We’ve all been concerned about recent news emanating from the Financial Services Royal Commission and the confidence of Australians to receive trustworthy, thoughtful and appropriate financial advice. The behaviour of many corporates and advisers has sometimes resulted in a devastating financial impact on investors.
Sadly, we have witnessed several of these occurrences when assisting and representing clients who have previously been serviced by bank and institutional financial planners.
Many, but not all, of the problems highlighted have stemmed from the vertical integration model that exists within the major banks and institutions. They employ the advisers who the clients deal with. They own the platforms that hosts the clients’ money. They own and manage the funds where the clients’ money is invested.
The conflict of interest is immediately apparent. The adviser will inevitably be incentivised to keep a client’s money within the corporate structure. As an ASIC report from earlier this year found:
While the big institutions’ approved product lists were made up of 21% of in-house products and 79% of external products, when a client’s money was invested, 68% of the time it went to their in-house products.
And what happens when the bank or institution is placed before a client?
Only 25% of the advice given by the big institutions was considered to be compliant by ASIC. 65% was considered non-compliant, with 10% considered non-compliant with significant concerns. The issue of non-compliance partially stemmed from recommending new financial products when there was no demonstration that a client would be better off.
Read the full ASIC article here.
FYG Planners
Our AFSL or financial services licensee, FYG Planners is privately owned and has no connection to any bank or institution. FYG Planners has no inhouse products so there is no bias towards any financial product. The goal of FYG Planners is for the advisers under their AFSL to build their financial planning business with their client being the first priority. An outcome that seems to have continually eluded the banks and institutions as they’ve adhered to their vertically integrated business model.
FYG Planners encourages only the best financial practices and it’s somewhat of a ‘John West’ in the financial planning industry. Every year many financial advice businesses look to change their licensee. Hundreds approach FYG Planners for licensing. Upon scrutiny, FYG rejects around 99% of the financial advice businesses they’re approached by each year.
It’s a select licensee based on ethics, trust, investment philosophy, skill and personality.
The 42 firms under the FYG license meet twice a year to continually update skills and keep abreast of best practices to better serve clients. This isn’t just limited to conferences, FYG has a massive knowledge base available and all firms are committed to supporting their fellow advisers. The overriding goal is providing clients with objective advice and personal solutions, which incorporates a structured and proven approach to investing and a fiduciary-based financial planning and wealth management service.
Finally, FYG management have been proactive in raising the bar for financial advice in Australia and around the world. FYG directors Peter Mancell and Jason Fowler are founding members of the Global Association of Independent Advisers (GAIA), a group of 17 advisory firms based in Australia, NZ , US, UK, Germany, Sweden , Switzerland and Chile, who collectively have an overriding commitment to fiduciary excellence.
The group openly shares global best practices and those ideas flow back into FYG Planners, so advisers can learn from each other and better serve clients.
Financial success is not about being lucky, but about being prudent about creating and preserving wealth. We believe clients should focus on what they do best and consider delegating the rest, but it’s absolutely vital they can find and rely on a trusted adviser to guide their lifestyle, financial and investment decisions.
The recent revelations from the banking royal commission highlight this so clearly.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
