Financial planners and odour

[Ext User(Xylord)]

It seems to me the sooner financial planners who charge
for their time and effort only as other professions do and
which do not accept (or rebate) 'commissions' drop the
term 'financial planners' and far more strongly differentiate
themselves, perhaps calling themselves qualified
financiial advisors for instance and have a separate
organisation with a high media profile as such then they
might not get tarred with the same brush.

regards Xylord

THE AGE By Alan Kohler
Westpoint wreck shows how deep commissions can cut
---------------------------------------------------------------------------------
http://theage.com.au/news/business/westpoint-wreck-shows-how-deep-commissions-can-cut/2006/02/03/1138958906665.html

selective quotes

Inter alia:
So why did financial planners encourage their clients to make what were
obviously bad investments? Because the promoters kicked back an average up-front
commission to planners of 10 per cent out of the money that they raised. Thus,
every $10 invested became $9 from the beginning. I have attempted to find
disclosure of this in the documentation promoting the funds but have failed.
Perhaps it's there somewhere.

The Westpoint collapse highlights the core problem with the investment industry,
and in particular financial planning — the conflicts of interest inherent in
sales commissions. Ninety per cent or more of financial planners are paid via
commissions from the promoters of investment products and therefore recommend
only commissioned products.
Most products are not Ponzi schemes, most planners are not dishonest and most
commissions are less than 10 per cent, but the industry is fundamentally
conflicted and this collapse will bring enormous pressure to bear, starting with
action by the Australian Securities and Investments Commission.

I understand none of the financial planners who sold these investment products
is a creditor of the group in his or her own right, although some are registered
as proxies and nominees of their unhappy clients. They obviously knew better
than to invest in this.

The impact of Westpoint is likely to go far beyond any direct actions by ASIC. A
revolution is needed in financial planning and Westpoint may be the spark.

[Ext User(P)]

Kinda reminds me of cricket before Kerry Packer and world series.. Probably
a good idea but the fee for service guys are probably too busy writing
finalicial plans for smarter people with a high net worth...

"Xylord" <xylord@yahooNOTTHIS.com> wrote in message
news:2628u15gtkkmobtg4st5ankc9u7jntona9@4ax.com...
>
> It seems to me the sooner financial planners who charge
> for their time and effort only as other professions do and
> which do not accept (or rebate) 'commissions' drop the
> term 'financial planners' and far more strongly differentiate
> themselves, perhaps calling themselves qualified
> financiial advisors for instance and have a separate
> organisation with a high media profile as such then they
> might not get tarred with the same brush.
>
> regards Xylord
>
> THE AGE By Alan Kohler
> Westpoint wreck shows how deep commissions can cut
> --------------------------------------------------------------------------
-------
>
http://theage.com.au/news/business/westpoint-wreck-shows-how-deep-commissions-can-cut/2006/02/03/1138958906665.html
>
> selective quotes
>
> Inter alia:
> So why did financial planners encourage their clients to make what were
> obviously bad investments? Because the promoters kicked back an average
up-front
> commission to planners of 10 per cent out of the money that they raised.
Thus,
> every $10 invested became $9 from the beginning. I have attempted to find
> disclosure of this in the documentation promoting the funds but have
failed.
> Perhaps it's there somewhere.
>
> The Westpoint collapse highlights the core problem with the investment
industry,
> and in particular financial planning - the conflicts of interest inherent
in
> sales commissions. Ninety per cent or more of financial planners are paid
via
> commissions from the promoters of investment products and therefore
recommend
> only commissioned products.
> Most products are not Ponzi schemes, most planners are not dishonest and
most
> commissions are less than 10 per cent, but the industry is fundamentally
> conflicted and this collapse will bring enormous pressure to bear,
starting with
> action by the Australian Securities and Investments Commission.
>
> I understand none of the financial planners who sold these investment
products
> is a creditor of the group in his or her own right, although some are
registered
> as proxies and nominees of their unhappy clients. They obviously knew
better
> than to invest in this.
>
> The impact of Westpoint is likely to go far beyond any direct actions by
ASIC. A
> revolution is needed in financial planning and Westpoint may be the spark.
>

