Message to clients and friends post Royal Commission final report

Dear clients and friends, I trust you are well and starting off a great year! 2019 is the year of pig in Chinese astrology and it is a symbol of good fortune and prosperity, definitely one of my favourite sign of Chinese astrology. I wanted to take the opportunity to thank you all for your […]

Dear clients and friends,

I trust you are well and starting off a great year! 2019 is the year of pig in Chinese astrology and it is a symbol of good fortune and prosperity, definitely one of my favourite sign of Chinese astrology.

I wanted to take the opportunity to thank you all for your support last year, and take some heat off the recent Royal Commission final report into the misconduct of banking and financial services in a quick message (you all know how much I love long emails and dot points!).

The effect that the final report would have on our services is minimal, and I will explain to you why and how we can continue to deliver five-star services as usual.

  1. One major issue that the RC has identified within the financial advising services is the “fee for no service” scandal. We have heard repeatedly over the last year how large financial institutions take advantage of the trust of their customers and deliberately ignore the one primary responsibility of a “service” business. The point that Honest Advice (ex Magneq Money) is highly process-driven and has the integrity of a small business, prevents us from such systematic failure. We are implementing key pieces of technology and system integration, including a robust Client Relationship Management (CRM) system, AI-driven automated processing and Wealth Portal, to ensure that nothing and no client falls through the gaps, and increase our practice efficiency and transparency, so we can afford to service clients without having to raise the price of Advice. We have trusted investment team diligently sending out the weekly market and economic commentary and updates on your account, taking care of your annual review, and I will be going to see you personally at least every six months to make sure you don’t miss anything important. We also have a reliable and supportive administration team, triple checking everything and never failed to surprise me on a daily basis.
  2. The end of the grandfathered commissions will have no effect on us also, as we don’t have any inherited interest associated with any of the grandfathered-commission-paying products. As a new business, we have the golden opportunity to build a robust system that is independent of the historical issues that many practices face, and we strive to become the best one in customer service, not the one that receives the most of the commissions regardless.
  3. Most of the findings are somewhat expected except for the no mentioning of vertical integration. Vertical integration, put simply, means the producer of a product hires their own sales person so that the products can be sold to customers in-house. Like when you go to a car dealership sales room, you are expected to buy a brand new car from the showroom, not a car from another manufacturer in their used car yard, regardless of how good the other car is. And what’s wrong with this, you might ask? There is nothing wrong with it if you are buying a non-financial product like a car, your new denture, even your medication under a doctor’s advice. However, financial advisers are bound by law to act in the best interest of clients, and they are required to compare and consider different products that are relevant to your situation and might be suitable for you. A larger advising business who is also a product producer (such as AMP and the big banks) has an embedded conflict of interest because they get rewarded for selling in-house product, instead of a product that may be best for the client from another bank. One of the best decisions that I think I’ve made last year, is to join Synchron as a licensee to regulate and oversee my advice. Synchron is the largest privately owned Australian Financial Services Licence holder in the country and does not produce financial products, nor does Honest Advice (ex Magneq Money), and together we will merely be acting as your personal financial adviser, working and only working for you and your family as our valued customer.
  4. Something that is not directly related to the Royal Commission but also contributed to the escalated financial advisers’ exodus, is the new Financial Adviser Standards and Ethics Authority (FASEA) regime. Under the new FESEA laws, financial advisers are required to complete a series of formal studies and pass exams to continue giving advice. In an industry survey, 30% of advisers have indicated that they would be looking to exist the industry before 2024. For an industry where the average adviser’s age is 52, it’s just not so feasible for everyone to take time to conduct formal study for a number of years if not more. As the Principal Adviser of Honest Advice (ex Magneq Money), I have completed a substantial amount of formal studies including two degrees in the field and multiple industry qualifications (and I’m not 52 yet!). Although haven’t been formally assessed, I am quite certain that the additional studies that I will be required to take time away from my clients to do are minimal.

To you my dear clients and friends, we are business as usual and thank you again for your ongoing trust and support! We will endeavour to organise a time to see you soon if we haven’t, and also keep you updated about what’s new with us, the progress of rolling out the technologies and education seminar about “how to choose a default super fund” soon.

Thank you everyone for your time and we will speak soon!

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