99% of Financial Planners Give the Rest a Bad Name

I read an article in The Age over the weekend titled ‘I Feel Sorry for Financial Planners’. Apparently, the changes to the Future of Financial Advice (FoFA) are a burden on financial planners. The legislation and paper work holds them back from providing sound advice.

You’ve got to be kidding me.

The financial planning industry is an absolute joke. I’m sure you’ve heard stories of the rampant fraud and deception in the industry. Maybe you even know friends and family who’ve lost massive chunks of their retirement savings. It’s shameful. Any moves to clean it up should be welcomed.

Yet it’s not just the outright fraud that you need to worry about. The focus on product sales and on growing their client book removes the impetus for a financial planner to provide quality and personalised advice.

Check out this excerpt from an ad for a financial planner I found on Seek today:

‘Our client, which has transformed its reputation in the market in recent times, is centred on a renewed commitment to providing holistic, tailored advice to its customer base. Offering a strong footprint in the local community, along with the stability and breadth of a pillar bank.

 How noble. They did acknowledge the bank has a questionable past. But maybe they’ve turned a new leaf and now care about their clients? Yet, read further and you’ll find the following candidate requirements:

  •  ‘Proven sales & business development results
  • Strong commercial acumen, and an understanding of the behaviours required to build a successful book of business
  • Exceptional relationship management skills, and the ability to build authenticity with both internal and external referral sources
  • Salary: Bonus’ [There’s no other salary details other than ‘bonus’]

Unfortunately, this is not an isolated case. After spending a good twenty minutes looking at financial planning jobs, I became quite familiar with the language used:

  •  ‘Grow your client base through networking and referrals. Identify cross-selling opportunities
  • Create stable relationships with internal stakeholders to further enhance referrals
  • Proactively identify new business opportunities, build relationships to promote services, network effectively and prospect for new clients
  • Proven sales acumen. Maintain a strong pipeline of referral business from your colleagues. Lucrative bonus
  • Demonstrate proven sales & business development results
  • Achieve sales and revenue targets across the region

There’s a good chance a financial planner won’t act with your best interests in mind. They face a conflict of interest because many still receive commissions from placing you into certain investments. That means you can be viewed as just someone to sell products to. And 80% of planners are tied to or employed by large institutions with funds management divisions.

It gets worse. Even those acting in good faith, and with their compensation aligned with your interests, are often woefully underqualified.

The following is from CPA Australia, one of the many companies providing ‘training’ for financial planners.

There is no specific qualification to become a financial advisor. Rather you must complete training in areas in which you will be providing advice, where the minimum requirements to comply with Tier 1 RG 146 are broadly equivalent to the ‘diploma’ level.

That’s it — not a bachelor’s degree — not even a high school certificate, but a ‘diploma equivalent’, which can be completed within a couple of weeks.

The firms employing these advisors don’t demand anything more. There was little mention in the job ads of any required investment knowledge, or of education above the diploma level — at best.

Once the ‘diploma equivalent’ is completed, advisors are then required to complete annual ‘ongoing professional development’. That’s a fancy name for quizzes — the ones with multiple choice answers. The answers to these are clearly spelled out in the accompanying reading material. Anyone who can press Ctrl+F on their keyboard can find the solution by simply searching for the answers within the document — they don’t even bother rewording it. No thinking required.

I know because I’ve completed these requirements — and I have to each year to stay compliant. Have I learnt anything from them? Did they make me more qualified to give advice?

Not at all. And it’s extremely concerning that advisors need no more education than this. These people can have a huge impact on your life, on your finances, on your future. It is absurd that this is the ONLY training requirement for financial advisors.

Yet, we learn that cheating is widespread within many firms. Advisors pass around the answers. It should make you wonder who would possibly need to cheat on such simple quizzes.

Even if your advisor truly strives to act in your best interests — you can’t assume that they are in any way competent.

Even if your portfolio has done well in recent years, you should question the quality of advice you’re receiving. Remember, the market is up 27% over the past three years, so don’t be too quick credit your advisor with any wins. Volatility will return to the market next year. Are you confident that they can continue to make you money? That they can protect your capital?

Of course, that’s not to say there aren’t knowledgeable, educated financial planners acting in your interests. There certainly are. But it can be near impossible to identify them.

One way to protect yourself is to get educated. Don’t leave yourself open to the shysters and the incompetent. Read widely, be careful who you trust, and take an active interest in your finances. Find like-minded and experienced people you know, if you can. The network we’ve built through The Albert Park Investors Guild is another place to start . We’re here to help make sure you’re not led astray.


Meagan Evans,
for the Markets and Money Australia

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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