The following extract from Crikey.com (beginning "The Westpoint saga.....") caught my eye. The sad irony about those seeking financial planning advice is that often they are doing so because they are - as mentioned in the Crikey article - financially unsophisticated and therefore have no way of knowing how to evaluate the "advice" they are being given.
I can't think of any way round this but suppose the best protection would be to (a) go to someone who has been personally recommended by a trusted friend/colleague, or (b) interview several and form an opinion based on common suggestions by all of them, and then go with the person with whom you feel most comfortable.
And probably most of all, avoid anyone with an association with a parent company, or bank etc., and who is paid via commission. Much better to pay a fee for service for independent advice.
If anyone else has some wisdom to offer on this question, I think it would be helpful to some of our newer members who are feeling a bit anxious about where to go to seek advice on setting up a SMSF etc.
Following is the quote from Crikey.
The Westpoint saga's latest twist raises some big questions concerning the way the Financial Planning Association (FPA) regulates its members' activities and how the financial services regulator (ASIC) fails to adequately protect the consumers it is meant to serve. ASIC now needs help from those of us who do know how the money business works and it might come as a surprise to some that it also needs protection from those in the money business who prefer it to be the toothless tiger that it is currently. I propose that ASIC have a board that consists of a mix of consumers, industry players and legal types who then bear some responsibility for making the necessary changes to a body that when it fails in its work, threatens to undermine confidence in the whole of the financial system. I for one would be prepared to put forward my 25 years experience in financial services as a resource. I'm sure some other like-minded, ethical and intelligent members of the financial services and legal community might do likewise, in order to promote genuine transparency and remove the stink that threatens to taint us all.
An accountant writes:
Re: Financial planners. As accountants the Government excluded us from providing financial advice, where beforehand we were able to provide general advice but not detailed specifics. As the accountant and tax agent for a client we were able to review and comment on a financial planners action plan, but the financial planners wanted us accountants cut out of this (they did a good job and the Govt agreed). The ASIC regulations are so tight now that we as the tax agents and accountants to the client – and having looked after their tax and accounts for many years – cannot comment. The financial planners are in fear of us affecting their "gravy train" of commissions. This is where the spin is and where ASIC and the Govt have got it wrong. The regulations favour the financial planners to protect their commissions, fearing we will advise the client of different products and therefore preclude their earn. BUT what if I read the plan and it is so obvious that the investments are not suitable, risky and pay big commissions? As the legislation stands I cannot give advice. Everyone has been focusing on "positive" advice (ie accountants suggest something else to the client and take the earn away from the financial planner), no one has thought, nor does the legislation allow us to provide the negative advice, and thus protect the client. This negative advice (to protect the client) is deemed to be "financial advice" as I see it and I have to keep my mouth shut for fear of being sued by the hungry financial planners.
Simon Drimer writes:
Re: Financial planners. Spot on Peter Mair (yesterday, item 3). Low-rent thieves in suits, most of them. Many people who visit financial planners are simply not financially sophisticated enough to make sensible judgements about the advice they are being given.