Financial advisors RANT!

Do you have a link to your podcast?

 

https://structuring.com.au/podcast/

 

or apple ‎The Structuring Podcast on Apple Podcasts

Note that i haven't recorded the one with the financial planner yet, it might be a few months before recorded and published

 

That's awesome thank you for the link.

 

Well, in my defence, I'm looking at some decent coin and honestly expected them to know more than me. I really should have known better.

Yeah, sick of searching for a needle in a haystack to find one that doesn't want to rip me a new one, so that's what we've decided to do. Absolutely floored that I knew more than the last one, and all the regulars here know that I've only just in the past couple of years been looking into super. They are supposed to be the experts.

 

An initial meeting that was free? The advice would come after they had researched surely

 

Many thanks for your comments/answers @Rolf Latham

One part I'm curious about, was your response to the part-time aspect.

Will we ever see financial advisors be able to work part time? Or does the required insurance mean the numbers don't add up charging an hourly rate, working 2-3 days a week?​

Isnt just the insurance, one has licencee costs, ASIC Funding Levy of $ 3600 pa etc. Our weeny FP biz with 2 staff has compliance and licencee costs of $ 46 000 pa. Sure thats scaleable with more advisers, but thats not the focus of that biz. Do we really want a generalist planner working 2 or 3 days work on OUR stuff............just like a borrower wanting top level advice doesn't want to work with someone that has had 60 % of the experience of a full timer.​

I grasp the financial side, and concur it sounds really tough in that element.

On the 2-3 day a week side, doesn't this make it near impossible for parents with caring duties etc. to perform the role? Just to play devil's advocate, if the best architect, doctor, or barista only worked 2-3 days a week, I would still be very interested in their services. But maybe I'm changing the premise here, because I've assumed they're experienced/older, but I can see how starting in the industry on part-time hours would be a very different situation.

Many thanks

 

No excuses..... "Improvise.. Adapt ...Overcome"..

 

Late last year I spoke to my accountant about my desire to set up a SMSF. I had been with Australian Super but for the past few years had been using the member invest function and had reached the point where needing to invest 20% of my balance in their set options was underperforming what I could do elsewhere. I'd finally reached a point where I was reasonably confident that I could handle my super investment strategy and not stuff it up. I also wanted to be able to pay my income protection insurance premiums from within my super - for a range of reasons. The policy currently sits outside super, it's a legacy policy with great coverage.

Anyway, my accountant was insistent I should speak to a FP about this. I have a rule, if you pay for professional advice you need to act on it. So I do as my accountant says.

The FP or their assistant spent MONTHS stuffing around getting quotes on new insurance policies. I received some shocking emails where they would outline how the options were "less good" than my current insurance but would enable me to retain the Australian Super arrangement. (Not what I wanted to do, because the 20 year compound impact of lower performance, even when fees were taken into account was definitely not worth it.) But they just had insurance blinkers on.

Yes I am going to spend more on fees having a SMSF. No I do not want to change my insurance policy to one which gives less coverage for the same fee. I have 20 years to go until I can access the funds and I am reasonably confident the compound effect of having a SMSF will make these decisions worthwhile.

Anyway. I know there are good FPs out there. The best one I ever met with was more like a coach, probably didn't comply with the rules but had an hourly rate; asked me lots of questions about what my thinking was and helped me tweak and polish the final bit of my general strategy. The rest. I am so much better off for taking matters into my own hands!

 

Try Paul Davies from Jackrison. He is a personal risk specialist with a AFSL license for insurance products only so can provide limited personal advise.

He does receive commissions but it's is a flat percentage to any products to avoid any bias recommendations

 

Yes, the initial meeting was free. The extraction of $$ was to come before anything was actioned.

 

What do you mean an hourly rate? As in come in for an hour meeting, pay a few hundred $ and get some advice? The legislation doesn't allow it unfortunately.

If you mean an hourly rate in terms of receiving a comprehensive plan, this is how a lot of people operate when pricing their initial advice to clients. It's just because of the rules an adviser probably has to spend 20+ hours of total time on a file (including paraplanning, client service etc.) to provide that advice which makes it expensive.

If only we could be like other professions it would be a lot more financially viable for people to see financial advisers - but that will take a long time to get there.

 

ZERO % probability. PI insurance costs have exploded. There are also now 30-40% less planners in the industry after all major quit (closed!!) their FP arms eg banks, major insurance companies etc. Even some that were purchased have wound up.
Simple maths - Compare being a mortgage broker and being a FP. You must ask who would want to be a FP. The compliance burden and the income dont stack up.

ASIC know its a issue but there is no fix. Low cost advice is poor advice and its really not possible and hasnt been for two to three decades to deliver low cost advice services. ASIC also wont actually say it but have framed much super reform over the past 10 years around this view. --- If you are in a industry fund it is low cost and required to be competitively benchmarked on returns. DONT CHANGE. Any adviser who tells you to is certainly enhancing risk and increasing costs. The dirty little secret. Try to find a FP that discloses this.

 

Interesting you should say that. Last year I was speaking to the financial firm I use and this came up in discussion. I was informed that after doing a bottom up analysis, meeting required compliance issues and the rest, the minimum cost worked out at around $4.5k. It's why long-term clients who asked simple questions about Centrelink, and were previously given advice free of charge, are being priced out of it. Valued people but not value clients.

 

The costs aren't as bad for existing clients because you can provide what is called 'further advice' if the basis of advice or client circumstances hasn't changed materially. This means only a record of advice is provided and an entirely new statement of advice doesn't need to be prepared.

 

Thanks for explaining. You're right, as in a world where, X task will take Y hours, and my rate is Z per hour $, do you want to proceed?

Or, hey can we touch base for 2 hours each year to chat, or catch-up if we have a life change/decision, knowing like a lawyer, you bill per hour etc.

Haven't worked through whether this is realistic or feasible, but I'm not in the industry so I'm just curious when I compare it to other industries.

 

Yeah in an ideal world advisers you speak with would have their pricing model based on an element of the time spent to undertake the task, but then also there are other elements to it like funds under advice has to be a component (there is additional risk with higher sums of money) and then also experience (why should an adviser earn less because they are more proficient in answering questions).

The ongoing service piece most advisers will charge you a retainer for that type of arrangement where you would have at least your annual catch up and action items from the catch up, plus there may be additional reviews based on the structure of your portfolio. There are definitely more premium firms which offer more wealth management orientated services.

The added bonus that you get with being on a retainer fee is that your adviser should be available to you any day of the year to assist with queries, they might manage your investment correspondence, complete any implementation work for you, provide educational content and newsletters etc. the list goes on.

 

It depends. If an adviser provides any ongoing services the fee disclosure statement (annual obligation) and other information may explain why a one off fee is not reflective of all the things done. Examples include dealing with copius paperwork and reports and updates for TFNs and banking and more. Deduction notices etc. Its not set and forget. Few advisers will perform services and charge $X x Y hours = $$$$ fee. Most adviser develop a generally all inclusive fee model where they dont break out all the respective time on compliance and admin and ongoing tasks etc. Its then not X hours but a ""unlimited time"" basis perhaps where ongoing discussions and updates and changes to investments / insurance etc may occur for no further cost. Review at a frequent periods. Other things may or may not be extra eg You want to start a pension ?, some issues with super contribution planning etc around a CGT gain etc, downsizer contributions, change fund etc. Seemingly simple things take time and arent visible.

Its not like tax work where a taxpayers says - Hey do my tax and we take X hours and charge $$$$ dollars. Financial advisory work often spans a period of time and the fee basis (eg billed monthly) and most platforms cater to that.