Financial planning is a question of value in royal commission wash-up

It’s Financial Planning Week, but for many advisers it’s anything but a celebration as they struggle in the fall-out from the banking royal commission’s attacks on their industry.

Battered by the banking royal commission and years of negative publicity, financial advisers are doing it tough.

Their value is being questioned more than ever before, but even the critics say a good adviser can benefit the right clients. And new research has put a price on that value.

Tania Tonkin, director of dmca advisory, said it might be tempting to rely on family members and robo-advice for financial help, but some money matters were too complex to leave to “broad brush planning”.

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Superannuation strategies for retirement, investment planning and coping after a divorce were examples, she said.

“It’s a pity the Hayne inquiry (royal commission) has cast all financial advisers in such a poor light,” Ms Tonkin said. “They are not all the same.

Author Annelise Nielsen.

Tania Tonkin, a director at dmca advisory

“You need to find someone you trust with the right qualifications — possibly part of a wider advisory firm that includes accountants and specialist advisory experts.”

A new analysis by Russell Investments found that quality financial advice could add 4.4 per cent a year an investment portfolio in areas such as tax-smart planning and addressing investors’ behavioural mistakes.

Russell Investments Australia managing director Jodie Hampshire said this “far surpasses the typical amount charged in adviser fees”.

“What the negative publicity around the Royal Commission has missed is that the vast majority of advice clients benefit from quality advice,” she said.

“We believe financial advisers have never been more valuable in Australia — perhaps, at a time when the perception of their value proposition is at its lowest.”

The value of financial advisers was questioned by the banking royal commission.

Ms Hampshire said there were worrying signs in financial markets, and while advisers could not control markets they could help clients manage their emotions and make rational decisions.

Separate research by Sunsuper has found that more than three-quarters of advice clients believe it gave them more peace of mind and helped them prepare better for retirement.

Author and Sky News Australia host Annelise Nielsen travelled the country covering the royal commission and has examined the financial advice industry in her new book Money Spinners.

Ms Nielsen said taking your time to increase your own financial literacy was often more useful than paying an adviser for their opinion.

“For most people a personal financial adviser won’t be necessary and will likely cost you more in fees than you’ll see in returns,” she said.

“But for those who earn over a certain amount, and especially those who accumulate a lot of money in superannuation, they can be worth their weight in gold.”

Ms Nielsen said advisers were unlikely to tell clients they didn’t require advice.

“Sometimes all you need to do is leave everything as is, but there’s often little incentive for an adviser to say ‘do nothing’,” she said.

@keanemoney

GOOD SIGNS

• An adviser is upfront about costs.

• No pressure to do anything you’re unsure about.

• Takes the time to understand your full situation.

• Member of a professional organisation such as the FPA.

RED FLAGS

• Being pushed into particular products.

• Pressured into acting quickly.

• Suggests get-rich-quick strategies.

• High-risk investment recommendations even if you don’t like taking risk.

Originally published as Financial planning is a question of value in royal commission wash-up