News Alert - What you need to know about the Banking Royal Commission and how it could affect you

Equitem’s take on the Royal Commission’s findings and Financial Advice

We have been following the Royal Commission into Banking Practices closely, and you will have no doubt heard about the Commission’s early findings through the media, particularly regarding Financial Planning practices.

Equitem has long held the view that an investigation of some sort was well overdue, particularly in the Financial Planning space, as banks, fund managers and other institutions have serious conflicts of interest when it comes to providing services to their clients.

By way of background, until as recently as three years ago, Financial Planners were bound only by a Code of Conduct to put a client’s interest ahead of their own. This was mandated by our professional body, the Association of Financial Advisers (AFA), of which Equitem is a member.

Since then, the Government and ASIC introduced the ‘Best Interests Duty’ Law, which states that Advisers are now personally legally required to act in the best interest of their clients at all times, above and beyond any ethical or moral requirement that exists. Financial Advisers are the only professionals in the country that are bound by such a law. Not even our Lawyers, Doctors, Accountants, Brokers, Agents or Retailers are bound, by law, to act solely in the interest of their clients.

The issue, therefore, becomes how can a Financial Planner, who is a salaried employee of a financial institution or insurer, possibly achieve this legal mandate when they are also legally required to maximise shareholder return and to achieve their own personal and business product and revenue sales targets? They can’t, and therefore they are conflicted.

We have been vocal through the AFA and other professional bodies and local government that one change we believe needs to happen is that if a Financial Adviser is an employee of a bank, investment company, insurance company, or any business that has shareholders or has their own in-house products to sell, they should not be allowed to be called a Financial Adviser. They should have to be called a Broker or Salesperson because they are not ‘advising’, they exist only to sell their employer’s product.

Equitem was formed in 2001, and our wonderful team choose to work here for the opposite reasons. We exist because we can truly operate in an environment without conflicted interests ensuring our sole focus is improving our client’s financial literacy and well-being. We exist so people have genuine alternatives available to them to seek professional advice, irrespective of product. Managing all the facets of one's financial life is complex. People need access to professionals with the confidence that they will truly be helped at a personal level, and not sold to.

At Equitem we charge a flat and transparent fee for providing Strategic Advice, and / or for the Management of funds or insurance policies within our business. We partner with professional people and organisations who align with our cultural and ethical stance on how improving client outcomes and experiences must be at the forefront of everything we do.

There will be more revelations to come as the Royal Commission continues, and there will be new policies and laws drafted, new compliance regimes and years of transformation as a result. In the meantime, we urge you to follow these tips for seeking professional financial advice by working with a business or an adviser who:
  • Discloses their fees, clearly and regularly
  • Charges for their advice via an engagement, and not a product
  • Is not conflicted because of having their own products to sell, or use only certain providers because they pay the highest commissions or rebates
  • Provides you with a choice of a fee instead of a commission for insurance products
  • Connects with you personally because seeking advice is not about getting rich quick, it’s a journey and a long-term partnership
  • Takes a holistic approach to ensure all your financial bases are covered
If you have ever sought advice from a bank or financial institution that may or may not yet be part of the Royal Commission, and are now concerned with the advice that you have received, please contact our office or your trusted adviser for assistance. We regularly see clients who come to Equitem, having sought advice elsewhere in the past and, having paid significant upfront or ongoing fees, are yet to receive any benefit or service beyond their first meeting. It is not too late to address this and to ensure you are on the right financial path.

As always, my team and I are here for you, our clients and partners, so if you have any questions please don’t hesitate to get in contact with us. We always look forward to hearing from you.

Kind Regards,

Bradley Ellison
Director, General Manager - B.Bus Mgmt, B.Bus IS, DFP (Fin Serv.), AFA
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