Jim Stackpool

A feature in the recent AFR highlights the failure of the Hayne Royal Commission to address the loopholes in the ‘Safe Harbour’ law.

Criticism of Evans Dixon’s heavy promotion of its own URF (US Masters Residential Property Fund) to its clients, as well as their reliance on the fund, which accounts for 67% of Dixon’s total group revenues, is currently gathering steam.

While the URF Fund’s complicated, multiple fee structure is relatively rare in Australia, conflict of interest between advice and product is not.

Drawing attention to this ongoing conflict in the financial services industry, Jim Stackpool of Certainty Advice Group in Sydney states that the law fails to protect the consumer from vertically integrated business models such as Evans Dixon’s. “The fact there’s a conflict of interest is irrelevant (under law),” he says.

He believes a contributing factor is the client’s trust that their adviser has done due diligence on the recommended funds. “That is what people pay for. And when they’re getting poor advice, they still don’t leave. There are often high fees on turnover of assets, which make it harder to close funds. People are busy, they don’t have time to do all the research, and they trust their adviser to do the right thing. And a lot of these institutions know this.”

In recent years, the value of URF has turned down sharply, with more and more investors speaking openly about their losses. Annette Pulbrook of FinBiz Advisers in Warners Bay asks: “What would be interesting to know is if Dixon had been advising their clients to sell out at any point. They’d turned off the management fees for the URF in 2017. Now they’re in damage control against a potential shareholder revolt, as clients have not only been losing money in some of their Dixon investments, but also from their Evans Dixon shareholdings. I suspect Dixon are less worried about the quality of their advice, and more concerned their clients may be turning on them.”

CFP Anne-Marie Humphries of Huon Financial Planning in Albury sees conflicted advice as being about ‘ticking boxes.’ “Vertically integrated institutions know how to tick the compliance boxes under the existing framework to protect themselves, while still recommending ‘in-house’ products to their clients. It may not be the best option for the client, but it’s legal, and they can do it.”

As to how consumers can look after their investments to the future, Stackpool’s advice is simple: “First, consumers must learn that the ‘Safe Harbour’ law does not protect all their interests. Trust in financial advice cannot be built when conflicts (perceived or real) are present. It all comes down to how advisers are paid – disclosure is not enough. Renumeration structures drive culture; unconflicted remuneration where clients pay for advice directly rather than advisers being paid from products is the best way.”

By Jim Stackpool, Director

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Jim Stackpool

Certainty Advice Group has announced a certification mark for ethical financial advice. It’s a first in Australia.

“Since 2005, we have always had a simple objective,” says MD of Certainty Advice Group, Jim Stackpool. “Consistent and methodical delivery of comprehensive and ethical advice without any real or perceived conflict or incentives. So by creating this new certification mark – called Certainty Advice – we are certifying our approach to not only make it accessible to more advisers, but more Australians.”

What is the Certainty Advice certification?

The mark certifies an individual adviser. As per any certification mark, there are checks to ensure compliance and adherence. The mark certifies advisers who adhere to include common approaches: how value is determined for clients, how clients are engaged and re-engaged every year, and how advice is priced without conflict. Being comprehensive and priced on value, it’s different from what most clients have experienced.

For Annette Pulbrook, the founder of boutique financial advice firm FinBiz in Newcastle, the new certification sets in stone the approach she has delivered for years. “Being part of a group of advisers all thriving on delivering value as judged by clients, not time sheets, is the only way. The certification mark provides my growing team with a platform tested and used in lots of other firms, not just ours. And it makes me more confident! Our clients keep re-engaging us – not for specific products or hours – but the value we provide”

David Murdoch, director of Paxton Bridge in Melbourne, says the certification rewards his firm for having the right conversations with clients. “Some advisers love picking shares, or untangling financial structures, or battling underwriters. While all those roles are important, the beauty of Certainty Advice certification is that it provides us with an ethical and commercial blue print to do what we love: financial project management.”

Jim Stackpool believes that while the new certification will take some time to take hold in the financial advice world, it will ultimately deliver comprehensive and ethical value for more Australians every year. “It’s not for every adviser, but I do believe this form of financial advice will be more accepted by most Australians by 2030.”

