Where Did My Money Go? The True Value Behind Financial Advice: Your Handbook When Dealing with Financial Advisers and Sorting Out Your Money

By Garth Broderick

This is the only financial manual on how to evaluate the value of your hard earned dollars that are charged by financial advisers.

As you know, there are already thousands of money guides on the market; maybe some of them are in your shelves.

Then... what is so special about this one?

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• Language: English
• Publisher: Garth Broderick
• Release date: Dec 1, 2020
• ISBN: 9780645043020

Garth Broderick

Garth Broderick has seen much during his almost decade long career as a financial planner - maybe a bit too much? He has taken it upon himself to reveal his experiences, thoughts and knowledge as a way to better help you understand your position as a client or potential client in the world of financial planning. He goes even further, educating and guiding you on how you can manage your own finances and take control over your life and become your own financial planner. You will not find Garth on the Financial Adviser Register on ASIC's Moneysmart website because the nature of this book is such that revealing his identity would put his relationships with friends, former and current co-workers at risk. Thus a Nom De plume (pen name) has been used. Garth does not wish to bore you with a personal story as it might lead you to believe that he has a bias towards a certain topic. However, he does reveal his experiences, gripes and future hopes for the industry he currently operates within. He has endeavoured to be as objective and honest as possible, without wishing to invite any aggression or controversy toward his person from fellow financial planners or clients. This book honestly states Garth's real experiences and opinion of the industry he has worked in now for almost a decade. This story follows the author's journey into financial planning, the characters encountered and his opinion on its past, present and future state of affairs. He also states his best tips for negotiating fees with financial planners, what they can do for you and whether they actually provide value for money.

Book preview

PUBLISHING INFORMATION

Author                      Garth Broderick

Title:                          Where did my money go!? The true value behind financial advice.

                                  Your handbook when dealing with financial advisers and sorting out your money

ISBN:                         978-0-6450430-2-0

Subject Category:     Finance, Personal-Australia-Handbook, Manual, etc.

                                    Managing Professional Relationships

                                    Personal Finance, How-to Guide

All rights reserved

No part of this book may be reproduced, shared, transmitted in any form or by any means without prior written consent by Garth Broderick. Should you wish to obtain permission, please email Garth at [e-mail]

Cover Design by      Katarina Nskvsky

Disclaimer

The material within this publication is of a general nature only, it does not contain and should not be misunderstood as personal financial advice. It is not the intention of this publication to provide specific guidance for your particular circumstances and thus it should not be used as the basis for any decision or lack thereof. This disclaimer poses that should you require it, seek professional, competent and trustworthy financial advice from a licensed financial planner who has completed their university education, passed the FASEA Adviser exam and ethics requirements, before making any financial decision. Garth Broderick disclaims all responsibility and or liability to any person who directly or indirectly takes an action or lack thereof based on the information presented in this publication.

Garth is not endorsed and is not affiliated with any financial product issuers mentioned within this publication.

Contents

About the Author

How can I make use of this book?

Introduction: An Overview of the Financial Advice Industry

Chapter 1    The evolution of the Advice Industry - From Shoot to kill to FASEA

Chapter 2    The increasing costs and barriers for clients to obtaining advice

Chapter 2.1 The Relationship between Financial Advisers and their Licensees

Chapter 3    What can I expect to pay a financial adviser / planner?

Chapter 4    The Financial Planning Carousel Process

Chapter 5    Where Financial Planners can add value in your life

Chapter 6    What does a Financial Adviser actually do when you’re not there?

Chapter 7    So… Is Financial Advice worth it?

Chapter 8    How YOU can take control of your life and be your own Financial Planner

Chapter 9    How do I do all of that stuff you mentioned?

Chapter 10  What’s the main difference between you and a financial planner?

Chapter 11  Fin & Main Conclusions (Too Long I didn’t want to read it all!)

Key concepts explained in the simplest of terms / Appendices

About the Author

Garth Broderick has seen much during his almost decade long career as a financial planner – maybe a bit too much? He has taken it upon himself to reveal his experiences, thoughts and knowledge as a way to better help you understand your position as a client or potential client in the world of financial planning.

He goes even further, educating and guiding you on how you can manage your own finances and take control over your life and become your own financial planner.

You will not find Garth on the Financial Adviser Register on ASIC’s Moneysmart website because the nature of this book is such that revealing his identity would put his relationships with friends, former and current co-workers at risk. Thus a Nom De plume (pen name) has been used.

Garth does not wish to bore you with a personal story as it might lead you to believe that he has a bias towards a certain topic. However, he does reveal his experiences, gripes and future hopes for the industry he currently operates within.

