I hope Commissioner Hayne’s recommendations are going to help us all understand that the vast majority of today’s financial advice is not financial advice.
Initial messages from his Royal Commission suggests he is focussed on how we’ve ended up with a banking and financial services industry that few Australians trust and respect.
The issue is that most financial advice is not actually financial advice.
It’s product advice.
And most of us don’t know the difference.
You’re right to think that some of the scandals could be addressed with stronger regulations, and setting better education standards for financial advisers will help, and the marketing departments of some institutions need to be more professional.
However, the fundamental issue is much simpler.
Paid for products, not advice
Banks, credit unions, super funds, insurance companies, investment groups don’t make any money providing financial advice. They make lots of money providing product advice.
Consider the advice our children get from their trusted and respected coach or teacher or the advice we get from our doctor is totally different to the advice from a website, textbook or advert. We understand that.
But we don’t understand that most financial advice today isn’t financial advice.
Yes, we are lucky to have world-class superannuation system – but it comes with financial product advice which is a fundamentally and significantly different to a world-class financial advice system.
Australians don’t know who to trust for honest, transparent, authentic advice for their financial decisions.
With nine of our top twenty companies being financial services groups, their marketing departments don’t go out of their way to inform us that they make very little money and goodwill from providing financial advice like the advice our kids get from good teachers or we get from our doctors.
We need strong banks, mortgage brokers, finance, insurance and investment groups. But we equally need to be made more aware, that we don’t get financial advice from these groups, we get financial product advice.
Changes are needed Mr Hayne to separate professional financial product distribution and professional advice.
Love to hear your thoughts?
About Jim Stackpool
For nearly 30 years Jim has influenced, coached, and consulted to advisory firms across Australia. As founder of Certainty Advice Group, he leads a like-minded team of professional advisory firms seeking to create greater certainty for their clients. As an author, blogger, columnist, and keynote speaker, Jim is regularly called upon for his professional insights into the advice industry. His latest book Seeking Certainty is available now.