[Ext User(Travis Morien)]

Xylord wrote:
> It seems to me the sooner financial planners who charge
> for their time and effort only as other professions do and
> which do not accept (or rebate) 'commissions' drop the
> term 'financial planners' and far more strongly differentiate
> themselves, perhaps calling themselves qualified
> financiial advisors for instance and have a separate
> organisation with a high media profile as such then they
> might not get tarred with the same brush.

A number of months ago I caused a serious stink with a couple of other
FPs who lurk on aus.invest when I made some remarks which were
criticial of the FPA.

I made the claim that the FPA is nothing more than a trade association
whose primary allegiance is to members and who thus doesn't want to
offend those it represents by making overtly negative comments about
the dodgy things that at least some of its members do, indeed the FPA
spends a lot of time actually DEFENDING practices which I personally
think are unacceptable, like their continued refusal to say anything
bad at all about commissions, even against the most egregious cases of
commission based product flogging.

The Westpoint case provides a good example. The FPA made a number of
statements regarding the Westpoint fiasco which actually blamed the
CLIENTS for making the decision to accept the recommendations made by
their advisor. The advisor's role, so the FPA said, was to make a
non-binding suggestion that a client do something, along with
disclosing the costs and risks involved, and provided the disclosure is
adequate its the CLIENT's fault if they follow the advisor's
recommendation and end up losing money - even when it was a dubious
product like a high commission mezzanine finance scheme that any
competant advisor should have known was unacceptably risky and far from
"investment grade".

This statement was heavily criticised by other organisations, such as
the Association of Independently Owned Financial Planners (AIOFP) who
accused the FPA of undermining the profession and causing people to
lose faith in advisors, to protect the hides of some bad apples. They
used words like "bizarre" when describing the FPA's stance.

This is precisely the kind of crap that the FPA does every time
advisors do something bad, which is why I do not wish to join them and
have them defend me.

I'd much prefer the FPA to react with strong condemnation of bad FP
practices rather than seek to divert blame, especially if they are
going to divert blame onto consumers!

Anyway, the shitstorm that erupted over all of this when AIOFP and
other groups expressed their horror at the FPA's public stance has
resulted in a fair bit of backpeddling by the FPA, though they're still
maintaining that advisors should be blamed for it and are looking for
scapegoats such as the audtors, misrepresentation by Westpoint itself,
etc.

See http://www.moneymanagement.com.au/articles/e1/0c03c4e1.asp

Travis
www.travismorien.com

[Ext User(John Wright)]

"Travis Morien" wrote
> Anyway, ... FPA, though they're still
> maintaining that advisors should be blamed for it and are looking for
> scapegoats such as the audtors ....

I think there is a "not" missing here; it should read "... advisors should
NOT be blamed ..."

Regards - JW

[Ext User(Travis Morien)]

John Wright wrote:
> "Travis Morien" wrote
> > Anyway, ... FPA, though they're still
> > maintaining that advisors should be blamed for it and are looking for
> > scapegoats such as the audtors ....
>
> I think there is a "not" missing here; it should read "... advisors should
> NOT be blamed ..."
>
Yeah, I spotted that after posting but figured you'd all know what I
meant. :)

Travis
www.travismorien.com

[Ext User(Travis Morien)]

See also http://www.moneymanagement.com.au/articles/5e/0c03c35e.asp for
some of the remarks by the FPA which the AIOFP was objecting to.

-----

The Financial Planning Association (FPA), meanwhile, has said that the
ultimate responsibility for any money lost through products associated
with Westpoint lies with investors, not financial planners.

"All financial advisers have a duty to know their client and make
appropriate advice, which investors accept when they sign off on the
recommendation."

"Advisers give the options but clients make the choices. If a [client]
is not confident they can always get a second opinion."