He has endeavoured to be as objective and honest as possible, without wishing to invite any aggression or controversy toward his person from fellow financial planners or clients. This book honestly states Garth’s real experiences and opinion of the industry he has worked in now for almost a decade.

This story follows the author’s journey into financial planning, the characters encountered and his opinion on its past, present and future state of affairs. He also states his best tips for negotiating fees with financial planners, what they can do for you and whether they actually provide value for money.

How can I make

use of this book?

Purpose of this Book: To educate everyday Australians what they can expect when they see a financial adviser and what they will actually do for you as a client and how much they charge you and whether that is value for money or not. Also this book explores how you can take over and become your own financial adviser.

Questions that people get answered when reading this book:

Financial Planning questions answered:

•How did the financial planning industry evolve into what it has become?

•How much does a financial planner cost?

•Are financial planners trustworthy?

•What does a financial planner do for me?

•What is the entire process if I decide to see a financial planner?

•When should I use a financial planner?

•Is financial planning only for rich people?

•Are financial planners salespeople?

•What does a financial planner do in the background when he’s not talking to me?

•How can a financial planner help me?

•How does a financial planner earn money?

•How can I do it myself?

Personal Questions Answered:

•How do I save money?

•How do I increase my earnings?

•How do I earn money without working?

•How do I reduce my debt?

•How can I invest money in stocks?

•How do I invest my superannuation correctly?

•How do I insure myself correctly?

•How can I retire early?

•How much do I need to retire?

•How much is the age pension, and is it enough to live off?

•How do I manage my estate plan?

This book is about empowering you as an individual into understanding that you alone (without the use of a financial planner) can deal with the various strategies and questions that are relevant to your current financial circumstances.

It is about taking control and in the process of doing so, saving on fees that would otherwise shave years or more off your retirement savings.

This book also aims to assist in general and functional knowledge of the financial services industry and what you could reasonably expect to encounter when aiming to seek advice from a financial planning professional.

It will provide practical insight into how the industry has become the way it has through ongoing and frequent legislative tinkering and where it is going in the next 6 years (2026). It also gives an overview of the financial planning process which will assist you again in giving you a sense on clairvoyance of what you can expect from a financial planner in terms of the professional relationship that you would be able to build with them.

I will help you in steering yourself towards financial independence and freedom too…probably the reason you picked up this book in the first place! I will set out rules that are universal in the pursuit of becoming financially free which will allow you some peace of mind for the future to come.

This book offers you practical financial wisdom in handling your own financial affairs in chapters 7 and 8 but take note: This isn’t your ‘Barefoot Investor’ book. It is specifically for the purposes of taking an inside look into the world of financial planning and how you as a consumer (or an adviser) might expect it to be.

It finally offers some anecdotes and personal experiences from my time of working in the industry to this day and literally every position from client administration, sales, and para planning and giving financial advice as an authorised representative to everyday Australians.

The target audience of this book is mainly directed at people who are currently in a relationship with a financial planner or those who have already seen a financial adviser before, and finally those who are considering the services of a financial planner.

Without further a-do, let’s look at how the industry has been shaped from its Wild West sales culture to one of modern day ‘professional standards.’

Introduction

An Overview of the

Financial Advice Industry

Once upon a time in Australia’s wild west of financial services there existed the embryo of what we would now call the financial planning industry, though in those days you would definitely not have called it that, it was more akin to a type of insurance or financial sales industry and didn’t resemble anything like it would today (at least in face value). ‘Financial planning’ is actually a relatively new term and profession only arising in the last 20 years or so with the advent of the financial services reform act to the existing Corporations act back in 2002.

Fast forward to 2020….As of Today, Australian Financial Planners no longer only sell us Life insurance and Whole of life ‘savings plans’ like they did decades ago, but they also look after billions of dollars in their client’s hard earned money and superannuation investments. There were more-or-less 26,100 authorised financial planners in Australia in June 2019. Fast-forward and freeze frame today. There are now roughly 21,000 active financial planners in Australia today (a sharp decrease of 5,000 in only one year and it’s getting lower every month) – and in my opinion, that is destined to be as much as there ever will be.

I say this because as a former adviser, I see there is writing on the wall; many financial planners are not cut out to continue ahead as this industry is culled and decimated through the latest regulatory reforms after the Royal Commission and in the wake of the new FASEA (Financial Adviser Standards and Ethics Authority) educational, ethics and compliance requirements. We will go more into what requirements those are later.

