners and dealer groups to earn ‘passive’ income at the expense of consumers and therefore financial planners should be required to regularly gain the approval of their clients to continue to charge such fees for financial advice. The alternative (preferred by ISN) is to ban asset-based fees altogether. After all, they give rise to the same serious conflicts of interest as sales commissions.

The ASIC report has pulled back the curtain to reveal the extent to which the structure of the financial planning industry impedes planners from being able to act in the best interests of their clients.  This is why the Future of Financial Advice reforms are essential to restructure the industry to serve the interests of clients, who are relying on advisers to help them save for retirement, build wealth, and otherwise manage their financial lives.

ISN believes that reforming the financial advice industry should, at the very least, reverse the current ratio – so that 90% of income is generated by client fees and 10% by neutral product payments.

Financial planners also need to fight for the integrity of their own industry so that they can stand up and say, just like the pharmacists: “We’re not for sale”.