Hi,
Today I received some junk mail pertaining to our accounting practice.
It was from a firm of financial planners who (in their advertising) pride themselves on “looking after your financial life.”
Well…
The flyer, which was for recommending leasing services, came with a with comps slip that reads:
Accountants are earning $100,000 pa from offering Leasing and Lending services to their clients
Are you missing out?
To see how easy it can be, call us on…”
To me this illustrates the two-faced approach to financial planning that’s seeing investors paying advisers for losing money.
Nuts. It’s nuts!
It’s essential to be the one in control. My experience is that financial planning is more about commissions than helping people create wealth. What are your thoughts?
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
That’s pretty much the same conclusion that Choice Magazine drew when they examined financial planners a few months back.
They found that many planners recommended investments that earned them the most commission, were too risky for the client’s needs or were unnecessary (faster repayment of the mortgage and elimination of consumer debts might have been a better approach).
The article is well worth reading and got quite a bit of media attention at the time.
Hi folks,
Whilst I complete my University degree, I work part-time as an IT Support Officer at AMP’s West Perth offices. (I’m assuming everyone knows who AMP is) As someone who has taken a very active interest in their personal finances/creating wealth through investments etc. I’ve found this to be a great opportunity in this respect because I get to talk with Financial planners and other financial professionals.
One of the interesting things I’ve noticed with the financial plans that area created by these planners are that whilst they are usually somewhere in the vicinity of about 40 pages or so, the majority of those pages are standard ‘templated’ kind of pages with regular financial waffle. From what I have observed (without reading the plans of course) is that a very small part of the plans are actually specifically tailored to the individual(s).
Now I’m not making any sweeping generalisations that all financial plans are the same, this is just what I’ve noticed in my time working with AMP, which incidently, was rated as one of the worst in the Choice review if I remember correctly. I know this doesnt relate to the issue of commissions, but I think it does raise a good issue with Financial Planning firms moving towards a ‘mass production’ kind of approach to planning, which involves very little specific tailoring to an individiuals circumstances.
On a side note, I should also say that the people I work with a extremely nice and good friends, and I’m not trying top badmouth AMP in any way, just making some comments on what I’ve observed. [
]Regards,
Brett []“Even if you’re on the right track you’ll get run over if you just sit there.”
G’day,
Like Brett, I also work in an IT role with one of the “big 4” banks. Part of my role includes the IT support of the network of Financial Planners attached to the bank.
The “plans” produced by the software ( used by these Finacial Planners ) is also mostly “templates” as Brett mentioned. However, the software takes this concept one step further. Based on the results of some simple “risk analysis” questions ( about 10 questions ), the software also selects the pre-determined funds to invest in !! Also, the way it calculates the amount of “available” cash you have, is based purely on the amount of equity you have in your PPOR ( principle place of residence ).
End of story. No individual tailoring, no assesing whether you can actually afford the repayments – purely pre-programmed outcomes. Frightening.
Having said that, there are a handful of Financial Planners attached to the bank who actually do go out of their way to genuinely create a real plan for their clients, but this would literally be less than 5% of the entire financial planning staff. There are very helpful planners out there – but they are rare.
Like Brett, I too have had some very interesting discussions about money and planning, investing for the futer in both shares and property etc. But it is scary to think that of the BILLIONS of dollars that these planners have under management, most is there because “the computer said so”.
If you do see a planner – ask heaps and heaps of questions before giving them your money !!
BDM
Hi everyone,
A very interesting topic. I have visited with financial planners in the past and a member of my family is also a FP. Two observations I have made in relation to Steves thoughts are:
1. They know alot about the ‘administrative rules’ governing their industry, (the funds, the paperwork, the forms, indemnity clauses etc) but they know very little about investment, the dynamics how to make money (except for themselves). They virtually ignore property, and focus soley on share based managed funds. They know the funds (brands) and historical returns, but usually don’t understand the funds strategies, the people etc, preferring to rely on ratings agency recommendations as their main means of evaluating the funds suitability. My view is they tend to follow the herd, rather than proactively seeking out the next growth opportunity based on their research of the world / business / consumer trends etc.
2. They tend to be commission and incentive focused. They get paid upfront and get a commission trailer on the funds under management in many cases. So whether the fund performs or not they still get paid unlike the contributor. As others have pointed out, most of the work they do is based on editing proforma ‘plans’ based on computer generated information so they really do little thinking about the actual value of the investment decisions. An example of the incentives on offer – say a planner put $X amount of business through a certain wholesale group, then they will be entitled to a trip to an exotic island location or something like that. I’d hate to think that my money was to be allocated to a fund based on the need to make up the numbers to secure the FP’s next holiday!Anyway suffice to say I have never had a great degree of confidence in the PF industry. I would not like to have them manage my money. In my view, structually there is no incentive for them to work hard for their money or for their clients.
“The power of accurate observation is commonly called cynicism by those who have not got it” – George Bernard Shaw
Hi Steve & All,
We have had experience with three financial planners in just over three years.
One crunched the figures and got us into a negative geared property at Coomera that is only now starting to go ok. Didn’t research for ourselves.
The next one (18 months ago) said they could manage our affairs for round $8000, but that we were not in a good position at all and should look at shares etc. At this time we had the above neg. property and PPOR worth about $300k. Didn’t go back after this initial visit.
The third one from Westpac (15 months ago) knew nothing at all about property, focused on shares, managed funds & life insurance that he said we needed for round $3000pa, (can pay off a couple of cheapies for that!) with large trailing commission which was not disclosed until we found it in the paper work. When we cancelled, having decided on a substantially lesser amount of policy of OUR choice and for our needs, he would not return any phone calls and we had to sort out the mess directly with the bank by phone and fax.
I would never consider another financial adviser as I believe the ones we saw had only their own interest in mind. Since being ‘in a bad way’ 18 months ago we have learnt so much and now have 10 properties, most cash flow positive, 2 settling today.
So from experience, I would say the same as others, research research research for yourself, do your due diligence. There is nothing that you can’t do and you are in control of your own financial affairs.
Appreciate the great input on this site.
Anna
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