My considered response to the RC (and what I think needs to happen…)

Hi ,

Steve here.

I’ve been a bit quiet lately…

Now before you ‘jump with joy’ or start ‘fist pumping’ the closest person next to you… 🙂 , I’ve actually taken some of my own advice and decided to ‘hide in a cave’ for a while….

Not because I wanted to go all ‘cave man’… but I thought it was important for me to lay low for a while and have a really good think about what the future of financial advice might look like going forward…

So I’ve literally been on ‘marketing & social media blackout’ for the past couple of months while I CONTEMPLATE & DIGEST what’s been happening.

I’m trying – but it’s very hard to stay positive…

My Thoughts…

Now, I recognise the importance of the Royal Commission process and that there needed to be some changes in some of the ways that some people acted in the past and some of the unacceptable behavior from a small group of people.

I think everyone can acknowledge that… And frankly, I do agree with many of the recommendations handed down.

But the primary focus of the royal commission was supposed be have been to restore trust in the banking & financial system and come up with ways to make obtaining quality financial advice affordable, efficient and accessible by more Australians.

And in that regard, I think the RC has failed dismally!

In fact, I believe that what is a more likely outcome is further mistrust of the financial sector from the public, less people seeking (or being able to afford) financial advice when they need it and a community reluctant to ask for help with their finances – creating a negative ‘knock-on effect’.

More strain on the government as people rely on assistance to cover any shortfall, and a massive ‘under-insurance’ problem as less and less are properly advised around implementing or keeping their important insurance cover.

Not to mention a large number of financial planners (and their staff) who may exit the industry due to the onerous education requirements placed on them simply to maintain their license… Good, honest, ethical, experienced, hard working people whose futures are under direct threat and options limited. It’s a disgrace!

The big banks have escaped largely unscathed.

Vertical integration – which was at the forefront of issues plaguing the industry – has been pretty much left untouched.

And the ‘shake up’ that was supposed to have a substantial positive impact on the industry and consumers, has left a raft of small business owners with business valuations which have plummeted, additional layers of compliance (which will only add to the administration burden and therefore the cost to serve…), and an entire profession scratching it’s head wondering what happened and how they could get it so wrong…!

The New Normal…

There is a lot of detail in the report… I’m not going to regurgitate it all here…

Unfortunately, most of the general public will NOT read or understand that detail and instead form their opinion/s based on sensational headlines and the commentary they read in the media… That I can say with confidence.

So instead, what I am going to do is talk about the OPPORTUNITIES for financial planners and a few things that need to be considered in the provision of quality advice going forward.

See, this royal commission should never have even been an issue…

Commissioner Hayne touched on the ‘six norms’ of conduct in his interim report. And seriously, these shouldn’t even be a thing…

1. Obey the law
2. Do not mislead or deceive
3. Act fairly
4. Provide services that are fit for purpose
5. Deliver services with reasonable care and skill and
6. When acting for another, act in the best interests of the other.

For me personally, I don’t understand how Best Interest Duty (BID) even needs to be legislated? But again, it’s the actions and culture of a ‘few’ that have tarnished an entire industry and we are now left to pick up the pieces. I think it is impossible to legislate for honesty & ethics.

But from adversity, comes opportunity…!

Transparency. Open, honest communication. Fairness. Diligence.

These are the ‘new normal’.

Structured advice programs and choices for your clients so that they can control how & when they interact, what level of advice they receive and how much they pay…

Gone are the days where you can get free money – and not service your clients. It sounds basic & simple, but now more than ever, you need to have great relationships with clients and position the importance of your annual review program. Make it a non-negotiable.

As a financial advice community, we all need to rebuild trust!

Collectively, that trust needs to be rebuilt based on ACTIONS and VALUE.

Not what we say – but what we DO!

We need our clients to see – really see – the great work that we do, how it improves their financial position and what it would ‘cost’ them if they didn’t receive that advice…

If you don’t have a proper Value Proposition in place by now and know how to articulate it well, then, I think you’ll find it very difficult to survive in the new world…

You need to build your business on 3 Foundations…

People – you need to be very specific in the type of prospects that you attract and build a business on the right people with problems that you can help with. Solutions & Results will be the currency of the future…

Purpose – Never before has it been so important to show leadership and be THE person that people look to for advice & solutions. Have a voice. Create connection. People are looking to be lead – so it’s up to you to be that person. Lead by example.

Profit – NO – it’s not a ‘dirty word’. Especially if you have your clients’ best interest at heart at all times. In fact, that’s the only way a financial planning business of the future will survive. However, you are in a commercial business. Streamline, automate, outsource, delegate, eliminate on the back end, and create systems to consistently attract & convert the right people at the front.

Looking forward…

This is a fantastic opportunity to re-design your business and create the business of the future. You have the chance to re-build it – your way!

Your staff members will leave…

Your clients will move on…

But there is only one person that will remain… YOU!

You are the only constant in your business.

It’s time to create a business that is designed your way.

For what YOU want.

So that you can focus on the things you are good at.

That you are passionate about

What you are meant to be doing.

High-end financial advice work for quality clients and a focus on income producing activities.

You have the chance to build a business around people you WANT to work with and who have a capacity to pay for your quality advice…

Too many financial planners believe that people are unwilling to pay for quality financial advice.

That has NOT been my experience.

With a crystal clear value proposition, a process/mechanism that has clients ‘buy-in’ to their needs and the solutions you can provide, clearly defined advice packages available to suit all your clients needs (low, medium, high touch options so they feel like they have a choice and you have a solution to suit most price brackets) and smart tools to help you and make it easy for you to deliver, what you’ll find is that your clients DO NOT expect you to work for free. Most (not all) but most people expect to pay for services and value received. The emphasis here is on the ‘value received’.

In summary…

Unfortunately, I believe that the RC has ‘missed the mark’ and again we – as an industry – are faced with the un-intended consequences of legislators & political groups with no real intrinsic knowledge of how the financial advice space works in practice – who have tried to wield the axe, but as always, the blame has overlooked big business and landed directly on the doorstep of hard working, small business owners and individuals.

The finance/mortgage sector is now a political ‘time bomb’. By removal of commissions to mortgage brokers means that people who can afford that service – will pay for it, and those who cannot, will go to the banks due to reduced competition (and probably still get charged brokerage…).

It has played into the banks hands beautifully. Lack of competition and a monopoly situation will lead to higher costs, inferior products, minimal transparency and importantly, a lack of advice on things like structure, best rates, payment options etc.

Ultimately, another negative outcome from the RC.

Average, hard working, middle class Australians will suffer in the long run.

But alas, while many aspects of the report & recommendations were disappointing, I’m left with an overwhelming sense of opportunity & optimism.

Financial planners are resilient.

We’ve endured things like this before.

It is another opportunity to improve & grow.

Replace greed with best interest.

Replace cost with value.

Replace customers with relationships.

Hopefully the behavior of the big institutions has now been exposed and they too will amend their practices and fall into line with community expectations (or at least enforcement of penalties to act as a deterrent and chastise those who continue to work outside community expectations…) and make financial advice more accessible & affordable to more Australians.

Wasn’t that what the royal commission was all about in the first place…?

Choose your new model wisely.

Take good care of each other.

Steve