Banks should exit the Financial Planning business

What an extraordinary week at the Banking Royal Commission. AMP’s reputation has been shredded when the head of advice Jack Regan admitted that the financial services giant blatantly lied to ASIC 20 times and that they continued to charge advice fees for orphaned clients. Then it was CBA’s turn when the commissioner accused them of being the “Gold Medalist” of taking fees for no service. I could go on, however, I am sure most of you are following the story. No wonder the general public have reduced faith in the financial planning industry.

Seventeen years ago, Scott, Frances & I came to the conclusion that the conflict of interest in the providers of financial products, controlling an army of effectively product salespeople, was completely conflicted, and in our opinion not in the best interest of clients. So we made a huge decision, and to be quite frank a scary one at the time, to apply for our own financial services license and to leave our AMP owned dealer Hillross.

We were thrilled that our Licensee was awarded to us in what seemed record time. What came next from AMP/Hillross was reminiscent of the Eagles song ‘you can check out any time you like but you can never leave’. I won’t go into details, but we found ourselves in a David and Goliath fight in NSW Courts fighting for our business and clients. I am very happy, and I am sure our clients at the time were also, that we won the right to allow our clients to choose to stay with Alman’s or be allocated to another adviser. 99% of clients chose to continue our journey together.

So it seems our stance on this issue and decision to break the conflict of product and advice has been vindicated this week.

Today National MP’s are eyeing structural change according to the Sydney Morning Herald. Barnaby Joyce is quoted as arguing the banks “should seriously consider whether they should be in the financial planning business at all.” Allan Fels, the former ACCC Chair, told Fairfax Media that he endorsed the forced separation of financial business from the large financial institutions. All I can say is watch this space.

Stephen Lowry CFP, DFP, FAIM, is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.

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