There have been some well-documented, high profile cases of the financial planning arms of Big 4 Banks (eg NAB and CBA) undertaking highly inappropriate behaviour, resulting in sackings and compensation being paid to hundreds of clients who received poor advice.
While I believe the industry definitely needs a shake-up, we can’t tar all advisers with the same brush.
Here are a couple of financial planning myths that I’d like to address.
MYTH: All financial planners are crooks trying to make a profit at your expense
There are no doubt some rogue advisers operating out there – although I’d argue it’s more a case of poor processes and procedures which have allowed these advisers to run rampant for so long. This has led to inadequate or poor strategic advice, and in some cases doctoring of client files to cover up poor practices. This is absolutely reprehensible and unacceptable.
However I know plenty of financial advisers (and am a qualified financial adviser myself), and from my experience most are hard-working people who absolutely have the client’s interest at heart. These are people who genuinely get a kick out of helping people prepare a long term plan to build a secure financial future for their family.
While the inappropriate practices seen at NAB and CBA are unacceptable, I’m a passionate advocate for increasing financial literacy – as there are certain key aspects that people need to be aware of:
- There’s no such thing as a risk-free investment – so you need to be clear on your level of risk aversion (this will determine the type of investments you should undertake)
- If you’re not prepared to lose something, DON’T INVEST (But remember – DOING NOTHING is a form of risk)
MYTH: Financial planners work on commissions so they won’t recommend what’s best for you, just what deal gives them the best commission
Unfortunately, it’s a human behaviour fact that if people are incentivised to operate a certain way, chances are some will (regardless of the consequences). Whenever commissions are offered, which are largely hidden from the customer, it can affect the advice offered.
Thankfully, one of the most significant changes to the industry in recent times is the move to ‘fee for service’.
MYTH: DIY wealth creation
Some people elect to have a crack at doing their own financial planning. That’s all well and good… but the fact is, not all of us are equipped with the skills to successfully manage our family’s financial future. You wouldn’t do your own wiring or plumbing… why risk your family’s financial future by doing it yourself? You should always seek an expert’s advice and experience before taking any significant financial action.
MYTH: Advisers will just push their own products
Many of the high profile (basket) cases lately have a common theme – advisers working for the bank and not for you! If aligned to a financial institution, the adviser will of course push that institution’s products – not necessarily the right product for you.
Always look for an independently owned advisor – someone who isn’t tied to a financial institution’s products. They’re able to scour the market to find the absolute right product for you – regardless of whose product it is.
MYTH: “The messiah complex” – Property
The great Australian dream to own our home has been on performance enhancing peptides over the last decade. But while property is a great asset to own – and I’m a huge advocate for it – it’s not the only asset you should own. One of the oldest but truest financial planning fundamentals is “Don’t put all your eggs in one basket”. Diversify your assets, and also where you own those assets: property, shares and term deposits, both in and outside of super.
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