Can trust in financial planners rebuild after royal commission?

FINANCIAL planners are feeling the pressure from a week of disastrous evidence uncovered at the banking royal commission, but it’s not difficult to ensure you don’t get burnt.

TRUST can crumble quickly, as the finance world has discovered in recent days.

But it also can bounce back. I remember studying journalism in the 1990s and being shocked to learn I was joining a profession viewed as one of the least ethical and honest of all occupations.

At the time journalists were highly regarded by just 7 per cent of Aussies, and ranked only above car salesmen, according to Roy Morgan Research’s annual survey that has been running since 1976.

Fortunately, since then newspaper journalists have improved to 20 per cent on the trust-meter, better than several jobs including politicians (16 per cent), stockbrokers (11 per cent), real estate agents (7 per cent), advertising people (5 per cent) and car salesmen (4 per cent).

Commonwealth Bank executive Marianne Perkovic was grilled at the royal commission. Photo: AAP Image/Julian Smith

Soon there may be another profession ranked lower — financial planners. In 2017 these guardians of our money were seen as ethical and honest by 25 per cent of Australians, but last week’s financial services royal commission evidence should spark a plunge.

The litany of lies, rip-offs and corporate greed uncovered at the royal commission paints all financial planners in an unpleasant greenish-brown shade, even though the problems outlined have been in big, profit hungry companies.

REVEALED: The Commonwealth Bank charged dead clients for financial advice

AMP admitted to charging clients for advice they never received, then lying to regulator ASIC many times in a cover-up while its senior executives enjoyed multimillion-dollar pay packets.

The Commonwealth Bank agreed it was the “gold medallist” in fees for no service, where people get charged annual fees for ongoing financial advice but never speak to an adviser.

Smaller financial planning firms, many who have spent years building up strong relationships with their clients, are fuming.

AMP executive Anthony “Jack” Regan leaves the royal commission. Photo: Stuart McEvoy

MidSec director and adviser David Middleton says the evidence given at the royal commission is an “absolute disgrace” and many professional advisers are “heartily sick” that the shocking behaviour of some high-profile firms is viewed as indicating industry-wide malpractice.

Wealth for Life Financial Planning principal Rex Whitford agrees that all advisers “get tarred with the same brush”.

“We’re not looking to rip people off. No one can have a sustainable business whose sole purpose is to rip people off — your reputation is everything,” he says.

The problem with the big firms is that their unwieldy systems and churning core of advisers leaves customers out in the cold, but that doesn’t mean that all financial planning is pointless.

Good financial advice is worth its weight in gold. Clever strategies can potentially save you tens of thousands of dollars in tax, earn you hundreds of thousands of extra dollars from investments or retirement savings, and protect your family with calculated life insurance.

Many Aussies are happy with their advisers, at banks or elsewhere, and shouldn’t get rid of them simply because a few bad eggs are stinking up the industry.

But always ask questions and know what you are paying for. A good adviser will be able to explain how they deliver you value for your money.

Trust in financial planners has suffered a big dent, but it can improve over time, just like it did for us pesky journalists.

@keanemoney