Choose Independence and be really FREE!
Last Thursday was American Independence Day, the 4th of July, which celebrates the Continental Congress declaring that the thirteen American colonies were no longer subject to the monarch of Britain and were now united, free, and independent states.
My business, Wealth Train, is also independent. We don’t celebrate a national holiday about independent financial advice just yet, but as word spreads, who knows?
Why is independence so important though?
In 2009, the financial advice industry’s regulator, ASIC, made a submission to government that was designed to restore investor confidence in the financial markets and protect retail investors. ASIC went on record saying that the typical financial planner acts as a “sales force for financial product manufacturers” and that advisers are “a product pipeline”.
Eighty-five per cent of financial planners are associated with a product manufacturer, who are paid by commission or asset fees (commissions by another name). ASIC says these commissions and product affiliations are conflicts of interest which “distort the quality of advice” and should be banned.
The leading consumer advocacy group in Australia, CHOICE, is lobbying for the same thing.
When it comes to financial advice, there is a gold standard. Similar to the Heart Foundation’s “Tick” which guides Australians on healthier eating choices, members of the Independent Financial Advisers Association of Australia, the IFAAA, have to meet the Gold Standard of Independence™, which guides Australians on how to find financial advisers who practice without incentive and without conflicts.
To qualify as an IFAAA Practising Member, advisers must satisfy these three criteria:
1. No ownership links or affiliations with product manufacturers. Impartiality is impossible where an adviser has links to a product manufacturer. Ownership links create an environment where the adviser resembles, at best, a well-intentioned salesperson.
2. No commissions or incentive payments from product manufacturers. Commissions are payments made by product manufacturers to their distribution network. They create a conflict of interest between advisers and their clients.
3. No asset-based fees. Asset fees, although authorised by the client, are calculated precisely the same way a commission is calculated. Asset fees are incentives that prevent an adviser from being impartial and therefore create a conflict of interest between adviser and client.
The three stars in the symbol of the IFAAA represent the three criteria of the IFAAA Gold Standard Independence™ – no links to products manufacturers, no commissions, and no asset based fees. This is a Gold Standard for financial advice and the symbol represents trust and professionalism.
Are you starting to see why advice being independent is important?!
Many Australians are starting to take notice. A report by EY has found the use of independent advisers and independent advisory firms in Australia is expected to surge over the next three years, by 73 per cent and 93 per cent respectively.
I’m sure you can see why I choose to be an independent financial adviser and why I’m also proud to be one! If you see value in independent financial advice to help you achieve financial independence, then give me a call.
If you’d like to find out more about how INDEPENDENT financial advice could help you manage cash flow, pay off the mortgage faster, get the most out of super and invest wisely, then get in touch on 0411 484 464 or head to wealthtrain.com.au.
Daniel McGregor is the man behind Wealth Train and is a member of the Independent Financial Advisers Association of Australia. This advice may not be suitable to you because it contains general advice which does not take into consideration any of your personal circumstances. All strategies and information provided are general advice only.
Daniel McGregor and Wealth Train are authorised representatives of Independent Financial Advisers Australia AFSL 464629