Print Post Approved PP255003/00299
Vol.26 No.15 | April 26, 2012 | $6.95 INC GST
The publication for the personal investment professional
www.moneymanagement.com.au
RISK MARKET GROWS: Page 7 | YEAR-END TAX STRATEGIES: Page 14
Best interests put to the test By Benjamin Levy THE tendency of independent selfmanaged super fund (SMSF) clients to treat their financial planner as a consultant rather than a trusted adviser and only seek advice about some issues could cause planners to fail the best interests test. Concerns have been raised among SMSF advisers that independent clients who want total control over their investments and only approach their adviser to sign off on their own ideas could lead to planners failing the best interests test by being unaware of the client’s entire financial situation. ipac south australia superannuation strategist Peter Crump warned that a majority of SMSF clients were not treating their planner as a trusted adviser and were only approaching them to seek certain investment information, leaving the adviser incapable of considering other important issues. “The ‘coach-seeker’ wants only a little
help, they may want to ask for information and take it on board as they see fit, or ask for affirmation of what they’re proposing. In the current and proposed advice environment, that’s fairly difficult,” he said. SMSF advisers cannot engage on a single unique issue like the industry funds, and they need to convince their clients to have a higher level of engagement with their planner, Crump said. Fiducian Financial Services adviser Michael Dale suggested advisers have to make clear to SMSF clients that answers to investment-specific questions fall under scaled advice and don’t take into account the client’s wider financial circumstances. Financial planners must persuade their clients to show them their whole financial situation, Dale said. “We have a duty to give the whole picture, because very often people are not aware of the ramifications of death, or estate planning issues for example,” he said.
Michael Dale Seven out of 10 clients wouldn’t even be suited to an SMSF, Dale said. Some clients use their SMSF to hold only managed investments, in which case they would be better off using a personal
Life and annuities embedded in planner revenue By Mike Taylor
LIFE insurance and annuities have become far bigger parts o f t h e r eve n u e m o d e l fo r financial planners, according to the latest data compiled by Wealth Insights. The data, the result of surveys and focus groups conducted over the past month or so, has confirmed a significant increase in the number of planners advising on life insurance. According to the data, the provision of advice around life insurance has now become an integral part of the offering of almost all planners. The latest Wealth Insights research points to the continuation of a trend which emerged as traditional revenue streams retreated after the outset of the global financial crisis. The data suggests that the changes to the revenue models are unlikely to become embedded in practices, particularly as
Graph:
27%
22% 2011 Advisers sourcing revenue from annuities
Advisers expecting life products to become more important
56%
33% 2012 Source: Wealth Insights
planners seek to accommodate the regulatory environment emerging out of the Government’s Future of Financial Advice changes. Commenting on the data, Wealth Insights managing director Vanessa McMahon said almost all advisers now a d v i s e o n l i fe i n s u r a n c e , which typically accounts for over one-quarter (27 per cent) of planner revenue. McMahon said her company’s research also suggested the trend towards providing
Planning practices not so healthy By Chris Kennedy
Adviser revenue breakdown
Advisers sourcing revenue from life products
super provider instead, Dale said. It’s the responsibility of the adviser to tell clients if they would be better off with another option, he added. Hewison Private Wealth director Andrew Hewison warned that SMSF advisers needed to document if they were providing limited advice to an SMSF client, to cover themselves in case they weren’t being fully informed. “If they specifically state that they only want information on a particular area, then the adviser should provide a limited statement of advice detailing the fact that the advice only related to these areas,” Hewison said. Principal of Financial Services Partners practice Equilibrium Wealth Susan Du Chesne said a significant number of her clients preferred to make their own investment decisions while she provided the strategy behind the investments. The client should make it clear if they want to make their own investment decisions and only want advice around strategy, Du Chesne said.
advice around life was not about to end any time soon. “More than half of all advisers (56 per cent) expect life insurance to become more important to their practices over the next few years,” she said. Commenting on the results, McMahon said she believed the take-up of advice around l i fe i n s u r a n c e wa s b e i n g driven by a number of factors, not the least of which was Continued on page 3
THE average financial planning practice has a lot of room for improvement in major areas such as client communication and succession planning, according to data from financial planning practice consultancy Business Health. Among the key takeouts: seven out of 10 businesses have not surveyed their ‘A’ clients at any time in the past two years, and almost half contact their ‘A’ clients less than 10 times per year. Contact can include not just faceto-face meetings and personal phone calls but emails and client newsletters. Business Health director Terry Bell said the fact so few practices sought feedback from clients was one of the most surprising aspects of the data. “You’ve got a minimal communication program matched with the fact that most practices don’t know what their clients are thinking about them – it’s a double whammy.”
Bell also said it was surprising that 68 per cent of practices did not have a clearly articulated client value proposition. “Every business owner should be able to say ‘this is what I’m doing for the client’. That’s the DNA of a business,” he said. “There is a concern around how advisers are communicating the value of their advice.” More than half of practices still don’t have a succession plan in place – a statistic Bell said had changed very little in the past few years. “You should be prepared to sell even if you’re not looking at selling soon,” he said. Bell added that succession was a big issue because many advisers were approaching retirement. He said that when one looked at the mergers and aggregation in the sector, there were younger advisers who would come through who might be more qualified and more accepting of a new regime. The data also showed 35 per cent of practices do not segment Continued on page 3