Four things to consider when looking for financial advice following the Banking Royal Commission
The Banking Royal Commission highlighted numerous examples of poor behaviour from the financial services sector, with recommendations for tighter restrictions in its final report. The findings by Commissioner Hayne will inevitably make their way into law in the near future. At this stage, however, it is unclear exactly which recommendations will be adopted and the form the legislation will eventually take (particularly with a Federal Election underway).
In the meantime, having digested media reports of evidence from the Royal Commission hearings, consumers are right to feel wary when engaging financial advice services. Despite the activities of certain major operators, though, there are many firms who have a history of doing the right thing – those who already operate consistently in the manner recommended by the Commission.
So regardless of when and how the Commission’s recommendations are passed into law, the final report does give consumers some guidance about what to look for when seeking financial advice.
1. Consider the benefits of a smaller firm that always places customers first
The inquiry recommends an end to the sales culture of the financial planning sector – targeting businesses who do not put customers first and where profits are the highest priority. This is where a smaller firm like Fowler’s Group can really be the best option. Simply put, if we didn’t place our customers first, we couldn’t survive. Our business depends on looking after our clients’ interests, developing ongoing relationships and having customers return to us.
2. Is the advice being given in my best interest?
The Royal Commission has also demonstrated the genuine benefits of engaging a firm that places your interests first. Even before the hearings, an ASIC investigation found that in 75% of examined cases the banks had failed to act in the best interest of their customers, highlighting the in-built conflict of interest that arises where businesses provide advice on their very own products. Alternatively, as an operator with no financial products to sell and no ties to a particular institution, at Fowler’s we are untethered – free to prioritise our clients without any product bias.
3. A track record of being transparent is important
The final report from Commissioner Hayne also recommended greater disclosure measures. It’s worthwhile, therefore, looking at a firm’s history of transparency beyond what is required by law. At Fowler’s Group, for example, we have been disclosing on insurance advice for 15 years – well before any legal obligations were in place. This kind of track record provides out clients with peace of mind, knowing that there’s nothing we are trying to hide.
4. What will guarantee that an advisor will work in my best interests?
Fiduciary duty is the highest standard of care expected of a financial advisor. This recognises the special position of trust created by the client / advisor relationship and obliges the operator to always place the customer first (ie before their own profits). While there are many requirements already in place, with more likely to follow the Royal Commission report, the best way to ensure that you engage a genuine fiduciary financial advisor is where there has been some independent certification.
At Fowler’s, for instance, we are only one of six firms in Australian (and 150 worldwide) who have been audited and recognised with accreditation by the Centre for Fiduciary Excellence (CEFEX), an independent international body. This means you can always be certain we will uphold our fiduciary duty to place the client first.
Keeping these considerations in mind will help with navigating the financial services minefield following the Royal Commission, regardless of any legislative changes that are to come.
Get in touch with us at Fowler’s Group today and find out how a small, fiduciary financial advisor can really make a difference with building and protecting your wealth.