REVEALING: The Royal Commission into the financial services sector held in Melbounre. The Commissioner is Kenneth Hayne The financial services royal commission is illustrating, once again, that the status quo where the majority of financial planners are either employed by, or licensed through, the big banks and AMP is no longer tenable.
It is clear a situation where the product manufacturers are employing planners as their method of product distribution or sales is not an environment where the clients’ interests are put first. Further, the vast majority of financial planners not employed by the banks or the AMP are operating under licenses owned by these big institutions so that the institutions are able to control what products these planners can recommend to clients.
This causes a number of issues. First, the education given to many of these planners cannot help but be skewed towards the provision of advice that includes recommending products from the institution. Second, what is the quality of the products available? Surely, the institutions are not motivated to provide the offering that is best for the client when they don’t have to, because they are not allowing the associated adviser access to all the products in the marketplace. We have seen through the banks’ behaviour that shareholders come first.Possibly the best story that has emerged recentlyin relation to the royal commission was the make up of the government’s advisory board for financial services. This council consisted of the CEOs of the AMP, the Westpac Bank and the Suncorp Group. Incredibly, the council was advising Treasurer Morrison and Minister O’Dwyer that a royal commission into banking and financial services was not necessary.
This royal commission will go on and the fallout will be enormous for the financial services sector. The compliance regime will become even more onerous. We will also see some, if not all, of the big institutions withdraw from the advice space. However, financial advice will remain a critical part of people’s lives, particularly with the ever changing, ever growing superannuation system, but if there are fewer advisers doing an even more time-consuming job, what happens to the price for the consumer?
No doubt customers will start to vote with their feet by leaving the advice businesses owned by the big banks in search of privately owned advisory firms with an offering that has been developed purely to put the clients’ interests first.
Brad Ferguson is the managing director at the Newcastle office of Bell Partners