Now I ask myself as a financial planner: Is that a good thing that there will be less advisers in the industry as a result of this culling? Yes, it definitely is. Please note that the only group who says this isn’t a good thing is a ‘special’ type of demographic in the financial planning world – this demographic of the financial planning community are the ones that I like to classify as ‘endangered and soon to be extinct.’ These are advisers who are dreading the approaching asteroid known as the ‘FASEA educational standards’ which will have first contact with the industry on 1 January 2022. The second FASEA educational asteroid will have first contact on 1 January 2026.

To all of the ‘soon to be extinct’ financial planners who just picked up this book out of curiosity, your response would be: "All of these new educational requirements, laws and regulations don’t allow me to make a decent living! My clients will now suffer because they can’t access my advice due to increased costs! It’s terrible! And who said I wasn’t ethical – I don’t need to have a degree and take an exam to tell me that I’m ethical!"

To that my response is: "The new standards are in place to professionalise us in the eye of the public for better or worse. Look at what our peers both high and low have wrought upon the industry evidenced in the Royal Commission hearings, you can’t honestly say that ALL advisers are benevolent souls who only do the best to help their clients day in day out!."

You’ll say to me that: "It’s the bad apples! Not me!"

Then I’ll say: "There’s enough bad apples to have dozens of whole rotten orchards!"

Now back to the readers…

There are so many bad or incompetent advisers in this profession who are evidently uneducated, devious, un-altruistic and whom arguably do nzot recommend what is in their client’s best interests. This with the ever increasing and demanding laws put on not just those bad actors, but all of the financial planning industry – is supposed to be designed to stop those specific bad advisers.

These laws and reforms should make it easier for ASIC and other regulators to have an excuse towards the bad advisers to ban them, suspend them, imprison them, fine them, whatever. For all financial planners who aren’t one of those bad apples, it’s arguably a good long term outcome. Those advisers that are competent and diligent enough to give good advice and work within the laws and most recently within the FASEA educational standards have nothing to fear!

Some fears that a competent and diligent adviser would have at this time would be the increased costs of doing business which are ultimately subsidised by their client and thus forcing lower socioeconomic Australians out of the ability to get good and prudent financial advice. This is simply because the adviser cannot afford to spend time on them for the amount of money they charge.

The other fear would be the loss of trust bad advisers forced upon the industry and good advisers by association.

The idea of losing their client’s trust should be less worrying because clients would be able to see the difference between the adviser put on show during the Royal Commission and the adviser who serviced them, helped them and they would have no cause for doubting their competent and trustworthy financial planner. The rising costs of obtaining advice for less wealthy Australians is more worrying because the increased costs of doing business now means that some clients are just not economical to service in a capacity that would have been economical in the past. In a sense, financial planning could only be reserved for the wealthy going forward.

But then again… why would any person need to pay a financial planner thousands of dollars in fees per year after they’ve finished reading this book? This book is about empowering you as an individual / family. Throughout the course of reading this book, my hope is to have made you to understand your own financial situation and goals enough that you will be able to manage and make plans with your own money. Ultimately taking control and becoming your own financial planner!

I mean, being your own financial planner might sound like an impossible thing at first thought, but it’s easy enough considering that prior to the introduction of the FASEA educational standards for financial planners coming into existence in 2017, ‘professional’ financial planners with only a prior RG146 (Regulatory Guide 146 is a financial regulation for anyone providing financial advice) certificate could do it for you which they did and still currently do… without going to university, without passing a national exam, without having to be subject to a mandatory code of ethics and conduct, without having to do a reasonable amount of continued professional development! It’s as if the industry until recently has been operating without those things… and sadly, it has been.

Today’s Australian financial planning industry which oversees billions of dollars of funds under management; there exists plenty of financial planners that have never even attended university or similar educational standards (AQ8). Some are former tradesman, plumbers, plasterers and electricians, real estate agents, salespeople who thought they might give financial planning a go; a lot of the older financial planners are former insurance salesman/agents from yesteryear before financial planning would become a ‘profession’.

I would know, because I’ve worked alongside people of whom all of these former occupations turned financial planners belonged to. Before you scoff at the financial planners who used to be involved in those trades mentioned, let me be clear… I’m not saying tradesman for example are uneducated or dull… they are educated, in their own field, to which they have apprenticed to do…for years under a master of the trade; but have them, you or I complete a RG146 course within a few weeks and put them in a financial planning position and we’ll see if they’re as good as they are being a financial adviser as they are tradesman.

Trades apprenticeships take years to complete, through that experience; knowledge and expertise is formed. Once again, I stress that not long ago, you or I could all spend a pitiful 1-4 weeks completing an RG146 compliant course from an online education provider and be able to then for example advise your client to borrow/gear money using their home as a security and put it all into shares. Legislation surrounding the educational requirements to give advice on financial products and strategies has been broken along with the educational standards of Financial Advice providers, and it’s taken a looong time to fix it.

