Hi, as predicted at our April 2021 Conference in Hobart by Economists Dr John Hewson and AIOFP Independent Chair Professor Sarath Delpachitra, there are some very dark economic storm clouds gathering globally and the next few years look to be very volatile…..it appears their predictions will become reality.
The theme for the DECEMBER 5 – 9TH Gold Coast conference will be ‘Preparing for the Future’ where this will be discussed. For the less experienced Advisers with around 10 years service, they have only ever seen ‘blue sky’ and need to be aware of what happens in a ‘bear market’.
The same particularly applies for clients who have retired over the past 10 years enjoying steady positive returns, they really need to be managed to avoid AFCA/ASIC complaints if things don’t work out to their expectations. We have an expert on client relationships to assist with this process speaking at the conference.
Recently I participated in a pod cast with Private Portfolio Managers [PPM] Chair Hugh MacNally where these issues were discussed and particularly what Advisers should be aware of in volatile times. Before appearing I then reflected on my time in the industry and what I had learnt over the journey.
In case you did not know I established by former practice Goldsbrough F/S in late 1979 specialising in retirement advice until 2000 when the AIOFP needed to move out of Golsborough and me out of advice. I sold out in 2006 with Steve Prendeville handling the transaction.
Here are three key issues I have learnt –
- Most clients care more about the return OFF their capital than ON it. I went through 3 product failure episodes in my time [1984 Telford/AFT, 1987 Share market collapse ramifications and the FSFS Friendly Society in 1990] and the primary client concern was the preservation of their capital. Lesson? Obviously protect their capital and other options with ‘better’ returns can be countered by reminding them of your capital preservation objective. In bad times always keep the communications up with clients to keep them informed. This is why I have been hard on product failure and who is responsible over the years, going through it 3 times certainly does not fade thememory.
- If the asset allocation strategy or product fails, make sure you have a third party to blame or you will more than likely lose the client or worse. Make sure you are not identified as the ‘asset allocator’ of their portfolio unless you have that expertise covered. ASIC/AFCA have a habit of asking for your experience/qualifications to perform such duties. Having a third party to blame gives you the opportunity to ‘sack them’, find a new one and keep the client.
- Stay out of FICS/FOS/AFCA’s clutches. FICS was formed in 2003 to assist consumers but typically went too far with protection after the legal recovery imbalance consumers suffered in the 1980/90’s over product failure was addressed. No Politicians will ever touch AFCA fearing being classified as ‘anti – consumer’, it was designed to have no procedural fairness or natural justice for Advisers…..Forget your pride or principles, just settle with the client and move on…..very few Advisers win in this classic Kangaroo Court and you might even keep the client with a prompt settlement.
Before doing the PPM duty I asked an experienced Adviser about using third party groups like PPM and the response was ‘many do not add value, so I do it myself’.
PPM’s return over the past 26 years in their Multi Asset Fund has been 11.2%, that’s why they are sponsors and I was happy to get involved.
Regards.
Peter Johnston | Executive Director
Association of Independently Owned Financial Professionals
Suite 1211, 1 Queens Road, Melbourne VIC 3004
P 1800 111 203, d 03 9863 7574, m 0418 857 621
www.aiofp.net.au | Download my business card
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