Banking Royal Commission: A Quick Word...

Over the last couple of months, the Banking Royal Commission has, finally, exposed a variety of unsavoury practices that have been taking place in the Banking/Financial Planning community, triggering investigations and lawsuits levelled primarily at the four big banks and AMP. 

While I was well aware of many of the issues raised, I was also shocked and disappointed on hearing some of the client experiences that had surfaced during the proceedings. And one of the takeaways from this sad story that became quite clear to me is that the big bank's foray into wealth management (circa early 1990s) has essentially failed, and they know it.

Today, non-bank owned advice firms (like Westmount) currently represent only about 15% of the entire financial advice profession (85% are bank owned, AMP owned, or aligned with a union fund). But now, banks are heading for the exits, offloading their respective 'wealth management' divisions en masse.

So while this level of negative media attention is sometimes a little difficult for me to hear (as it unfairly tars every financial adviser with the same brush), I'm quietly optimistic that both clients and professional financial advisers will significantly benefit from the bank ownership 'exodus' taking place today; a direct consequence of the Banking Royal Commission.

Hopefully we're witnessing the early stages of a shift to a more thoughtful, transparent financial advice model where the client's best interests are at heart - the way it was always meant to be.

As we move forward, feel free to call me personally if you would like to discuss your own arrangements with us.

Rick Maggi, Certified Financial Planner

True Advisors versus 'Product Sellers'

Rick-Maggi BW.jpeg

In the wake of the Banking Royal Commission, the distinction between ‘product sellers’ and realFinancial Advisors seems to have been lost on the media and legislators. With the misdeeds of a very few, an entire profession (there are 18,000 financial advisers in Australia) has been unfairly tarred with the same brush, and left to pick up the pieces. 

This commentary recently appeared in IFA Magazine and I think it summarises our frustrations with the media coverage of the Banking Royal Commission perfectly...

Townsend’s Business and Corporate Lawyers principal Peter Townsend has defended financial advisers in the wake of the royal commission’s review of the industry and subsequent media outrage.

In a statement, Mr Townsend said the conversation around financial advisers following the royal commission’s review of the industry (which ran from Monday, 16 April till Friday, 27 April) overlooks a number of important issues.

“Financial planners in this country are copping a kicking that they just don’t deserve. Having watched the royal commission dish it out, and then read the media’s ‘outrage’, I smell a witch hunt and I simply have to point out some things which seem to have been missed in all the ‘courtroom drama’,” he said.

Mr Townsend noted that “there are in the order of 18,000” advisers in Australia, and the number of those who have appeared before the commission is not only “ridiculously small” but that sample is also already skewed.

“They’re the ones the ‘counsel assisting the commission’ have the dirt on,” Mr Townsend explained.

Additionally, the constant changes being made to legislation in the advice space means advisers need to do “much more professional development than your average solicitor” just to keep pace.

“The view that the majority of financial planners are money-hungry spivs is completely wrong. The many that I’ve dealt with have been honest, hard-working professionals who’d do just about anything to ensure their clients are well looked after,” Mr Townsend said.

“That is not to say that the issues raised before the commission are not serious, pervasive, distressing and regrettable. They need to be fixed, but the fix does not have to come by smearing all financial planners with the brush of deceit and dishonesty reserved for the dishonest, self-interested or negligent few.”

Mr Townsend said efforts should be made to better educate the public as to the role and value of financial advice, adding that confusion over the differences between product sellers and true advisers has also “been rampant” among legislators.

RIP Stephen Hawking

Stephen-Hawking-Westmount-Financial-Rick-Maggi.jpg

Stephen Hawking, the brilliant British theoretical physicist who overcame a debilitating disease to publish wildly popular books probing the mysteries of the universe, has died, according to a family spokesman. He was 76. 

Considered by many to be the world's greatest living scientist, Hawking was also a cosmologist, astronomer, mathematician and author of numerous books including the landmark "A Brief History of Time," which has sold more than 10 million copies.

With fellow physicist Roger Penrose, Hawking merged Einstein's theory of relativity with quantum theory to suggest that space and time would begin with the Big Bang and end in black holes. Hawking also discovered that black holes are not completely black but emit radiation and will likely eventually evaporate and disappear. 

Hawking suffered from ALS (amyotrophic lateral sclerosis), a neurodegenerative disease commonly known as Lou Gehrig's Disease, which is usually fatal within a few years. He was diagnosed in 1963, when he was 21, and doctors initially only gave him a few years to live.

The disease left Hawking wheelchair-bound and paralyzed. He was able to move only a few fingers on one hand and was completely dependent on others or on technology for virtually everything -- bathing, dressing, eating, even speech.

Hawking used a speech synthesizer that allowed him to speak in a computerized voice with an American accent.

"I try to lead as normal a life as possible, and not think about my condition, or regret the things it prevents me from doing, which are not that many," he wrote on his website.

"I have been lucky that my condition has progressed more slowly than is often the case. But it shows that one need not lose hope."

Shorten's Tax Proposals

Bill-Shorten-Dividend-Imputation-Westmount-Financial-Rick-Maggi.jpeg

Yesterday, the Opposition Leader revealed a new policy to abolish the ability for individuals to claim cash refunds on excess imputation credits that had not been applied to offset tax liabilities.

Mr Shorten said the abolition of the benefit would result in an additional $5.6 billion to the federal budget bottom line and reduce “unfair revenue leakage” that disadvantages voters in lower income brackets.

I believe the exact opposite would occur. 

By denying the lower income tax rate taxpayer a chance for a refund of the imputation credits, Mr Shorten is actually denying a low income person the tax credit whilst still taking more tax off the higher income taxpayer.  

In other words, Imputation tax credits on dividends actually redistribute wealth to lower income investors and take wealth off higher income investors.

Mr Shorten's proposal (and Industry Super Fund's David Whitely's enthusiastic support for it) is a cynical political calculation. They're essentially betting that their constituents will be so distracted with the usual class warfare sound bites that they'll forget to do the maths.

Rick Maggi