Skip to content
Australian Financial Planner confusion

Australian Financial Planner confusion

The 2011 Superannuation and Wealth Management in Australia report from Roy Morgan Research paints an alarming picture of the confusion within the industry in Australia.

Most financial planners are either working for one of the big eight fund managers or are aligned to them.  And therefore, to no one’s surprise surely, financial planners are funnelling most clients’ money into their own company’s products.

This would be fine were it not for the fact that a substantial proportion of the clients are unaware of this bias, as some financial planner firms are branded differently from the institution they are owned by or aligned with.

This cannot be good for the industry and is most certainly not in the interest of the consumer.  Australia’s “Future of Financial Advice” reforms, the Aussie equivalent of RDR, does not even tackle this issue.  It restricts itself to trying to remove commission bias by making fee-only payment for advice compulsory.  However, this will only increase the feeling among consumers that they are being given independent advice, which is patently not the case.

According to the Roy Morgan survey, even the best performer – ANZ Group– is guiding 46.2% of client money into it’s own products while AMP Group takes the prize with 81.3%.

Some of this is undoubtedly due to the fact that planners tend to use the platforms of their associated provider, which increases the likelihood of a suitable product match coming from them.  And in line with regulation, most Financial Planners do indicate their links to providers, albeit some more obviously than others.

Nevertheless, the lack of clarity is a danger to the credibility of the industry and could damage consumer confidence sharply in the event of a financial scandal.  This would result in all providers ending up tarred with the one brush.

When the Australian Government comes to review the Future of Financial Advice regulations, it would be better for both consumers and providers if simple, but effective, regulations are put in place to make such links obvious to the customer so that the customer clearly knows whether the advice is being given by a financial planner working for or aligned with a product provider or whether the advice comes from a truly independent perspective.

This way, the consumer would know what they were getting – always a key point in ensuring confidence in the market.  And if you are seeking to get people to provide for themselves by purchasing more financial products, then confidence is king.

Tom Murray

Share these Insights

Adversity breeds innovation

Steve Jobs gets a lot of credit for re-imagining computing, for making us mobile, and for putting technology in our…
Read More

Revival of Insurance: Accelerating Growth and Market Leadership with New Products and Business Models

Spring.  The season for rebirth.  Revival.  Rejuvenation.  We see the first colors – yellow daffodils, green grass, purple hyacinths and…
Read More

Customer Demands Drive the Need for an Integrated Experience for Disability Insurance and Absence Management

The script has played out time and time again. A company rolls out a coveted new offering, meeting a need…
Read More