------

My jaw dropped when I read those remarks. Of course financial planners
have a responsibility to do proper research of their recommendations
and have a certain amount of responsibility for the outcome.

If the FP is able to demonstrate that proper research was done and
based on the best information available at the time the investment
appeared to be attractive, then fair enough. Nobody (in their right
mind) could argue that FPs should be held accountable for every little
loss when proper research was done. All investments carry a degree of
risk, though of course it is important to avoid products which offer
higher risks than necessary for the given level of return. Thus,
research should be focused on ensuring that the amount of return on
offer is appropriate for the amount of risk.

I disagree with the notion that an advisor can recommend lousy
investments for which no proper research was done and a proper
investigation would have identified as poor choices and argue that his
Statement of Advice disclosed the high costs and made a few vague
remarks about high risk.and therefore its the client's dumb fault for
listening to the advisor. (Should have gotten a second opinion!)

Is it too much to ask for FPs to act as fiduciaries rather than
salespeople? Is it unreasonable to wish for the FP profession's
self-appointed "peak body" to try to encourage its members to act as
fiduciaries, instead of coming out all the time saying its ok to be a
salesman and as far as consumer protection goes its caveat emptor?

Travis
www.travismorien.com

[Ext User(Andrew Gabb)]

Travis Morien wrote:
> I made the claim that the FPA is nothing more than a trade association
> whose primary allegiance is to members and who thus doesn't want to
> offend those it represents by making overtly negative comments about

FWIW, Travis, this is why such organisations exist. Why should an
organisation whose funding comes from its members do anything else,
even though many such organisations make claims otherwise, and even
include it in their constitutions (which could cause an interesting
constitutional problem for them one day - but that's a different
issue).

The code of ethics of such organisations tends to reinforce this.
Ethics is not about being a good person (as many folks think), but
about not giving the profession a bad name, and not crapping on your
colleagues (or dobbing them in, for that matter).

If the FPA tends to protect 'bad' members, this probably reflects
the membership profile, and implies that a majority of the members
are probably 'bad'. (On a relatively low sample in my own
experience, this is the case.) If this wasn't so, the executive
would have been dumped by now. If this wasn't so, the FPA would want
to dump the bad eggs, because they're bad for the organisation and
the majority of its members.

Andrew
--
Andrew Gabb
email: agabb@tpgi.com.au Adelaide, South Australia
phone: +61 8 8342-1021, fax: +61 8 8269-3280
-----

[Ext User(Travis Morien)]

Andrew Gabb wrote:

> FWIW, Travis, this is why such organisations exist.

[snip]

I agree completely with everything you've said Andrew.

My main objection with the FPA is their advertising and public comments
which give the distinct impression that they are something other than
just another trade association.

The FPA runs advertisements which tell consumers that they should only
deal with FPA members. There is a very strong underlying message that
the FPA is a bastion of high quality advisors. Deal with a non-FPA
member, and the chances are you'll get a shyster.

Reality is that the FPA is an inclusive rather than an exclusive
organisation. The shysters are FPA members too, and the FPA isn't
really all that committed to removing them. In fact, many of their
public statements seem to display a greater concern for protecting
shysters than protecting the public.

If the FPA made it clear to the public that joining the FPA was
basically just a matter of filling in a form and paying your membership
dues on time, and quit making public statements implying that the FPA
was something more than just another trade association created to
protect the interests of its members, then I would not have anything to
complain about.

The financial planning profession really does need a good watchdog to
kick the bad apples out. They need to make strong statements about the
need for advisors to accept fiducuary responsibility and abolish the
product salesman mindset entirely, including coming out with very
strong statements in favour of fee for service and discouraging
commissions. The FPA is not, and never can be, such an organisation.
They should make this clear to the public so that the public is not
lulled into a false sense of security about the level of protection
that comes with only dealing with FPA members.