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Jim Stackpool

While many believe that Big Data and convenient technology will make financial advice easier, at Certainty Advice Group they’re not so sure.

What truly valuable advice is (and how clients can identify it) is the topic of this nationwide advice firm’s latest white paper, released May 2017.

“While accessible, easy apps for your quick ride, your pizza delivery, and your online shopping work great – should we be offering a quick fix for something so personal as advice?” asks Certainty Advice Group MD Jim Stackpool.

“As advisers who work closely with couples, families, and businesses through their major life decisions,we believe that truly valuable financial advice can never be just another product,” he says.

In the May 2017 white paper What Price Valuable Advice? Certainty Advice Group addresses what is missing in the financial advice conversation.

What Price Valuable Advice? searches the ever-changing landscape of tougher legislation, quick fixes and ‘robo-advice’, and instability for answers.

Exploring well beyond client concerns around investments, Certainty Advice Group has travelled all over Australia in search of the very root cause of why people seek out financial advice. “If you just talk about the insurance and Super and nothing else, it’s very short-sighted,” says Paul Gilbey of Hywood Partners in Perth “Taking a big-picture view means that you get client buy-in to the whole process.”

Taking a long-term approach is about the hard work of providing advice.

Rather than plugging clients into a program or a product, Certainty Advice Group considers that while this work is often challenging, it’s ultimately rewarding for the client.

“We help them create a much more disciplined approach and challenge their beliefs about money. When they’re actively participating in the advice, our clients feel like they’re doing more themselves to achieve their outcomes,” says Scott Farmer of Bravium in Canberra.

From asking the deeper questions of our clients, to keeping advice unconflicted by product fees, to generating trust over time, What Price Valuable Advice? is an important and timely touchstone for all advisers and for Australians seeking more meaningful insights into their dreams, goals, and desires.

Certainty Advice Group’s new white paper What Price Valuable Advice? is available for download.

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Jim Stackpool

“Thanks to reports like Mr Sedgwick’s more Australians will come to realise the banks are more like drug companies providing product and not like hospitals or doctors providing services.” Says Jim Stackpool Director of a national group of advisory firms – Certainty Advice Group.

“His report highlights that people’s behaviours will always align to how they are rewarded. If Mr Sedgwick’s recommendations are implemented, more Australians will realise how their banker or adviser is being remunerated. Then they will better understand if the advice or product offered is in their best interests.”

“There is a lot of talk about putting the customer first and acting in the best interest of the customer. It would be refreshing if this was done rather than talked” says Certainty Adviser Annette Pulbrook, Director of FinBiz Advisers in Warners Bay.

“Whilst the banks have a right to provide advice, there will always be a natural conflict between shareholder demands (and therefore management’s strategy) of the product manufacturer and advisors providing advice under the licence of the product manufacturer” says Scott Girdlestone, Director of William Buck, Sydney.

Stackpool says “The sales cultures of the banks, insurance companies and other financial institutions won’t change due reports like Mr Sedgwick’s or even a possible banking royal commission. What is changing is consumer’s understanding of a product-pushing sales culture versus a non-conflicted professional advice like they currently obtain from their doctor.”

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Jim Stackpool

A national group of financial advisory firms, Certainty Advice Group, predicts the populism sweeping aside long-held assumptions about financial security will change the financial advice landscape forever.

This theme is explored in the recently released white paper: Our Secret Financial Insecurities: Ensuring our rough patches don’t become our financial realities.

“Since Trump gobsmacked most media experts; since the Shooters Party broke the 68-year reign of the National Party in the Orange NSW by-election; and since Brexit the message is becoming clearer,” says MD of Certainty Advice Group, Jim Stackpool. “People hate feeling powerless. Neither government policy nor technological change can halt this response to real issues, real concerns, and real people.

“Financial advice needs to change, and it needs to change fast.”

Certainty Advice Group predicts that despite the relatively small drop in the recent Westpac-Melbourne Institute Consumer Sentiment Index for Australia (dropping only 1.1 per cent in November), Australians’ private feelings about their financial insecurity and control are growing. A large part of this is due to lack of knowing who to trust and turn to for broad, unbiased, professional advice.

“Financial advice has become a product. And more Australians are figuring that out,” says Paul Heatley, GM of TWD, an award-winning Certainty Advice firm in Perth.

