A new era for personal financial advice?

A new era for personal financial advice?The Future of Financial Advice (FOFA) reforms ban “conflicted remuneration” … in the future

Many people will be unfamiliar with the new FOFA reforms that came into effect on 1 July 2013. In this article, we look at one of the key changes: the banning of “conflicted remuneration”.

The intent of the FOFA reforms is to improve the quality of financial advice in Australia. One of the key elements of the reforms is to ban “conflicted remuneration” i.e. the payment of commissions and rebates by financial product issuers to advisers who recommend their product to a client. This reform is not peculiar to Australia – there has been a worldwide push to remove commission based financial products.

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Revisiting the Global Financial Crisis

Revisiting the Global Financial CrisisHow did you feel during the depths of the GFC?

With the benefit of time, we tend to forget the strength of emotions we experienced in the past. I recently came across an email that we sent to a couple who were struggling with the uncertainty created by the Global Financial Crisis . It was written on 19th February 2009 – a couple of weeks before world share markets bottomed.

The email is a good reminder of the heightened emotions that prevailed at the time and the irrationality that they can produce. The couple were imagining all kinds of catastrophes and looking for any other solution than patiently sitting things out. Investor sentiment at the time was pretty low, with pessimists outranking optimists by seven to one.

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The Top 10 Money Excuses

The Top 10 Money Excuses
The following article is courtesy of Jim Parker, Vice President, DFA Australia. It highlights that without a disciplined pre-conceived approach to making money related decisions, it is easy to justify actions that objectively may not be in your best interests.

People rationalise bad money decisions

Human beings have an astounding facility for self-deception when it comes to their own money.

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Independent Financial Advice: is it becoming more accessible?

Independent Financial Advice: is it becoming more accessible?
The Future of Financial Advice

The financial advice industry is going through some major reforms following numerous post GFC reviews and the Government’s “Future of Financial Advice” (FOFA) proposals. The intention is to create a profession of advice providers that is separate from the financial product providers. This requires breaking the (commission based) nexus that currently exists between the two.

While most advisers accept that this is the right path to take, there has been significant resistance to the proposed banning of financial product commissions. Understandably, the proposals require some significant reforms to the practices of the majority of advisers. In future, they will be required to seek payment directly from the consumer, rather than via commissions from the financial products they recommend.

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What is “The Value of Financial Planning”?

What is “The Value of Financial Planning”?

Financial planning continues to get a bad rap …

Financial planning continues to get a bad rap. The Global Financial Crisis, poor investment returns, the failure of various financial planning firms and investment schemes, threats of further government regulation of the industry and a media that is all too willing to focus on the negative are contributing factors. As a result, many people that should under no circumstances attempt to look after their personal financial affairs have been convinced that this is the best way to go.

And for those that continue to seek financial advice, too many decisions are being made on the basis of immediate cost rather than an assessment of value. This is often because it is difficult to judge the value ahead of making the decision to appoint a financial planner. But cost may be a very poor guide to quality. And, unfortunately, it will not reflect missed opportunities, mistakes and poor decisions. 

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DIY Financial Planning – The real costs may not be evident

DIY Financial Planning – The real costs may not be evidentDIY Financial Planning appears to be a low cost alternative

There are a lot of smart people who make some rather dumb choices with respect to their finances. More often than not this is driven by short term thinking and the desire to save an immediate out of pocket expense. There is often a failure to lift the eyes and see the bigger picture.

An example that highlights this is the use of superannuation. We’ve talked previously about the significant benefits of making pre-tax contributions to super. However, in this article we look at the benefits of making post-tax contributions to super.
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Is your investment risk strategy paying off?

Is your investment risk strategy paying off?Are you an intelligent risk taker?

Most investors accept the notion that risk and return are related and that those who are prepared to take on more risk will ultimately get rewarded for their risk taking. As we’ve seen with the implosion of some investments during the GFC, increased risk taking does not always guarantee higher returns, it simply exposes you to the opportunity for higher returns.
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