Statewide Super head of financial planning, Lisa Palmer (Pic: Supplied)
Over-regulating financial advice could lead to a large segment of Australians missing out on a service that could be integral to their futures, Statewide Super head of financial planning, Lisa Palmer, has warned.
An outright ban on vertical integration of financial advice or excessive regulation of educational standards could drain talent from the industry and increase the cost of advice, making the sector even more at odds with community expectations, Palmer told Investment Magazine.
“As an organisation, we really support financial advice and financial literacy,” Palmer said. “Most people go into financial planning for the right reasons, it’s very much a small set of people who don’t focus on the wellbeing of their clients.”
Industry fund Statewide has 145,000 members from 25,000 different employers, with $8.5 billion in funds under management. The fund has a team of financial advisers who are funded from membership fees, and they provide support to members on choosing the right investment options, ensuring appropriate insurance cover and making optimal fund contributions.
The fund also has an inhouse comprehensive advice team that gives detailed advice for people in different stages of their life, whether they’re moving into retirement, considering aged care or investing outside of super. This is charged directly to clients on a fee-for-service basis.
Statewide also calls in external advisers in some cases, such as for people in remote or regional areas. These are vetted to ensure a strong compliance history and alignment with Statewide’s ethos but the fund does not tell them what they should charge; rather, it encourages them to form a direct relationship with clients.
The fund’s planners are all on a salary without large bonus payments, Palmer said, and this makes their interaction with clients more genuine.
“I’ve heard of bank planners where their total packages, including bonuses, have been in the vicinity of several hundreds of thousands of dollars,” she said. “That’s not what these planners sign up for.”
Palmer has seen a greater number of people coming to Statewide for advice since the Hayne royal commission shone a light on conflicted remuneration structures in retail superannuation.
“We have seen a big shift in demand for our advice services at that comprehensive level. I’ve got multiple examples where people have been shopping around, meeting with a number of planners before making their decision to come to us,” she explained.
She has also heard of increasing numbers of planners seeking work, possibly coming over from the retail sector but most of the growth in planner numbers at Statewide has come from internal promotions. It’s probably a good time to be recruiting, she said.
“I have heard that there are a number of planners looking elsewhere but for me what’s most troubling is hearing there are a number of planners leaving the industry altogether,” Palmer said. “Some of that is likely to happen because of the increased education standards but, unfortunately, I’ve heard many stories where the reputational damage in an organisation has become so great the environment is hostile and [people] just can’t cope with that continued hostility.”
Palmer was frustrated that things like the best-interests duty needed to be enacted, as she said an organisation with a culture that encourages the sharing of information, complemented by a formal framework to guide planners through the grey zones of what they do, and regular audits of planner files, could ensure advisers work in the best interests of their members.
On the “dirty word” of vertical integration, Palmer said it had benefits and should be managed, rather than banned.
“I think it has benefits but what we’ve seen is a sales culture colliding with advice itself,” Palmer said. “I’ve seen that happen firsthand through my career when you have an environment that promotes a particular behaviour, whether it’s through sales or revenue or whatever it might be.
“We’re able to offer an advice service as part of the membership and potentially losing that will mean this whole segment of Australians is going to miss out on what is still quality advice.”
Increased scrutiny and regulation of the planning industry will not come at zero expense, she warned, and could lead to higher fees and greater barriers to financial advice for those who need it most.
Educational standards for planners are important but these, too, could be taken too far, she said: “I think what we will find is we will have this real loss of experience through those who say enough is enough.
“The biggest thing of most concern for some is the need to pass a national exam by January 2021, and that looks quite extensive. We’re talking a three- or four-hour exam proposed and some of them might not have studied for 20 years. That’s big.”
Palmer also encouraged more women to become financial advisers, as it has proved for her to be a flexible career choice. Her role at Statewide is her first full-time job since having children and her kids are now aged 16 and 12. Working part time was never a hindrance to her career progress, she said.
Having a greater proportion of women in the industry would also help lessen the barriers to financial literacy for women, as many often feel uncomfortable taking the first step of seeking advice for a bad financial situation.
This has been part of the ethos behind Statewide’s sponsorship of women’s sports, she said.