The financial planning industry in Australia is broken. The recent royal commission into banking has exposed that. It exposed a culture of charging fees without providing any ongoing advice to their clients. This meant that the people who could least afford it were leaking money without even knowing it, mostly from their precious retirement savings. The royal commission exposed a lot of pretty unsavoury practices within financial planning, but that’s not the whole story of why I left.
I have been fortunate enough to have worked with only the very best in the financial planning industry and mostly my opinion of financial planners is that they are good people who provide a very important service that benefits a lot of people. My experience, however, has primarily been in the high net worth space, which services individuals with over $1m in assets or income over $250,000 p.a. In these cases, the businesses are able to charge more and therefore provide an exceptional ongoing service to their clients. All of these businesses have been fee-for-service businesses and therefore any conflict of interest due to commissions has been avoided.
Access & Affordability
The problem that I have with financial planning, however, is that not everyone can afford to access the type of advice and service that is available through these high-net-worth focused businesses. And I get it. The regulation of the industry, while well-intentioned and necessary, has meant that the overheads of running a financial planning business mean businesses need to charge accordingly to stay afloat. Because of this, the only ones prepared to take on the lower end of the advice market was the banks. And the reason that they were able to do this is that rather than earning money from the advice they were giving, they would recommend only their own products, from where they could then take management fees to make up the shortfall. That doesn’t exactly ensure you’re getting the best advice and best products, right!
Reliance on another person
As well as the poor level of advice that people are getting from financial planners, another thing that peeves me about financial planning is that the service is set up to create a reliance on them. Most financial planners want to get a piece of your pie. Firstly, they only want to look after you if you have money and secondly, they want to manage your money so that they can charge you a percentage for what you make. IF you believe that financial planners can provide a return above the market, due to their superior skills in selecting assets and asset managers, this would make sense. But the majority of asset managers in Australia and worldwide are not actually very good at consistently providing a return above that of the overall market. If your financial planner agrees with this and then places you in an index style fund, then why are they charging you at all?
My preference is for people to really understand how to manage their own money and invest it in whatever best aligns to their values. Yes, getting advice can be useful and if you really want to outsource the administration of managing your money then, by all means, a financial planner will make this easier for you. But really understanding and taking responsibility for your own finances will put you in the best position financially.
Finally, one of the things that irks me the most about the financial planning industry is how male-dominated it is. Thankfully more recently there has been an increase in women joining the industry but as a whole, it is still very much run for men, by men. According to the FPA women make up only 20% of the industry as a whole.
Women’s financial empowerment is one of the core driving factors for starting my financial coaching business. I want women to take control and responsibility for their own finances and to not just survive financially but to thrive. The more money that women have, the more freedom we have over our own lives and the more power we have to impact and influence the world for the better. And I truly believe that the only way to heal our world is to shift the balance of masculine and feminine energies to a more even keel.
It should be said, that I think there still is a place for financial planners, depending on how complicated your situation is. If you need a recommendation for one, I know some wonderful, smart and ethical people who I can refer you to. But if you want to take control of your own financial future, I can teach you and guide you to achieving your goals, without a reliance on anyone in the long term. Tell me, what do you think of the financial planning industry? Have you ever got advice? What has your experience been?