We are an Independent Firm!

There. I said it.

You don't know how good it feels to be able to write this heading. It's really important to understand that you have to be careful calling yourself an independent Financial Planner in the current environment. There is so much that needs to be done and ticked off before you can call yourself this term. The fallout from ASIC is immense if you have not got all your ducks in a row. Let me explain what this means to us and to our current and prospective clients.

ASIC state that you can only call yourself "independent" as long as you meet the requirements of s923A of the Corporations Act. So what's down that little rabbit hole? ASIC makes it clear how you need to work with clients and product providers to ensure that you can call yourself independent. The IFAAA are a membership based group who have gone a step further than ASIC by stipulating even higher standards to ensure that the independence of advice is maintained with these requirements.

  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.

Source:  http://ifaaa.com.au/the-gold-standard/

Evolution Advisory or it's authorised representatives are not members of the IFAAA. These requirements have been listed to show the higher standards they and its members attain.

So our business model is based upon a flat fee for the provision of our wealth management services and advice. We are an advisory firm and as such we promote our advice as our primary product, not the sale of wealth management products. There is only about 100 truly independent financial planners in Australia out of about 12000 authorised representatives. You could say we are definitely in the minority. 

Considering the fallout from the Royal Commission into the activities of financial services, it was interesting to note that the financial planners or institutions that got hauled over hot coals were generally aligned to the major institutions such as AMP, CBA and Westpac or had interests in their own investment platforms ( Henderson Maxwell) It was in their interests and not in the interests of their clients that there aligned products were sold to consumers. This created the vertically aligned system so that they received clips of the ticket or additional revenues from the one client. Now don't get me wrong. Vertical integration is one of the most efficient business models in the market. The problem though lies in the fact that conflict is created and as a result, the clients goals are secondary to the products being sold and when your business is dealing with your clients money, this model is not suitable. There are a number of financial planners who call themselves independently owned or non-aligned. ASIC has also put these financial services firms on notice by not allowing the use of these terms. Other firms say they are independent but have all of their back office duties undertaken by a large financial services firm who receive what are called Volume Bonuses for the provision of these tasks. Can you see how murky the waters are?

I know on platforms such as LinkedIn I have had a number of discussions where some financial planners are calling for the cessation of grandfathered investment commissions. I agree with these points. At the same time, these same financial planners are profiting from the commissions received from the sale of risk insurance and lending trail commissions. Do you see the irony?

I know of many financial planners who agree that the independent model is great in theory but they could never change because too much of their revenue is based upon % based asset fees or insurance commissions. I feel sorry for them but I believe the world is changing in this regard. I could see this happening over 5 years ago. It has taken this long to get our affairs in order. We had to ask one of our member firms to get their own AFSL as they could not meet our standards. We have declined a number of potential member firms based upon their business activities. We can only accept those Financial Planners who are truly committed to this cause.

Does this make us any better? We can still make mistakes and our model is not perfect, but I believe that it is better than all the rest. We will receive significant protest for taking this stance but we believe that our actions are right and in the long run, our clients will receive great advice with minimal conflict.

When you see the names, Evolution Financial Planning or More Time Financial, please know that you are dealing with Independent Financial Planners who are looking to deliver great advice to ensure that your goals have every chance of being achieved.