A recent overseas study indicated that 50% of people did make use of a financial adviser. The reason given was a mistrust of the profession with most potential client choosing no advice over bad advice. Another study commissioned by Vanguard was able to quantify the value of advice proving that clients with advisers generated an additional 3% annualised return, which when compounded over the long-term is massive out-performance.
Unfortunately bad and crooked advice continues to plague the industry resulting in many clients opting out for fear of being taken, which ultimately results in a loose loose for clients and the industry as a whole.
The Financial Planning Institute (FPI) recently updated their code of ethics for their members listing eight key principles for providing ethical advice. I recommend anyone who has an adviser or who is considering getting advice measure their adviser against each of these eight principles, which I will briefly cover.
1) Client First
This should go without saying; advice is a fiduciary service based on trust where the client’s interests must always come before that of the adviser. Sadly this is probably where the industry has dropped the ball the most.
Difficult if not impossible to measure; but clearly the foundation of trust and non-negotiable for any adviser.
This talks to independent advice; I am not sure how any tied agent working for an institution can truly claim to offer best advice when constrained by their employer’s profit motive.
Advisers should asked themselves, is this same advice I would give my mother?
Qualifications, experience and continued education are essential for best advice.
I certainly don’t need to elaborate on this point.
A diligent adviser will continue to “sharpen the sword” and have a passion for what he / she does, which should be clearly evident in their service and the way they conduct their own affairs.
The term profession originates from being a scholar and a gentleman. A person held in high regard, afforded an automatic trust based on their standing in society and unquestionable ethics.
Ethics is not about doing things right, but doing the right thing.
I urge clients to take a chance and interview an adviser or two. A good starting point is to choose a member of the Financial Planning Institute who holds their members accountable to the above code of ethics and I urge fellow advisers to help clean up the industry by exposing the bad apples and not to simply rely on the regulator to do so.
Mcomm, CFP®, HdipTax
T. 021-851 3746