Travis
www.travismorien.com

[Ext User(sarge)]

Andrew Gabb wrote:
> Travis Morien wrote:
>
>> I made the claim that the FPA is nothing more than a trade association
>> whose primary allegiance is to members and who thus doesn't want to
>> offend those it represents by making overtly negative comments about
>
>
> FWIW, Travis, this is why such organisations exist. Why should an
> organisation whose funding comes from its members do anything else, even
> though many such organisations make claims otherwise, and even include
> it in their constitutions (which could cause an interesting
> constitutional problem for them one day - but that's a different issue).
>
> The code of ethics of such organisations tends to reinforce this. Ethics
> is not about being a good person (as many folks think), but about not
> giving the profession a bad name, and not crapping on your colleagues
> (or dobbing them in, for that matter).
>
> If the FPA tends to protect 'bad' members, this probably reflects the
> membership profile, and implies that a majority of the members are
> probably 'bad'. (On a relatively low sample in my own experience, this
> is the case.) If this wasn't so, the executive would have been dumped by
> now. If this wasn't so, the FPA would want to dump the bad eggs, because
> they're bad for the organisation and the majority of its members.
>
> Andrew
Andrew,

Don't know that the term "bad" is appropriate for the majority of
financial planners. Apathetic is a term I would use.

I believe most financial planners are acting in the best interests of
their clients, or at least in a manner they believe is to the benefit of
their clients. Yes they benefit themselves, but this is not different
from any other worker. Anyone who generates an income from their
customers is acting in their own interest - the hope is they are also
acting in the best interest of their clients as well.

Problem to me is that most financial planners couldn't give a stuff
about what is best for the industry as a whole and just want to focus on
what is best for them personally.

I have been through this fight on a smaller scale within the firm I work
for. The fight to change our fee structure continues, but at least now
the planners have a choice between charging an appropriate fee for
service or gouging the client for every cent (previously we could only
use commissions). Good news is that a larger and larger percentage of
the firms planners are moving to fee for service and the firm has capped
the maximum fee (commission or fee for service) that our clients now
pay. We lost a lot of high revenue generating planners over these
changes but that was a good thing.

Now unless the industry can organise itself, possibly by having another
industry group to speak out against the FPA, the changes will remain
very slow. I believe we don't need a fight about fees vs commission or
independent vs non-independent (there is room and arguments for both
sides in both cases). What we need a group to speak publicly about
clients being given full disclosure, being educated about the risks
associated with the investments they are being offered and paying a fair
fee for what the service & advice they receive.

sarge

[Ext User(sarge)]

Xylord wrote:
> It seems to me the sooner financial planners who charge
> for their time and effort only as other professions do and
> which do not accept (or rebate) 'commissions' drop the
> term 'financial planners' and far more strongly differentiate
> themselves, perhaps calling themselves qualified
> financiial advisors for instance and have a separate
> organisation with a high media profile as such then they
> might not get tarred with the same brush.
>
> regards Xylord
>
I agree that planners need to start charging like other professionals
(ie. fee based upon work delivered NOT dollars invested). As to whether
they are paid by commission or fee from the client - I am less worried.
My preference is for every planner to be fee for service, but I accept
some people do not have the capacity to pay this way (such as some
people rolling over their Super who may have no funds available outside
Super). The thing is that excess commissions (ie amount over acceptable
fee) should be rebated back to the client.

Commissions are a problem, but scrapping them will not be the magic
thing to make the industry as a whole better. The industry need to get
rid of the planners that gouge every client for every dollar possible.
Most of the time the only reason I see planners able to do this is that
they have uneducated clients who do not understand the fee structure.

For example, I saw a lady a couple of months ago who had $1M to invest.
We offered a comprehensive plan (investment / super / retirement /
estate / insurances, etc) at a cost of $6,600 up front and $ 5,500
ongoing (flat fee with full commission rebate). Another planner had
offered her investment advice only at a cost of 1.1% upfront and 0.5% pa
ongoing PLUS the trialling commission. This lady was so uneducated that
she could not work out that 1.1% of $1M was $11,000. She kept insisting
it was only $1,100. The plan from the other adviser only disclosed in %
terms (which it shouldn't have) and as such she went with them. Because
the fee will come out of the investment I doubt she will ever notice.

