A mortgage broker has claimed that financial planners have lost the trust of the Australian public, and that people now contact their mortgage broker as the first point of call to solve their financial problems.
“Research shows that between 60% and 80% of people believe that the best source for financial advice is to see a financial planner. However, the proportion of Australians that have an ongoing and engaged relationship with a financial planner appears to be in the range of 10% to 20%, based on various studies (I suspect it’s towards the lower end of this range),” he wrote.
“Why are people so reluctant to engage with a financial advisor? I believe they have generally lost the trust of the Australian public because of their reliance on commissions from only one investment asset class (managed share investment products) and reluctance to consider property investing in their advice. The important point is that Australian’s don’t believe that they can get independent and reliable advice from financial planners.”
He went on to add that accountants, who are the second most popular source of financial advice behind family and friends according to ASIC research, tend to get bogged down in tax compliance activities “and rarely have time (and perhaps knowledge, license, PI cover, etc.) to spend time on delivering proactive advice and planning”.
A broken system
Wemyss has claimed that the financial services industry is broken because Australians don’t have a trusted source they can call upon to help them make financial decisions.
“This is evidenced by the fact that people seek more financial advice from family and friends rather than trained professionals (as confirmed by ASIC research),” he wrote.
Claiming that mortgage brokers seem to have captured the trust and respect of Australians, Wemyss has called for brokers to make the most of the “enormous opportunity” that exists to help Australians make this country the richest in the world.
Financial advisers may be concerned to read Wemyss’ suggestion that, given the role that mortgage brokers play, a better description of the service that they provide is ‘financial broker’.
“People contact their mortgage broker as the first point of call to solve their financial problems or get questions answered. Mortgage brokers foster a network of trusted advisors to whom they call upon to solve their clients’ problems. The term ‘mortgage broker’ doesn’t encompass the help offered, so perhaps ‘financial broker’ is a more accurate description,” he wrote.
“A Financial Broker’s relationship with its clients is based on mutual respect, honesty, trust and advice – quite distinct from a simple product sales relationship of past financial services participants.”
So is he suggesting that mortgage brokers muscle into the financial advice space? While Wemyss doesn’t advocate that all mortgage brokers should become financial advisers, he has claimed that brokers should broaden their horizons.
“In essence, we simply need to help clients avoid making poor financial decisions and avoid procrastination. We don’t have to morph into financial planners or tax advisors – I’m not suggesting this – although some of us may choose to engage in further training. In simple terms the approach I’m suggesting is “thinking beyond the mortgage”.”
Click here to read the full manifesto.
By Ian Fieldman