Mercer actuary David Knox says the data used to determine the old age dependency ratio is “totally out of date” and overstates the severity of the problem.
From their inception, SMSFs have always attracted more than their fair share of criticism. Now it’s an ageing membership that’s being used to restrict their numbers.
Who can you trust to invest your money?
In a world of stockbrokers, financial planners, advisers, coaches, and wealth managers, who can you trust to invest your money?
As a stockbroker that began fifteen years ago, I witnessed first-hand how the financial advice industry underwent significant changes caused by a long list of events such as the Global Financial Crisis, online broking, FOFA regulations, banking Royal Commission and rising customer demands. Gone are the days of the boisterous trading floors, replaced by fast and efficient digital trading systems. The same can be said about the “Collins Street” (or “George Street”) stockbroker. Retail stockbrokers are a dying breed since the onset of discount online broking. Fast and efficient trading systems such as CommSec offering $20 trades, up-to-date broker research and live company announcements quickly displaced the middleman that acted between the client and stock exchange. The final blow was felt when restrictions were placed on stockbroking commissions by the Government’s Future of Financial Advice (FOFA) reform package, which caused a major shift in the industry. The term “broker” refers to someone that gets paid on a commission for making an investment. So with the ban, came a new breed of stockbrokers, called “Private Client Advisers” or “Wealth Managers.” What do all the terms mean?
Private Client Adviser or Wealth Manager or Financial Adviser
All three job titles refer to the same career. A private client adviser and wealth manager are a part of the financial advice industry that generally services high-net-worth individuals at an investment bank, stockbroking firm, independent financial advisory (IFA) practice or an accounting firm. Advisers are usually bright, hard-working and degree-qualified from a top university. An adviser may obtain a certified financial planner (CFP) designation, meaning that advisor has met the CFP Board’s professional expertise criteria. Advisers tend to love sales, are insatiable networkers, and have a distinct love for the investment markets. Wealth managers live and breathe the market, and will often stay ahead of the learning curve simply because they Hoover-up all the information they can find, because they’re so interested in the markets. Skilled advisers tend to provide advice across the spectrum, from strategy including superannuation, to in-depth portfolio and investment management. They are constantly researching investment ideas, offering new opportunities and actively managing things like strategic asset allocation and stock selection. Under an AFSL licence, the adviser will provide a client with a comprehensive statement of advice, covering the details and the recommended strategies, and then offer regular ongoing and proactive support. Advisers often charge a flat fee for their service rather than a percentage of assets under management. They are generally the most experienced investment experts, and their expertise is what sets them apart from financial planners.
Financial Planner
Going back a decade ago, almost all financial planners were former life insurance sales people. This is because financial planning is more aligned with limiting risk using insurance to make life easier, and to facilitate financial security. Planners tend to focus on the strategy side of your situation, with investment decisions either outsourced to a ‘model portfolio’ or via a more passive investment approach. They help you build a secure foundation for your family, to enable comfortable retirement. Effective financial planning takes a holistic approach to a client’s finances and looks at everything from budgeting, cash flows, savings, insurance, superannuation, tax, debt and retirement, but generally with less focus on investments. For example, a financial planner can provide you with advice during a major life event such as expanding your family etc. Planners usually work for the big banks or financial services firms and seek a solution to manage finances, for now and the future. A planner will usually produce a comprehensive financial plan detailing recommendation on how to achieve one’s goals. Financial planners have become a lot more focused on client demand rather than on product-pushing.
Financial Coach
In many cases, financial coaches operate in an unregulated industry that is not covered by ASIC. A financial coach is generally not a financial adviser or planner and is not covered by Australian regulations. They may have financial advice experience or credible qualifications, but have opted for a different path and tend to market themselves as a better choice over an expensive financial adviser or planner. If they do not have an AFSL license, they will not be covered by financial services industry regulation, and should not provide any sort of investment strategy advice or advice on your finances.
So what do they do?
Their expertise lies in the ‘behavioural’ side of finance. Financial coaches help establish a positive relationship with money by increasing your financial literacy and how you treat money. The problem is many of these financial coaches charge an exorbitant amount for what is really conventional information that you can download for free from Google. They sell a ‘get rich quick’ dream and promise huge returns. But when reading the fine print, all of these claims are dismissed. Coaches often charge lump-sum fees in the $2,000-$4,000 range, via flashy sales websites, using aggressive sales techniques. It is very much “buyer beware” in this part of the industry.
In a nutshell, the difference between a financial adviser and financial planner is: Advisers will invest your money and a planner helps you get and stay wealthy. A financial coach however, could end up losing you a lot of money.