We need some form of financial educate in our schools system and better
education of the general public to help them make the right decisions.
This would be more use then just abolishing commissions (which I would
also agree with).

sarge

[Ext User(Travis Morien)]

sarge wrote:

> Now unless the industry can organise itself, possibly by having another
> industry group to speak out against the FPA, the changes will remain
> very slow.

The AIOFP, CPA Australia, FINSIA and the CFA Institute have all had a
number of less than positive things to say about the FPA.

CPA for instance have come out with a very strongly worded
recommendation that their members charge for their services on a time
or fixed fee basis and avoid/rebate commissions and asset based fees.
(I don't recall the name of the document, but I've got a copy on my
desk at work provided to me by one of my colleagues in the accounting
arm of Compass).

AIOFP expressed absolute horror at the "caveat emptor" statements FPA
made after the Westpoint scandal broke, saying that it undermines the
confidence clients have in advisors.


> I believe we don't need a fight about fees vs commission or
> independent vs non-independent (there is room and arguments for both
> sides in both cases). What we need a group to speak publicly about
> clients being given full disclosure, being educated about the risks
> associated with the investments they are being offered and paying a fair
> fee for what the service & advice they receive.

I don't think anybody is suggesting that banning commissions would be a
magic bullett, or that non-independent advisors aren't any good, but
its hard to deny that there are inherent conflicts of interest in both
which the industry needs to work to avoid.

Commissions do not corrupt uncorruptible advisors and turn good people
into sharks, but its hard to deny that commissions do attract corrupt
advisors and are greatly favoured by sharks. I wonder if there were
ANY fee for service commission-rebaters involved in the Westpoint
mezzanine schemes. I sincerely doubt it.

Your statement about people needing to use a commission structure with
super rollovers is partially true, but I differentiate between
facilities that enable advisors to take a fixed establishment fee and
fixed account servicing fees out, which many wraps/MTs can do, and
traditional percentage based entry fees which apply to ALL
contributions and percentage based trail commissions which are directly
linked to the account balance.

Although I call myself strictly fee for service, I do use fixed
establishment fees and dollar based ongoing fees for some accounts,
particularly superannuation. This is of course a choice that I let my
clients make as I make it quite clear that I don't care what method the
client uses to pay me, I get paid the same either way. I believe this
is materially different to the usual entry fee and trail commissions
where the amount the advisor receives depends on the type or manager of
product recommended and the amounts invested and thus the advisor has
the temptation to recommend strategies which can increase their
commission based income.

Travis
www.travismorien.com

[Ext User(Travis Morien)]

sarge wrote:

> For example, I saw a lady a couple of months ago who had $1M to invest.
> We offered a comprehensive plan (investment / super / retirement /
> estate / insurances, etc) at a cost of $6,600 up front and $ 5,500
> ongoing (flat fee with full commission rebate). Another planner had
> offered her investment advice only at a cost of 1.1% upfront and 0.5% pa
> ongoing PLUS the trialling commission. This lady was so uneducated that
> she could not work out that 1.1% of $1M was $11,000. She kept insisting
> it was only $1,100. The plan from the other adviser only disclosed in %
> terms (which it shouldn't have) and as such she went with them. Because
> the fee will come out of the investment I doubt she will ever notice.


You're quite right about that. This is why financial planners need to
strive for the highest levels of professionalism and fiduciary duty,
rather than the FPA's "caveat emptor" position that FPs do not deserve
to be trusted and clients ought to seek a second opinion at the very
least and read the fine print very carefully to see what the possibly
dodgy FP is trying to get them into.

