This article contains a little bit of questionable language and a sizable rant. Do not read if you are easily offended or a bad adviser.
It’s Bonfire Night here in the UK and the legend of Guy Fawkes is taking centre stage. Nowadays, Guy’s cause might be labelled as religious extremism. However, there are days when I’d like to take gunpowder to the worst aspects of the financial services industry…and here’s why.
Aunty Kay & The Bad Adviser (a true story)
A few years back, during the depths of the global financial crisis, I was visiting my aunty Kay in Australia. She asked me to look at some of her investments because they had dropped significantly in value, as had most people’s investments at that time. She wanted to ensure that she was receiving the right advice for her situation.
As I read through the advice she had received, I became more and more incensed. It encapsulated everything I hate about bad advice. Why?
The Written Report Was A Load Of Crap
I’ve tried to find a nicer, more polite way of phrasing this, but there just isn’t one. The written report had no redeeming features. Not one.
- It was 80 pages long.
- It included all correct legal disclosures, making it overly dense and difficult to comprehend.
- The parts that weren’t stipulated by the regulator were brief, irrelevant to Kay’s situation and (in my opinion) completely misrepresented what she had discussed with the adviser.
- It was generic investment advice, with nothing specific about what she wanted to do with her life and how this advice would help her achieve her goals.
- Kay had clearly stated she wanted investments that were no risk, yet her money was placed into two property funds and a bond fund. In my view, the adviser was either giving advice that suited himself or he was totally incompetent. In either case he shouldn’t be practicing.
- Despite all this, she was charged fees as if she had received genuine, personally tailored financial planning advice.
- The recommendations were clearly written for the benefit of the adviser, not my aunty.
They Hid Behind Regulation When Challenged
When, at my behest, aunty Kay made a complaint, the adviser and the network claimed that everything was done by the book and they were right. That sort of defensive attitude makes me even angrier. This was a lady who wanted a no risk investment, even if it meant no return; she fully understood that. The adviser just ducked for cover and, had I not been involved over the many months it took to resolve the issue, my aunty would have given up. Not once did anyone (not the adviser in question nor the network itself) call or write to her to apologise for what was, very clearly, poor advice.
Advice between a client and their adviser is personal and confidential and therefore, in my view, the penalty should also be personal. This adviser simply left the company and there was no comeback. He may well be working somewhere else giving the same shitty advice to some other poor, unsuspecting individual.
I do wonder why advisers like this aren’t fined or banned from practising at the very least. We deal with people’s life savings, after all; our profession should not be staffed by mugs.
Bad advisers hide behind regulations and blame the compliance culture for their own shortcomings, rather than focussing on what’s best for the client. Businesses that run client-focussed models don’t have any major compliance issues. Issues only arise when businesses try to comply to the letter of the law, with no consideration to the spirit of it.
They Displayed A Total Lack Of Knowledge
In the instance with aunty Kay, the adviser clearly had no understanding of diversification. This is such a basic tenet of good investment advice. If you don’t know something as basic as that as an adviser, then you’re a bloody idiot who should be incarcerated for sheer stupidity.
The Network Engaged in Cynical Practices
Let me be clear; I’m not anti-networks, I’m just anti-bad ones. In this instance the group in question appear to have mopped up a large number of bottom-end advisers to grow into one of the largest networks in Australia in a very short space of time. They had knowingly and cynically taken on advisers like the one who advised aunty Kay after the shake-out from the Aussie equivalent of RDR. Pay peanuts, get monkeys perhaps?
Here Endeth My Rant
It is my belief that the (totally understandable) lack of trust across the financial services industry is as a result of these types of issues. By addressing the trust issue, it is possible we could create an industry that is ten times the size of what we have now.
It’s beholden on all of us to be doing the right job for clients. Perfection may well be unattainable, but excellence isn’t. Be excellent!
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