The financial services gravy trail will derail

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Industry lobbying recently had another win over consumers. Around Christmas the government announced its intention to soften proposed new laws around financial advice and in doing so, continue to allow conflicts of interest in financial planning.

The news was welcomed by an industry that has become addicted to commissions, kickbacks and hidden agendas. Unfortunately it was a step backwards for consumers.

The traditional financial advisers cheered, claiming that “the [proposed] legislation went overboard in some areas creating massive administration costs and putting good financial advice out of the reach of a number of people.”

We disagree!

Smart investment advice should be just as accessible and affordable for someone with $10,000 as it is for someone with $10 million. The problem is that traditional financial planning firms are still 20 years behind when it comes to leveraging technology to help clients cut fees and achieve better investment outcomes.

Their days are numbered

In 2009 David Jones and Myer were basking in profit margins unheard of to their global retail counterparts. There were few alternatives for Australian consumers. 

Then came online shopping. Small competitors like The Iconic and Kogan popped up and in doing so exposed the big retailers for duping Australian consumers – in many cases charging 30% to 40% more than their overseas peers. Global players also pounced – ASOS and eBay converted huge numbers of Australians into online shoppers and even mocked the pricing strategy of bricks and mortar retailers along the way.

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Since 2009 online retail sales have doubled in Australia to $14.4 billion per year. Traditional retail sales have gone nowhere. David Jones and Myer share prices have halved. This month they even discussed a merger to save face.

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Australians know when they are getting taken for a ride

Australians paid $18.6 billion in fees to super funds last year and delivered the big four banks with a combined profit of $26.8 billion dollars. Despite their huge fee haul, the big retail super funds (Colonial, OnePath and AMP) have recorded 30% worse returns than Industry super over the last 10 years. Don’t take my word for it, these are the official APRA figures.

There were just 2 retail super funds in the top 50 funds by % return over 2004-2013. We think that sounds suspiciously like Australians are getting taken for a ride.
 

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Main image: Daniel Lee via Flickr

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Chris Brycki

Stockspot Founder and CEO

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