Travis
www.travismorien.com

[Ext User(Fitzroy)]

"Travis Morien" <travismorien@yahoo.com> wrote in message
news:1139031977.160939.239040@z14g2000cwz.googlegr oups.com...
>
>
> The Westpoint case provides a good example. The FPA made a number of
> statements regarding the Westpoint fiasco which actually blamed the
> CLIENTS for making the decision to accept the recommendations made by
> their advisor.
>


Which is not the sort of thing you would expect from professionals
in medicine, law, accountancy etc, nor from any association which
represents them.

This is why I do not regard financial planning as a legitimate
profession. No more than product distributors it seems.

And here is no binding code of ethics. Worse than real estate agents.

(present company excepted of course)

[Ext User(Fitzroy)]

"sarge" <sarge@nolongerinuse.com.au> wrote in message
news:43e46ad8$1@news1.veridas.net...
> Andrew Gabb wrote:
> > Travis Morien wrote:
> >
> >> I made the claim that the FPA is nothing more than a trade association
> >> whose primary allegiance is to members and who thus doesn't want to
> >> offend those it represents by making overtly negative comments about
> >
> >
> > FWIW, Travis, this is why such organisations exist. Why should an
> > organisation whose funding comes from its members do anything else, even
> > though many such organisations make claims otherwise, and even include
> > it in their constitutions (which could cause an interesting
> > constitutional problem for them one day - but that's a different issue).
> >
> > The code of ethics of such organisations tends to reinforce this. Ethics
> > is not about being a good person (as many folks think), but about not
> > giving the profession a bad name, and not crapping on your colleagues
> > (or dobbing them in, for that matter).
> >
> > If the FPA tends to protect 'bad' members, this probably reflects the
> > membership profile, and implies that a majority of the members are
> > probably 'bad'. (On a relatively low sample in my own experience, this
> > is the case.) If this wasn't so, the executive would have been dumped by
> > now. If this wasn't so, the FPA would want to dump the bad eggs, because
> > they're bad for the organisation and the majority of its members.
> >
> > Andrew
> Andrew,
>
> Don't know that the term "bad" is appropriate for the majority of
> financial planners. Apathetic is a term I would use.
>



I'd stick with "bad".

[Ext User(Lionel)]

Travis Morien wrote:
> See also http://www.moneymanagement.com.au/articles/5e/0c03c35e.asp for
> some of the remarks by the FPA which the AIOFP was objecting to.
>
> -----
>
> The Financial Planning Association (FPA), meanwhile, has said that the
> ultimate responsibility for any money lost through products associated
> with Westpoint lies with investors, not financial planners.
>
> "All financial advisers have a duty to know their client and make
> appropriate advice, which investors accept when they sign off on the
> recommendation."
>
> "Advisers give the options but clients make the choices. If a [client]
> is not confident they can always get a second opinion."
>
> ------
>
> My jaw dropped when I read those remarks. Of course financial planners
> have a responsibility to do proper research of their recommendations
> and have a certain amount of responsibility for the outcome.


[snip]

I'm glad to see these comments. I think the same goes for accountants.
There are so many people out there who don't have much
accounting/financial knowledge and so they take there tax affairs to a
professional so that they can have the confidence that it will get done
properly, but at the end of the day it is said that the customer signs
off and it is ultimately their responsibility. How about those who can't
understand most of what gets submitted to the ATO?

I also agree that the customer should take responsibility also, but
there needs to be a reasonable balance.

Lionel.

[Ext User(Andrew Gabb)]

Travis Morien wrote:
> The financial planning profession really does need a good watchdog to
> kick the bad apples out. They need to make strong statements about the
> need for advisors to accept fiducuary responsibility and abolish the
> product salesman mindset entirely, including coming out with very
> strong statements in favour of fee for service and discouraging
> commissions. The FPA is not, and never can be, such an organisation.
> They should make this clear to the public so that the public is not
> lulled into a false sense of security about the level of protection
> that comes with only dealing with FPA members.

Why should they, Travis? It's in the FPA'a interest and those of
their members *not* to do this, surely.

