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Yours truly took a few days of R&R in Fiji but before I went I noted quite a bit of press on the subject of Financial Advisers. I also noted that there was much misinformation being thrown about by adviser industry leaders and I thought it useful to air some of my experiences in the field – which I believe has some relevance. And it is one based on experience.
Let me explain. About 15 years ago I stepped off the cooperate executive ladder and I think on a high so I was looking for a role that was more fulfilling – perhaps for others but also for myself. I had already been investing on the sharemarket but I would not say in such a brilliant manner. So I thought I would do financial planning. I certainly had an excellent grasp of financials and how to turn a badly hemorrhaging business into a thriving profitable one. I had a degree in Commerce and good financial strategic savvy. So I thought I had a reasonable foundation for training in the field.
A large financial advising firm offered me a job and said they would put me through a course. I declined their offer to pay for the course as I wanted to feel unattached, no strings etc., - if it ultimately happened I had a different view of the world than theirs.
The course took only two weeks full time. Intensive, but also doing the course were candidates – sponsored by companies – that had in my view little useful financial experience. Yet within weeks of graduation they were writing plans, recommending strategies and products, collecting fees. Plans were written from a template. As planners we fitted an impressive model. We were very well dressed, very courteous and personable, polished and above all very plausible.
There was a standard model in everything we did – from the template through to the range of products available. These were a stock standard list. Even though there may be other superior product options we were confined to the list. But the upfront fees – 5-6% of funds invested or exit fees at sometimes similar levels – or trailing commissions - were often less attractive than the stock standard list.
There was a so-called safety net or cross check in the firms system in that if you were a new planner then a successful, experienced planner would vet what you had done. But these ‘checkers’ were successful at maximizing the model – which was not necessarily in the clients absolute best interest.
I lasted only a few weeks and left very disillusioned. One aspect of this dissatisfaction in being a financial planner was that there was not a lot of scope for what I thought was providing clever strategic advice. It was a dispensary.
I am not saying that there was misleading of clients but I just felt that the advice - for some of the above reasons – fell a long way short of what it could have been.
I am not dumping on the profession 15 years down the track. And I am not merely writing history which anyone can do. Since I left the industry after my short sojourn there has been considerable legislation.
In my view much of this has been micro. The legislators and monitoring bodies can’t distinguish between the woods and the trees. They are focussed on tree protection but yet forests are wiped out. We have seen recent collapses of sizable firms, taking the hard earned savings of hundreds of investors with them. In my view legislation has failed.
Why am I saying all this? Because it is going to happen again and again and again.
It reminds me of one’s own health. GPs and others do their absolute best I am sure, but I reckon I need to know a certain minimum about my health to be able to manage my own health – and to manage my doctor. Good as the medical profession might be it is still caveat emptor.
And so it is with ones investments. If you use advisers at least know enough to manage them.
Enjoy the ride
Tom Scollon
Chief Analyst |