The advice model is seriously flawed so take care when you’re looking for financial guidance
‘You need to see a planner” is one of the mantras of the financial services industry. We are led to believe that planners can help us reach our financial goals and make us money.
Some 2.3 million Australians visited a financial planner in 2016. They sought advice about retirement (about 35%), loans and investments (25%), a self-managed super fund (20%), tax (10%) and estate planning (10%).
But rather than building wealth, too many Australians have had their wealth gouged by poor financial planner practices. The Hayne royal commission into misconduct in financial services uncovered jaw-dropping evidence that going to a financial planner hasn’t helped people; instead it has been to the detriment of hundreds of thousands of Australians.
It revealed that people were overcharged, received poor advice, paid for advice they never received and were pushed into products that hurt their ability to reach their goals. Planners were reluctant to change under performing investments because that would interfere with their “grandfathered” trailing commissions. In some cases people were financially devastated.
What went so wrong? The problem has been with the “vertical integration” model of the big financial institutions – the big four banks and AMP. They have run their own investments and insurance as well as owning the product distribution through financial planners. These five own the bulk of all financial planning businesses in Australia although this situation is set to change. Often consumers don’t even know that their financial planner is tied to a big bank or AMP as there are lots of confusing brands.
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