If you were part of a competing organisation, of course, and could
show that the claims were untrue, you could give them a really hard
time. Of course, advertising is fairly careful in these areas - they
tend to imply rather than state superiority.

Andrew
--
Andrew Gabb
email: agabb@tpgi.com.au Adelaide, South Australia
phone: +61 8 8342-1021, fax: +61 8 8269-3280
-----

[Ext User(Andrew Gabb)]

sarge wrote:
> Don't know that the term "bad" is appropriate for the majority of
> financial planners. Apathetic is a term I would use.

I deliberately used 'bad' (in quotes) to cover a multitude of sins,
both separately and in combination. Apathetic wasn't one of them.
They did include incompetent, partial, corrupt, crooked, and predatory.

> I believe most financial planners are acting in the best interests of
> their clients, or at least in a manner they believe is to the benefit of
> their clients. Yes they benefit themselves, but this is not different
> from any other worker. Anyone who generates an income from their
> customers is acting in their own interest - the hope is they are also
> acting in the best interest of their clients as well.

I'd word this a bit differently too. I believe that most financial
planners feel they are doing a reasonable job for their clients. The
problem comes in defining 'best interests' or even what a
'reasonable job' is.

A number of friends and acquaintances (and their parents) are
delighted with their advisors. Very few of these know anything about
investment at all, in any form. They have no idea what the
benchmarks are, or even how much their investments earned or
improved in value. I guess they rate their advisors on how clever
the advisor tells them his is (I know this is true in one case), and
how much he sucks up to them.

Given the fact that so many of the clients are ignorant of their
options or what performance they can expect, the results are
unfortunately predictable. Businessmen (and I include financial
advisors in this group) are not all that different from the rest of
humanity. Put under stress or given copious opportunities to exploit
their clients, their morality is put under pressure and has a
tendency to slip. Many don't notice this, and put the odd more
obvious transgressions under 'good business practice'. Yup, I've
done it too - it's very hard to resist the relentless pressure to
make an easy buck or two.

Many of the funds make it even easier for them by hiding commissions
as well as they can, and providing less tangible 'incentives'.

I'd really like to see the recent ACA study backed up by some
serious random audits of FPAs, assessing their performance across
their client base, and publishing the results. Not easy, and not
easy to set up politically, but the only way things will improve is
for the obvious leaches and incompentents to be put out of business,
one way or the other.

Andrew
--
Andrew Gabb
email: agabb@tpgi.com.au Adelaide, South Australia
phone: +61 8 8342-1021, fax: +61 8 8269-3280
-----

[Ext User(Andrew Gabb)]

sarge wrote:
> We need some form of financial educate in our schools system and better
> education of the general public to help them make the right decisions.
> This would be more use then just abolishing commissions (which I would
> also agree with).

There's actually a fair amount of good advice out there. The trouble
is that it takes too much due diligence for the average investor who
is looking for an advisor. And generally if you've got enough
knowledge to suss out a good FPA, you probably don't need one.

Until you can make the bad apples feel real pain, the problems will
continue. And you can't rely on the FPA to that, apparently.

Andrew
--
Andrew Gabb
email: agabb@tpgi.com.au Adelaide, South Australia
phone: +61 8 8342-1021, fax: +61 8 8269-3280
-----

[Ext User(Travis Morien)]

Andrew Gabb wrote:
> And generally if you've got enough
> knowledge to suss out a good FPA, you probably don't need one.

You've used FPA as a noun a couple of times in your two recent posts.
Just to let you know, members of the Financial Planning Association are
not referred to as "FPAs", unlike members of CPA Australia who are
known as "CPAs".

Being a member of the FPA is not an achievement as it requires no study
and there is no entry exam or any ongoing obligation besides making
your membership payments on time and not getting prosecuted for
anything which would embarrass the FPA. Members of the FPA do not
acquire the title "FPA", though they can mention their FPA membership,
for what its worth.