Paul started his advice career in a bank out in the Narrogin wheat belt, where he was trained to offer the impartial, ‘invisible’ advice that helped clients forward financially. “That worked until this kind of new bank thinking had us focus on sales targets instead. The result is that more people are disillusioned as to where to get that advice.”

Jeff Thurecht of Evalesco, a Certainty Advice firm in Sydney, believes this is about keeping up with the Joneses “or, ensuring our kids keep up with the Joneses’ kids,” he says. “What’s different today, thanks to ‘financial pornography’ is that too many people are still in the dark about their financial lives. They don’t know or understand basic products, they don’t know the questions to ask or who to ask them of, while, understandably, feeling they are deserving of the rewards of their hard work. No one is immune. So, we in the advice industries – such as accountants, banking, and financial advisers – have to work harder to address these issues if we are to get through this rising tide of financial insecurity.”

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Jim Stackpool

A national group of financial advisory firms predict the ‘territorial dispute’ between accountants and financial planners will soon be a trend of the past. This theme is explored in the recently released white paper Crossing the Divide: Financial advisory, accounting and the SMSF opportunity

“The industry experts got it wrong,” says MD of Certainty Advice Group, Jim Stackpool.

“Across all media outlets, experts were expecting thousands more than the few hundred accounting firms that applied for their own financial services license in advance of the June 30 exemption cut-off date.

“The reason they got it wrong? It’s simple. The advice is different.”

Certainty Advice Group believes that today, Australians are more informed and far better aware of the differences between why they see a financial adviser and why they see an accountant. A large part of this is the great job accountants have done to build their clients’ trust in their advice.

“Gathering trust is the big issue,” says Scott Farmer, the principle of Bravium, a Canberra-based Certainty Advice firm. “Accountants aren’t thinking about us and our role as financial advisers. They will never do anything to endanger their trusted role, so logically they will focus on their accounting expertise. Any professional dispute has been overstated for years”.

According to Travis Martin of TWD, a Certainty Advice firm based in West Perth, these   perceived disputes had more to do with issues of conflicted advice models inherent in vertically integrated operations. Travis sees that this has rightly caused significant damage to the reputation of the financial planning industry. “We just don’t see disputes in our world because we don’t have any of the industry’s incentive barriers affecting our advice. Like the medical profession we seek to collaborate and find solutions that work for the client, the accountant and our firm”.

Annette Pulbrook of FinBiz, a Certainty Advice firm from Warner’s Bay, believes former disputes were mainly between the financial product-based firms whose future is being commoditised. “Those financial planning or accounting firms fighting over the same clients are destined for a frustrating future. The rising level of professionalism will overwhelm them if they really believe their competition is one another. Their biggest competition is their mindset and old advice habits which will just keep them busy but less productive every year.”

Overall, accountants with a similar advice niche to Certainty Advice Group just get it. As ‘fourth generation advisers’ (whose main priority is the client’s needs, best interests and greater good), we could have much in common. Jeff Thurecht of Evalesco, a Certainty Advice firm based in Sydney says: “We accountants that get it, we both talk a common language, we have extensive experience who have similar complexities, aspirations and fears, which, though lots of work, makes it enjoyable and fruitful for all involved”.

Certainty Advice Group’s new white paper Crossing the Divide: Financial advisory, accounting and the SMSF opportunity is available here.

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Jim Stackpool

Do advisers really need a tertiary compliance degree?

The nationwide Certainty Advice Group has responded to Treasurer Morrison’s proposal for more stringent compliance accreditations.

In his recent blog post, Certainty Advice Group founder Jim Stackpool sparked debate in the industry by proposing an alternative to the legislation. Hands-on experience, similar to an accountant’s ‘professional year’, could tackle the rapid changes in industry: in particular the fast-growing technology solutions transforming the industry.

Certainty Advice Group senior partners and advisers respond to Recommendation 25, and to Stackpool’s calls for reform:

1. Degree entry is compulsory in most other professions

Todd Stanford of William Buck says “Doctors, engineers, actuaries, and all other type of professions have to be degree-qualified as a minimum.” He agrees with Terry Powell of PF Private Wealth that degree qualifications would raise industry – and therefore consumer – perceptions. “If we’re sincere about making financial advice a profession then it does need to raise the barriers to entry,” says Terry.

