Product Aligned Advice is (Mostly) Irrelevant

The Sydney Morning Herald will have you falsely believe that “the financial advice industry has been dealt a blow with evidence that some of its biggest names – AMP, Colonial, and BT – are mostly telling clients simply to buy products offered by their parent companies.” Read the original SMH article.

That conclusion is wrong. Believing it will cause you unnecessary stress and probably lose you money.

The reality is that this product focus is stressing about the detail and missing the big picture.

For example, product focus is like stressing about finding the best pair of mountain climbing shoes.

  • What if you’re never quite sure you’ve got the best shoes so you never set off on your trek up the mountain? (Behaviour and delay)
  • What if you set off but you’re on the wrong mountain? You get to the top and you look across and realise you actually wanted to summit a different mountain? (Life goal clarity)

The greatest cost in wealth creation is behavioural. The long term lifestyle cost of a slightly more expensive product to get you from A to B is minimal when compared to the cost of delay.

Don’t allow worry about product-aligned financial advice to cause you to procrastinate from taking positive action with your finances. The procrastination will be far costlier to your short and long term lifestyle.

Further the product has nowhere near the impact of getting the right strategy and being clear on your goals. And since goals clarification and strategy selection are the steps before product selection all good financial planners will advise you on that irrespective of them being tied to product provider. That is the true value of planinng your finances.

Stop worrying about finding the best investment product and just take positive action today towards your personal clearly defined goals.

If you need greater clarity of your goals and you need support to consistently take action then hire a financial planner to guide and suport you. They’re like a personal trainer for you and your money.

P.S. Just in case you’ve assumed I am tied to a product provider – I’m not. I deliberately choose my licensee to ensure I can recommend an extremely broad range of products across many providers. I am aligned to your best outcome not to a product. (Just ask my clients.)

2 thoughts on “Product Aligned Advice is (Mostly) Irrelevant

  1. Hi Matt,

    I disagree with you – but in a good way (I hope!)

    If the SMH wants to expose the shonky practices of advisers who pretend to work for the client but actually favour their parent companies, then I’m all for it. The more publicity that gets, the better.

    The SMH article defines an “independent” adviser as somebody who’s not owned by a product company. But is that enough? Surely true independence means they have no restrictions (explicit or implicit) in any of the advice they give.

    And THIS is the problem. Even if they’re not tied to a product vendor, if they’re commission-based advisers, their independence is compromised.

    Does anybody honestly believe that most commission-based advisers make truly independent recommendations based on their clients’ real needs? Clearly they don’t. If they did, they would be advising more people to, say, invest in residential real estate, pump excess cash into their small business, or buy a reliable second-hand car for their teenage daughters. But there’s no commission in that for them!

    I think you’re too polite to say it about your colleagues, so I’ll say it for you: Hire a fee-for-service adviser (like you) who actually takes the time and trouble to understand their clients’ needs and can make truly independent advice.

    Forget about whether there’s a secret relationship to a product vendor. That makes them LESS independent, but the lack of that alone isn’t enough to make them independent.

    I say this as a very happy client of yours who for years has rejected financial advisers for this very reason. The advice YOU have given, on the other hand, has been relevant, considered and has already saved me more money than the fee I pay you.


    1. Thanks for your detailed thoughts, Gihan. (And for your kind testimonial.)

      As expected, philosophically we do agree. The correct definition of “independent” as codified in financial services law is that the adviser does not receive/retain any commission from clients. Commission on even one single product from one client prohibits the use of the term independent by advisers. That is why there are apparently only 15 such advisers in all of Australia.

      When it comes to using a fee based planner over a commission planner, I agree for the reasons you illustrated. It’s the only way to get true, broad advice that considers how you use money to achieve all of your life goals.

      It is important to note that there are many great financial planners whose licensee is ultimately owned by a product provider. These advisers do charge fees, do rebate commissions and do deliver true whole-of-life financial planning. Sometimes, when it gets to the product that implement the strategy they may be limited to products tied to their licensee. But that doesn’t make the strategic planning any worse. It just means the tactical execution may not be as value-for-money as it could be.

      In essence that was my driving point in the article.

      I see too many people not take any action because they are hamstrung by the fear of seeing a product aligned adviser. But product provider owned does not equal commission based fee structure.

      Overcome your fear of action: find a well qualified adviser, agree a fixed fee and take action today. Delay is the greatest cost in wealth creation!

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