Many Australians are seeking independent financial planning advice – that is, advice from a financial adviser that is not conflicted by factors such as ownership links or commissions.  The truth is that in Australia, independent financial planners are getting harder and harder to find.  This article aims to give you some tips about what to look for when searching for independent financial advice.

 

Independent Financial Planning Advice Rule #1 – No Affiliation With Product Providers

Of the almost 18,000 Authorised Representatives (aka financial advisers) registered with ASIC, it is estimated that around 80% of these are affiliated in some way with a product provider, be it a bank, insurance company, or a fund manager.  This leaves around 20% of all advisers whose Australian Financial Services License is not linked to product providers.  Unfortunately, this number is expected to decline in the coming years.  Smaller independents are slowly being bought out by large product providers.  In addition, the ‘big boys’ have larger marketing budgets and are slowly taking over the industry.

Here is a table showing some of the top financial planning groups in Australia and their major shareholders*:

Dealer Group

Majority Shareholder

AMP Financial Planning

AMP

ANZ Financial Planning

ANZ

Apogee Financial Planning

NAB

AXA Financial Planning

AMP

Charter Financial Planning

AMP

Commonwealth Financial Planning

CBA

Consultum Financial Advisers

IOOF

Count Wealth Accountants

CBA

Financial Wisdom

CBA

Garvan Financial Planning

NAB

Genesys Wealth Advisers

NAB

Godfrey Pembroke

NAB

Guardian Financial Planning

Suncorp

Hillross Financial Services

AMP

IPAC Securities

AMP

Magnitude Financial Planning

Westpac

Millennium 3 Financial Services

ANZ

MLC Financial Planning

NAB

Pivotal Financial Advisers

Tower

Professional Investment Services

Aviva

RBS Morgans

Royal Bank of Scotland

Retireinvest

ING / ANZ

Securitor Financial Group

Westpac

Westpac Financial Planning

Westpac

* Please note this list was compiled in October 2011 and is accurate to the best of our knowledge however should not be relied upon in your decision making process.  Always consult the Financial Services Guide (FSG) when choosing a financial adviser.

 

Why might having a majority shareholder who is also a product provider be a problem?
The problem is that a conflict of interest is introduced into your relationship with your financial planner.  Of course, it makes sense that if you walked into a local corner store which was owned by a food manufacturer, you’d expect that that brand of food would be stocked in the shop, perhaps without the variety of other brands you’d also like to see.  The idea of product manufacturers owning or having a major shareholding in financial planning businesses is not a problem, as long as the consumer is aware that their financial planner may not be able to offer them the full range of products available, or may have extra incentives to sell certain products.  The consumer needs to be aware that for around 8 out of every 10 financial advisers in Australia, that this is the reality.

 

So, what should I be looking for if I want an independent financial advisor?
If getting independent financial planning advice is important to you (and in our opinion it should be to minimise the conflicts of interest in the financial advice you receive), you will need to do your homework.  Look for a financial planner who operates under a dealer group (also known as a licensee) who has no ownership links or ties to any product provider.  They are a minority, but they do exist.  Terms to search for in Google might be “independent financial planning” or “independent financial advice”.  Remember to thoroughly read the Financial Services Guide (FSG) of a dealer group before choosing a financial planner.  This document by law must outline any ownership ties with other businesses such as product providers which may affect the financial advice you receive.

 

Independent Financial Planning Advice Rule #2 – No Commissions

Commissions are where a financial adviser is paid by a product provider.  Ever heard the saying “never bite the hand that feeds you”?  By being paid by a product provider instead of the client (known as fee for service or fee only financial planning), the financial planner is incentivised by the product provider that is paying him or her as opposed to working for the client and providing the best possible financial advice.  An example of this is where a financial planner believes their client requires life insurance.  There are two insurers:  Insurance company A offers a superior product but is offering less commission than insurance company B.  Whilst the insurance product of company A is in the best interests of the client, the financial planner has the ethical dilemma of whether to place their client with company A because it is better for the client, or company B because he/she will be paid more.
This is why we believe that in addition to not being owned by a bank or large dealer group, a truly independent financial adviser should operate on a “fee for service” method of remuneration where the client pays for the advice just like any other professional service.

 

Get more information on independent financial planning advice

Financial Spectrum’s financial planners in Sydney are independently owned and offer fee for service financial planning advice.  We’re also principal members of the Financial Planning Association (FPA) and have been voted as finalists in the Sydney Business Awards for 2010 and 2011.  For more information or to arrange a complimentary first financial planning meeting in Sydney with one of our financial advisers, send us a financial planning meeting request or give us a call on 1300 886 018.

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2 Responses to “How to Find Independent Financial Planning Advice in Australia”

  1. John April 20, 2013 at 5:36 pm #

    Would like to be out through to an adviser/planner. Need advice.

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