There is a title that some FPA members can use, CFP (Certified
Financial Planner), which is something that requires extra study and
for which there is an exam. Unlike in the US and other countries,
where CFP is a stand-alone qualification, in Australia CFP membership
is tied with FPA membership.

There are "better" qualifications in Australia, including Bachelor,
Masters and PhD level work, which are not linked to FPA membership, but
none of these (apart from PhD, where of course you are known as
"Doctor") impart any title onto their recipient.

The short way I refer to the job I'm in is by describing myself as an
FP. There is no A.

Travis
www.travismorien.com

[Ext User(sarge)]

Andrew Gabb wrote:
> sarge wrote:
>
>> Don't know that the term "bad" is appropriate for the majority of
>> financial planners. Apathetic is a term I would use.
>
>
> I deliberately used 'bad' (in quotes) to cover a multitude of sins, both
> separately and in combination. Apathetic wasn't one of them. They did
> include incompetent, partial, corrupt, crooked, and predatory.
>
So you honestly believe that "most" financial planners are bad ? Out of
interest how many do you personally know and what methods have you used
to determine this to be the case ?

>> I believe most financial planners are acting in the best interests of
>> their clients, or at least in a manner they believe is to the benefit
>> of their clients. Yes they benefit themselves, but this is not
>> different from any other worker. Anyone who generates an income from
>> their customers is acting in their own interest - the hope is they are
>> also acting in the best interest of their clients as well.
>
>
> I'd word this a bit differently too. I believe that most financial
> planners feel they are doing a reasonable job for their clients. The
> problem comes in defining 'best interests' or even what a 'reasonable
> job' is.
>
Could you please define "best interests" and "reasonable job" for me so
we at least are talking about the same thing.

> A number of friends and acquaintances (and their parents) are delighted
> with their advisors.
Good to see.

Very few of these know anything about investment at
> all, in any form.
That sums up the clear majority of Australians - which incidently is
probably why the majority of Australians could use the assistance of a
financial planner.

They have no idea what the benchmarks are, or even how
> much their investments earned or improved in value.
If they are unable to work out (or read) the return on their investment
I'm surprised they had any money to invest in the first place.

I guess they rate
> their advisors on how clever the advisor tells them his is (I know this
> is true in one case), and how much he sucks up to them.
>
People should feel comfortable and happy with their adviser (we all want
to work with people we get on with). But to judge them on this criteria
sets them up to be ripped off. They should be prepared to be critical of
their adviser, but not based on something as simple as did I or didn't I
make as much as my neighbor Joe Blow - which is how some people judge
the performance of their financial plan - but rather have I been
listened to and am I achieving my goals.

> Given the fact that so many of the clients are ignorant of their options
> or what performance they can expect, the results are unfortunately
> predictable. Businessmen (and I include financial advisors in this
> group) are not all that different from the rest of humanity.
So is it "most" financial planners that are bad - or are you now saying
"most" business people are bad ?

Put under
> stress or given copious opportunities to exploit their clients, their
> morality is put under pressure and has a tendency to slip. Many don't
> notice this, and put the odd more obvious transgressions under 'good
> business practice'. Yup, I've done it too - it's very hard to resist the
> relentless pressure to make an easy buck or two.
>
I see now - you are bad, so you assume that "most" people are therefore
bad. Glad you cleared that one up.

> Many of the funds make it even easier for them by hiding commissions as
> well as they can, and providing less tangible 'incentives'.
>
There should be no hidden incentives. Anyone caught not disclosing the
benefits that they receive should be automatically banned from he
industry for life. This is a fundamental thing - the client deserves to
know what they are paying be it by fee or commission or incentive.

> I'd really like to see the recent ACA study backed up by some serious
> random audits of FPAs, assessing their performance across their client
> base, and publishing the results. Not easy, and not easy to set up
> politically, but the only way things will improve is for the obvious
> leaches and incompentents to be put out of business, one way or the other.
>
You mean FP not FPA. One is a Financial Planner the other is an
Association. But I agree with you the leaches and incompentents do need
to be removed from the industry.

sarge