“I would struggle to hire someone who wasn’t degree-qualified who wanted to be a financial planner,” says Travis Martin of TWD. “Ideally I’d look for a financial planning degree, but if not,Commerce or Engineering – something where they teach the analytical processes of problem-solving.”

2. Practical skills should be part of compliance

“Saying you’ve got another degree doesn’t make you a better adviser, and it won’t make you more ethical, says David Murdoch of Paxton Bridge Financial. “A lot of graduates are technically very good, but struggle at first with their commercial sense, and issues like strategic management. That’s where I think any accreditation should be far more practical. A curriculum could include disciplines such as ethics, project, client and strategic management.”

3. A ‘professional year’ could gain valuable experience

“The technical side is very important,” says Colin Benvenuto of Emerge Financial. “But it doesn’t solve the issue of professionalism and ethics. That’s where the ‘professional year’ could really dig deep: What is your contribution to community, to people, family and to generations through your work?”

4. Restructure the industry first

“While getting a degree is important, it’s not going to solve the ethics problem in our industry,” says Travis Martin. “We also need to look at the way the industry is structured, which is around products. We need to realign client outcomes in terms of compliance. Not products. All this, including degrees and ethics, will contribute towards professionalising our industry.”

Scott Farmer of Bravium notes that “at the end of the day, the client engagement process is most important. It’s the focus on getting results and being able to represent value that’s important. That’s not a training or a compliance issue, it’s really a cultural issue in our industry.”

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Jim Stackpool

The Financial Services Council’s Life Insurance Conference held before Easter has brought the ‘incentive elephant’ back into the room.

On the day, former member of the Australian Prudential Regulatory Authority John Trowbridge highlighted the structural problems of incentive-based practices within the insurance industry.

For many, his comments have re-ignited anxiety in the belief that ‘Mum and Dad’ Australians will be worse off if all commissions were removed from all financial products.

While Trowbridge’s comments have sparked furious debate, his strong words are backed by Certainty Advisers, who are also calling for structural change to the industry.

The Certainty Advice Group surveyed their nationwide pool of financial advisers, with the following reactions:

• “I feel for those advisers who still regard their business success as dependent upon commissions. Good advisers realise that their clients are not buying products but relationships with providers of products. Many advisers still aren’t confident enough to uncouple their products and their pricing” – Certainty Adviser Troy MacMillan, TWD, Perth.
• “Driving this reaction is the perception by many advisers that their clients won’t see value in their advice. They then conclude that their clients won’t pay their fees for insurance, claims, underwriting or other needed advice” – Certainty Adviser Terry Powell, PF Private Wealth, Geelong.
• “Too many insurance agents and investment advisers fail to understand the opportunities available to them using engagement models based upon value.” – Certainty Adviser and Principal Scott Farmer, Bravium, Canberra.
• “We have worked hard to remove any real or perceived conflicts regarding how we recommend and price our advice. Our clients not only accept it, we know they find our approach refreshing” – Scott Girdlestone, Director of Wealth Advisory, William Buck Sydney.

Founder of Certainty Advice Group Jim Stackpool observes that the Trowbridge’s ‘incentive elephant’ is not unique to the insurance industry. “What’s different about financial services industries is the speed of converging changes caused by technology, regulatory reform and consumers demanding more value for money,” he says.

“Mr Trowbridge’s comments should be taken as one of the many opportunities for advisers as to how advice will be delivered in the future.

“It’s the confidence and sense of security that great advisers have always provided their advice clients. Shifting their remuneration models to better reflect the value they add is becoming more and more a necessity.”

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Titled, And the walls came tumbling down: Why the industry must build a new foundation, the paper’s authors: Ray Miles, executive chairman of Fortnum Financial Group; Dan Miles, managing director of Innova Asset Management; and leading consultant Jim Stackpool, have called on the industry to separate financial product from financial advice; abandon all sales incentives; and build a new advice culture.

According to the paper, the majority of advisers are still distributors of financial product because there has been no fundamental change or improvement to the industry’s culture and practises in the last 20 years, despite numerous parliamentary inquiries and reforms. “In the aftermath a several recent advice scandals, it’s clear culture isn’t a passing fad,” Stackpool said.

