Speaking recently as part of After Hours with Vanessa Stoykov and Orbis Investments head of institutional business Jason Ciccolallo, Hostplus CIO Sam Sicilia discussed what the outcomes of the Royal Commission mean for financial advice.
During the interview, Sicilia said that “it’s hard to come to the conclusion that the Royal Commission came up with anything other than the need to act in the best interests of your clients, your members and financial planning practices.”
He noted that, despite the controversies surrounding the Commission, there are “lots of advisers” who are “very good” and committed to acting in clients’ best interests.
“They get up every day to do that for their clients,” he continued. “They’re not the target for the criticism that came out of the Royal Commission. Where advice was provided that was not in a client’s best interest [inside or outside of super], it was often tilted because it was in the best interests of the employer, and that has to stop. That’s pretty simple.”
Over time, Sicilia sees the “power” in financial services shifting to the consumer, which will have a natural impact on the financial advisers who are able to continue writing business.
He explained: “The power is shifting from the provider to the consumer. We’ve seen that again and again in other industries, so what would make you think the finance industry or superannuation is immune from that force?”
As to why it’s taken the industry up until this point for that power shift to occur, Sicilia said: “When superannuation balances are low, nobody really pays a lot of attention. And when they start getting substantial, all of a sudden people take more interest. It’s a natural cause of events.”
“So as those balances get bigger,” he added, “and as the next generation comes in and learns from the generation before it, the role of financial planners will be entrenched. The good financial planners will survive, the bad ones will not. It’s Darwinism, if you like. That’s the natural cause of events.”
Describing this process as a self-correcting mechanism, Sicilia concluded: “With the power shifting to the individual, the individual makes decisions on their own, or they will seek advice. So whether you’re a financial adviser or a superannuation, being trusted will be the key to whom they deal with.”
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