Historical/Financial Planning/Australia

IFSA OPENS NEW DOORS FOR CAREER FINANCIAL PLANNERS

By-line: Lesley Dewar …….Dated: June 22, 2009

Introduction: The author Lesley Dewar, took her retirement as a financial planner on 30th June 2009. She was a Certified Financial planner, a prolific writer in Financial topics and regularly published in industry magazines. Lesley was well recognised as a conference speaker, highly regarded for her in-depth discussions on financial planning matters, and endorsed by many in the industry.

She authored this article and sent it for publication to several industry sites on 22nd June 2009. It was her last week as a Certified Financial Planner and she was retiring to become a writer. It is offered to Medium readers as an example of her work in the industry.

IFSA OPENS NEW DOORS FOR CAREER FINANCIAL PLANNERS

The investment managers and super fund managers are going to have to be far more honest about their real performance figures — especially if they have a large % of illiquid investments and all funds have to provide a measure of unit pricing. This will hit Government Employees Super Fund Members hard, (who I expect will have to start coming clean on the amount of tax liability their clients have) and the industry funds (who have slush funds to prop up returns).

The measures are not retrospective; but will apply to new corporate funds or members leaving a corporate fund to enter, say, a Navigator pension fund or a Colonial super fund, or making a choice of fund for salary sacrifice.

Member Advice Fee: MAF will be agreed up front with the client; the client decides if they pay, or the fund pays; they can exercise their choice to turn the fee off within a given time limit of once a year after receiving their statements; and tax neutrality is a big issue. Somehow, the charter requires tax neutrality because the member who pays from the fund definitely pays less.

Will the ATO rollover and make financial planning fees tax deductible for everyone? If they do, then expect the tax inside the super fund to increase from 15% to 17.5%, to cover the revenue loss on the Financial Planner’s fees.

Expect a cap on the amount of fees that can be claimed (maybe to be a ratio of the fund value on funds in excess of, say, $500,000 ) — because the ATO won’t stand idly by and let Financial Planners charge like wounded bulls and the clients allow them, because it’s all tax deductible. Who needs trees, now????

The Plan Service Fee: PSF There is going to be a lot of regulation to make fund managers and corporate super funds be more open about their actual performance figures; one area of the industry that will be hit hard is where Financial Planners (so called) get paid large ongoing trails on corporate funds with hundreds of members who never see the advisor (AMP, NML, Zurich, Aviva — this will hurt their corporate advisors).

It will also be interesting to see how industry funds show their PSF and handle those members who decide to turn it off, because they don’t get any service and their results are not good.

But it will also open up opportunities for good Financial Planners who are currently locked out of servicing those clients, when approached by them. There will now be an opportunity for the fund member to turn off the PSF and elect to pay a MAF to a different adviser — one of their own choosing.

If they elect for the MAF to be paid by the fund, what a fun time the fund administration is going to have, directing all the MAF’s to the correct dealers, to be passed on to the AR as the new FP.

The one big issue that it does not address (of course) is the relationship between the AFSL Holder (Australian Financial Services License) and their ARs (Authorised Representatives)– and I can only see that becoming a thorn in the side of the regulators — because they want everyone to have access to qualified advice but fail to outline their understanding of the practicalities of the industry structure.

Tax deductibility of Financial Planners’ fees will help, but it is not the true answer. Neither is every Tom, Dick and Harry running out to get their own AFSL — because IFSA (Investment and Financial Services Association) and ASIC can’t properly supervise the ones they have now.

AFSL Holders are going to have to handle these changes extremely carefully or their best advisers will be looking at where they will be remunerated fairly for the work they do and taking the clients with them.

Member of corporate and personal super funds have to take more responsibility. How you get them to do that without actually engaging them in discussion and thus triggering a first MAF is beyond me! Then, if you do the job right, you can extend your Financial Planner service into non super areas and charge accordingly — from the product or by the client.

Again, this opens the door for new and better financial planners to service the fund members than the advisor who concerns himself/herself with only the upper corporate level of members.

There is $400billion in SMSF and small, non-regulated funds that these rules appear not to touch, because they are not regulated by APRA — which is one third of the money in super — not to speak of the $15billion that lies rotting in the ATO.

However, the accountants are going to be drawn into relationships with licensed advisers because IFSA is determined that member of SMSFs have access to the same levels of qualified advice AND those members will have to pay the MAF to the licensed Financial Planner; while the PSF (that accountants derive from their clients) can be turned off by the clients, since the disclosure of fees and services will have to be much more up front, disclosed in advance and separated from actual taxation charges.

Personally, I think there is huge scope here for business growth based on personal service — because everyone and I mean everyone who asks for help in an industry fund or a corporate fund is going to be told up front — “that’s advice you want — you have to pay a MAF” — and that’s when the true value of good advice and good service will really come to the fore. It is really exciting — and handled properly, these new rules will strengthen relationships and bind clients. If you service them, you get paid — if not, you don’t.

Footnote: I authored this article and sent it for publication to several industry sites on 22nd June 2009. It was my last week as a Certified Financial Planner since I sold my practice in May 2009 and was retiring to become a writer.

I have no idea if it was ever published but I have kept a copy as an example of my deep dives into the ethics, practice, and study of Financial Planning in Australia.

Certainly, my thoughts were echoed the Australian Financial Review in the lead story of 19th August 2009. However, it’s a subscriber only story.

Being A Good Financial Planner Is About Caring, Not Just Making Money For Yourself.

The constant introduction of legislation and the “tick the box” attitude to ethics and giving suitable or appropriate advice will never be the answer to protecting clients and their money.

I am very proud of my career as a financial planner, and to this day, in 2024, I still count many of my clients among my friends.

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