The article talks about the recent scandal in the financial planning industry arising from advice given from Commonwealth Bank financial planners. I have to be careful what I say here because the CBA has a lot more money to spend on expensive lawyers than me, but we'll see how we go. And if any CBA representatives are reading this, "these aren't the droids you are looking for".
The article talks about the lack of education and work experience required to become a financial adviser. Hallelujah!! I've been saying this for years. The government keeps trying to improve the industry with constant reforms around disclosure etc, but they continually fail to miss the point. Increasing education requirements plus including some workplace work experience/traineeship requirement etc will without a doubt improve the industry, why? Because it will increase the knowledge of the financial advisers resulting in better advice, obviously, but more importantly it'll weed out the dodgy/fly by nighters who won't choose financial planning as a get rich quick industry as they don't want to invest the years to become one. They'll move into something else, snake oil salesman or something else where they can sell and make a quick dollar.
Doctors are always up on lists of most trustworthy professions because they need to commit so much time into education then on the job training, that they all passionately want to be one and then once they are a doctor, they do everything they can to be the best they can be.
Then onto the next point and that is financial planning within the banks. Firstly, the banks are a great place for budding financial advisers who have very little financial planning education and no workplace training to get a job straight in as a financial adviser, because the banks don't care. There is no KPI's in the bank that measure successful client outcomes. Most small financial planning firms won't hire an adviser without experience, they'll often hire those as paraplanners, who write the plans for the financial advisers so they get on the job experience and knowledge before being a financial adviser.. To start straight off as a financial adviser, then banks are a good place to start. Secondly, when the financial advice is coming from the place that owns the products that are being recommended, there is a massive conflict of interest there. I'm calling dingo on that. Dingo Dingo Dingo.
If we look at the failings in the financial advice industry, they all relate to either a lack of education and/or a conflict of interest. Westpoint/agricultural schemes etc - massive commissions created a conflict of interest. Storm financial - were paid a % of funds invested, so they had a massive conflict to ensure massive amounts were invested and the Commonwealth Bank scandal, well, take your pick, was it lack of knowledge and education or a conflict of interest in the advice coming from a product provider. I'll bet a combination of both.
If we ensure all advisers have a strong educational background, plus a minimum traineeship type program, you'll ensure advisers know how to give good advice. Then if you remove all conflicts of interest, mainly product ownership and ties, then the advisers will be able to solely work in the clients interests. Adding 5 more pages of disclosure to an already large document that clients already don't read doesn't help anything.
If you would like to watch the Four Corners report into the CBA financial planning scandal, it can be view here. It was very frustrating for me to watch.
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