Module 1 Crucial Concepts What it means to be a practising member of a recognised profession
What does your client value? post-Royal Commission phone survey about integrity in financial advice 40-55 year olds 38% Sydney, Melbourne, Brisbane 62% Is getting financial advice a good idea? YES. NO.
What does your client value? post-Royal Commission phone survey about integrity in financial advice 40-55 year olds 58% Sydney, Melbourne, Brisbane 42% YES. Are you getting financial advice? NO.
88% Said that the genuine independence of a financial adviser is important to them.
The value of independence 86% Would prefer to pay for their advice directly rather than via a commission Would be more likely to invest in a longer 83% term relationship if they knew their adviser was genuinely independent
How the public sees financial advisers
How the public sees financial advisers
Self interest The opposite of a profession Vacuous newsletter Employed by a product issuer Automatically generated Employed by a non-aligned AFSL portfolio report Offer of a review once a year Empty value propositions
Professionalism: what does it mean?
Professional “ Independence and expertise are generally considered key characteristics Standards of a professional. An industry culture and remuneration model that is seen to Authority interfere with these two traits of professionalism in inherently problematic.”
Professional Standards Authority
Independence The first requirement of a recognised profession
Independence The first requirement of a recognised profession
Independence The first requirement of a recognised profession
Benefits to the adviser “I no longer feel like a Independence salesperson” The bedrock of a profession “ I couldn’t tell the client what I really believed, give them the advice I wanted to give them”
Benefits to the consumer “My adviser is a nice person and I like her but I need someone who’s impartial.” Independence “My bank guy can’t advise me, all he can do is sell me things.” The bedrock of a profession “I need a second opinion on my planner’s advice from someone who’s independent.”
Corporations Act s923A must not receive commissions from a product issuer [s923A(2)(a)(i)] must not receive remuneration calculated as a volume of business [s923A(2)(a)(ii)] must not accept gifts from a product issuer that might influence them [s923A(2)(a)(iii)] Independence neither you NOR any adviser under the AFSL you are authorised by [s923A(2)(b)] A deep dive must not have any additional product restrictions imposed on them by their Licensee [s923A(2)(d)] must not have any association with either a financial product or a financial product issuer [s923A(2)(e)]
Independence A deep dive
Conflicts of Interest Practical tests Are you dispensing advice … or How do you profit from the advice selling products/class of products? you dispense? Are your fees reliant on the client Is the fee clear & transparent and following your advice? your terms unambiguous? Do you discount or delay your fees Is its method of collection agreed pending implementation? before work commences? Does your revenue rely on a transaction?
The ‘throw the baby out with the bathwater’ objection The ‘I’m halfway there can you spot Conflicts of me the difference’ objection interest The ‘head in the sand’ objection Arguments for keeping them The ‘everyone else is doing it why shouldn’t I’ objection
“You can’t eliminate all conflicts so don’t bother eliminating any.” Conflicts of “I have my own AFSL.” interest “Charging asset fees is not a conflict” Arguments for keeping them “Hardly anyone meets the independence definition anyway so it should be changed.”
What’s happening in the mind and heart of your client What your client wants from a relationship with you Recap … The meaning of independence Arguments for and against maintaining conflicts of interest Conflicts of interest: the slippery slope
Resources Crucial Concepts Case studies from the trenches Multimedia links and articles Key questions to ask your client Tips on leading your staff Curly client questions
Resources eCourse home page Your dashboard FAQ library Members forum Home page announcements Questions for next live event
Coming up next … How much you charge Module 2 What you charge for How to calculate your fees How to charge fees as an independent How to collect fees When you collect fees How you renew your fees
Preparing for Module 2 Homework: fees exercise List all clients you derived revenue from last year Calculate the total revenue received for each client Break that revenue down by method collected Specify whether it was one-off or recurring
Final words … It starts with a simple decision.
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