“Culture is a fundamental driver of behaviour and trusted advice which is why the latest round of government reforms won’t propel the industry forward or lead to better client outcomes. Risk commissions, volume rebates, complex buyer of last resort arrangements, and other incentives including discounted bank fees, lower insurance premiums, transition payments, discounted licensing and dealer services, and free tickets to major sporting events still exist, which perpetuate a culture of selling and not of professional, objective advice.”

While quality, client-centred advice was flourishing in parts of the industry, Dan Miles, managing director of Innova Asset Management, said a deeper public understanding of the financial planning process, and what financial advisers did and didn’t do, was required in order to help consumers more easily identify rogue advisers.

The report also called for a clear separation between financial advisers and product distributors by labelling anyone who is paid based on the sale of a product or who ties the value of their business valuation to a product manufacturer’s BOLR contract to be called a product provider.

“The new generation of professionals are reinventing the advice process so it isn’t linked to product but is purely about uncovering a client’s true goals and objectives, showing them what’s realistically achievable given their situation, what they need to do to achieve their goals, how to manage risk, and keep them on track over the long-term to maximise the chances of success,” Dan Miles said.

The new paper, which is a follow-up to the controversial ‘The sky is falling’ paper, concludes by detailing how the industry can earn the trust of consumers.

In addition to being more transparent and spearheading sensible reforms, Ray Miles, executive chairman of Fortnum Financial Group, said the advice industry needed to focus solely on solving the client’s problems, and in doing so, would ultimately solve its own.

“Trust will happen, or begin to return if you believe we ever had it, when clients believe that financial planners are working in their best interests and the industry is structured to protect them, and it isn’t right now,” he said.

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The Certainty Adviser (CA) designation, which has been trademarked with IP Australia and is in the process of gaining a certification mark from the Australian Competition and Consumer Commission (ACCC), will be officially launched at the group’s Cultivating Advice Conference in Sydney this week.

Membership will be open to aligned and non-aligned advisers and accountants who meet three key criteria. They must serve the public good. They must not receive any revenue, or accept any financial benefit, from a product or service provider; and they must adopt the fee and disclosure guidelines set out in the Accounting Professional and Ethical Standards Board’s originally proposed APES 230 standard.

Certainty Advice Group managing director Jim Stackpool said the new name and designation reflected the group’s sharper focus on partnering with advisers who specialised in the removal of financial uncertainty and its expanded mission to make advice irresistible and lay the cornerstone for an improved, compelling advice proposition.

“We are continuing SCAT’s work of helping advisers build productive, scalable and profitable practices only we have much bolder and ambitious goals,” he said.

“We want to reinvent advice and educate consumers about what advice should look like and ultimately deliver. In most cases, it will bear little resemblance to what they’re likely to experience today.”

“So far we are happy with the consumer reaction. Since the launch of my financial advice book for consumers last year, we’re now getting 2000 hits per month on the book site. We introduce relevant enquiries to our certified advisers as part of our approach.”

A key plank in the group’s strategy to change the tainted public perception of financial planning is to attract over 100 Certainty Advisers Australia-wide and get them actively talking about the value they add.

These “remarkable stories” will illustrate the group’s “new world” approach and how it differs from the “old world” product and transaction-based approach, Stackpool said.

So far there are 20 Certainty Advisers. They come from seven firms which have been part of the Cultivating Advice program for years, including Perth-based The Wealth Designers.

According to TWD general manager Paul Heatley and managing director Troy MacMillan, the CA mark is the mark of an adviser who has been independently deemed to provide comprehensive advice that leads to improved client outcomes and greater financial certainty.

“Our mission is to add greater financial certainty to peoples’ lives and change the negative perception of the financial advice industry,” Heatley said.

“It won’t be easy which is why we need to gather a group of accredited advisers working together to get the right message out there.”

Certainty Advice Group membership is $4,000 per year. Certainty Advisers pay an additional $1,000 to maintain the designation. The fees cover the cost of biannual audits, online forums, practical articles and content, ongoing support, and potentially client leads.

Advisers must regularly provide evidence that their advice and practices are aligned to the Certainty Adviser model. They must also foster a collaborative culture of knowledge sharing and encouragement. Over time, there must also be quantitative evidence of customer satisfaction.

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