It might be bad form, but I’ve never read the author I’ve pulled the quote from to begin this article.
Yet I truly doubt I’ve missed Upton Sinclair’s point when I read the following line: “It’s difficult to get a man to understand something when his salary depends on him not understanding it.”
I’ve seen this quote attached to people and industries accused of having conflicts of interest. And unfortunately, it couldn’t be more appropriate when it comes to financial planning. That really doesn’t have to be defended because we all know it’s true. Conflicts of interest have always played a part in the past and clearly they will continue to exist in the future.
I’ll ignore the politics of FOFA, but if you’ve been paying attention as the recent discussion over FOFA rollbacks has played out in the media, you would have noticed much of the talk referenced lobbying by the big institutions that have control of 80 per cent of the ‘advice’ industry. The head of one bank’s wealth management divisions even publicly waded into the discussion to throw his weight behind the rollback.
Leverage your point of difference
It’s tough to wipe that ‘self-interest’ tag off when it hits an industry as a whole. However, if you’re a professional adviser working in the independent space, the institutions may have just given you a free shot at clearly delineating the difference between ‘you and them’.
The advent of FOFA now provides a public reference point to use when explaining to clients (and potential clients) how you’re one of the few who actually want to put their interests first and act as a true fiduciary.
Frankly, I found FOFA to be a huge regulatory and cost burden but importantly there were some benefits to ensure clients came first. Watering down the duty to put clients’ interests first means the rent-seekers from the big institutions will ensure client interests will come second to theirs.
The outing of rogue planners at the big institutions has only highlighted the sales-based cultures that still exist within the industry. And despite the public reassurances that the rogues have been cracked down upon and new compliance risk management procedures are in place, why were the institutions still lobbying to have the FOFA ‘best interest’ clause removed?
Probably so there’s no issue with their vertical integration and clients’ portfolios can be jammed full of that institution’s own funds.
Whatever the case, if you’re a professional adviser working in the independent space, the institutions publicly showing their hand should be considered a free kick for you. You’re acting in your clients’ best interests and you’ll be acting in the best interests of prospective clients, while many others aren’t. Make sure everyone understands that.
Peter is the managing director of FYG Planners. He is a Certified Financial Planner (CFP) who started in the financial services industry in 1981. A specialist in business development, Peter’s role primarily focuses on providing strategic planning advice to FYG Planners on its future direction, improving the technical skill base of the group, identifying business growth opportunities and services that can be developed for use by FYG Planners Advisers.
