Why is independent important? (Part 1)
On the fourth day of independence, we examine why it can be important that your advisor is independent. On the first day of independence we gave you our Declaration of Independence; on the second day we explained why independence is not enough and on the third day we showed you where you can find Australia’s independent financial planners.
When it comes to your finances, it’s a fair bet that financial independence is high on your list of goals. And if it’s not, it should be.
Independence means being able to afford what you want to do when you need or want to do it. It means you can live your dream lifestyle and it means you are able to provide all the opportunities you can to your family.
Independence is an incredibly uplifting word because in one powerful word it conveys so much.
On the upside side it reminds us of freedom, peace of mind, confidence and control. On the downside lack of independence fills us with a sense of uncertainty, a sense of dependency on forces outside of our control, a sense that we are exposed to conflicts that can work against us.
In the extreme sense, this lack of independence in the 13 American colonies filled them with a rightful fear of tyranny, abuses, injuries and despotism. They had long trusted a sovereign in a nation far across the seas to act in their best interests and they had been sorely let down. In response they sought and then fought for their independence.
If we look at the rise of America since that time, it is clear that achieving independence was the best thing they could have done politically and financially. Independence had a large impact on their financial wellbeing.
Unless you’ve been sleeping under a rock in recent years, you will be aware that advisors tied to financial institutions have wreaked havoc on the financial lives of many Australians. None of these advisors had independence from the very financial institutions that lost these clients’ money.
If you’re a Macquarie Private client you’ll be aware of the Penske File and other scandals that have burnt people just like you. Advisors encouraged clients into their own Macquarie products to line their own pockets. The number of Macquarie Private clients who have fled this scandalous behaviour in recent years to independent advisors has been significant.
If you’re a Commonwealth Bank client (they own Count Financial, CBA Financial Planning and Financial Wisdom) you know of the ongoing scandal that has enveloped many of their advisors. Again, CBA tied advisors encouraged clients into their own Commonwealth Bank / Colonial products to line their own pockets. So too at NAB/MLC and their tied advisors. AMP and their tied advisors have a similar poor track record. Smaller operators such as Storm Financial have tied themselves to financial institutions via white labelled products removing any independence and again losing their clients’ money.
A good way to see if your tied advisor at least makes an attempt at an independent attitude is to see what platform they funnel all their clients onto. If you’re advised by a Westpac/BT tied advisor and they encourage you onto a BT or Asgard platform; a NAB/MLC client and they encourage you onto a MLC/Navigator platform; a Macquarie Private client and they encourage you onto Macquarie Wrap; or an AMP tied advisor who encourages you onto the AMP platform; then they are not even pretending to be independent.
Key to note here is the fact that if you seek independent advice it does not automatically mean you will be getting good advice. We explained why independence on its own is not enough here.
We have more than enough evidence from the seemingly endless scandals plaguing advice tied to financial institutions listed above. In case after case, advice given by advisors tied to institutions and/or remunerated through commissions led to clients who trusted them losing significant sums of money.
Nothwithstanding these scandals, we know many advisors tied to institutions who are doing a good job for their clients and who seek to fight against the internal structures inherently biased against the clients. These are good people who avoid commissions and who do the best they can in an inherently conflicted situation.
We are also encouraged that more and more advisors are moving towards true independent professionalism in financial planning. There are 74 such advisors in Australia and it is rising continually.
From the historical and recent lessons above, it is clear why independence was in America’s best financial interests and why it’s best for yours.
On the fifth day of independence we examine other key reasons why independent financial advice can be best for you.
- On the first day of independence, your financial planner gave to you ‘Quantum Financial’s Declaration of Independence’
- On the second day of independence, your financial planner gave to you ‘Libertatem non sufficit… or Independence is not enough’
- On the third day of independence, your financial planner gave to you ‘Where can you find Australia’s independent financial planners?’
- On the fourth day of independence, your financial planner gave to you ‘Where can you find Australia’s independent financial planners?’