There is a knowledge gap between what people think advisers know from what they themselves know and how easy it would actually be to close that gap.

If we take a look at ASICs media releases – almost every month we see at least 1 adviser being banned, sanctioned or getting fined for misconduct or unconscionable conduct. This causes reputational damage to other advisers who are educated competent and giving advice in the best interests of their client. Giving ‘financial advice’ in the past was more akin to selling a financial product or service and it did not even require a university degree let alone any formal qualification, you could have in the early days done your week’s short course and be deemed compliant by RG146 standards (ASICs regulatory guide 36) and start advising retirees on how to invest their life savings! Ever further into the past in the dark days, before (1992)… absolutely nothing, not even an Australian Financial Services Licence was required, just agency or employment with one of the big financial companies flogging whole of life insurance policies! Am I losing you? Fear not, dear reader, all will be explained within this book. But first…

Like we did with tradesmen, now let’s compare Financial Planners to Doctors in the Medical profession. In Australia, doctors make up around 17,000 of our population, whereas by last count financial planners make up roughly 25,000. Now to the financial planning clients still reading this book – Is it fair to compare doctors and financial planners? Yes… yes it is. Consider the simple fact that doctors must cure you of your physical ailment and look after your medical wellbeing… well, a financial planner is supposed to cure your money ailments and look after your financial wellbeing.

A financial planner should be a doctor for your finances. Nothing less. However, Doctor’s being the important profession that they are; are subject to the ancient Hippocratic oath (code of ethics/conduct), massive amounts of study and experience, intelligence, due care and skill and after all that they are finally able to call themselves medical doctors. So why aren’t Financial Planners put through the same rigour if they have that much power to destroy your financial life (and by extension your mental health) by making profiteering recommendations after falsely gaining your trust? They shouldn’t.

You wouldn’t expect a doctor to recommend or prescribe a medication or treatment for your ailment that doesn’t even suit your needs or purpose only for their benefit because they get a sweet kickback and more money from recommending that prescription would you? Well this is the akin to what Financial Planners have done very frequently in the past and it’s a big, big problem in the industry, especially the banks.

It’s called having a conflict of interest and it’s a major thorn in our (the good advisers out there) sides, because whilst we can manage our conflicts of interest by recommending strategies and products truly in our client’s best interest; honestly - where does it start and stop; being conflicted that is? Is the AMP/IOOF/Bank financial adviser who can only (or is strongly incentivised to) recommend AMP/IOOF/Bank products conflicted? Is the Industry Super internal adviser conflicted because they only give advice on their own employers’ fund not others? Can a ‘non-aligned’ financial planner stay out of conflicts of interest when they recommend and receive commissions from insurance products and the old superannuation ‘grandfathered’ commissions – can they justify their APL (approved product list) which has 99 products approved by their licensee but not the last 100 which may be suitable to a client?

It’s hard to draw the line somewhere. The blame game of who’s wrong in an industry sense usually ends up in a 3 way fight between (Corporations) Financial Product manufacturers, Financial Advisers who use these products for their clients & ASIC, the regulator (and by extension the Government). More often than not it’s the non-aligned, small financial planners who get the short end of the stick in terms of sanction, punishment and finger pointing as they don’t really have real financial conflict resolution and lobbying power like the banks or other large financial institutions have.

Within this more-or-less intertwined 3 way struggle, you see the connections through financial planners within those large ‘aligned’ financial planning practices and even from non-aligned advisers recommending their licensees’ products. These aligned financial planners have been small yet effective cogs within these massive banking and financial institution’s engines - contributing toward the product manufacturers’ revenue streams who are thus able to lobby the government / regulator who for the most part sat on their hands as the amount of complaints and the media built up enough bad credit.

That bad credit which build up over time eventually forced the Government and regulator to act out of public pressure and it turned into the Royal Commission into banking and financial services.

It all stems to a large degree from the Product providers who have also notoriously given their in-house advisers and even the ‘non-aligned’ advisers and their licensees’ sweet kickbacks and incentives to recommend their product over all other competitors which really does raise issues with conflicts of interest.

The largest failure of the Royal Commission recommendations was to allow ‘vertically integrated’ financial planning practices to continue recommending their own products through aligned or in-house advisers. The only main benefit that vertically integrated practices offer to the end client is that they have scalability and easy access to an inbuilt supply chain allowing them the ability to industrialise their processes – which allows the ability to pass on savings onto their clients. But it does not help when it creates conflicts of interest that are inherent within these large practices which cause advice that puts the client in a worse position. If you go to