Thoughts on the Senate Inquiry

by Doug Morris

Like many of you, we’ve been keeping an eye on the Senate Inquiry in Canberra into problems facing the financial planning arms of Macquarie, ANZ, NAB, and CBA.

Depressing as the individual stories coming out of the hearings are, painting all banks and financial planners as evil is foolish and a bit lazy. On balance financial planning is a good thing. The industry puts Australian families’ money to work in the markets and provides a secure retirement for millions. Sharesight services dozens of financial planning firms who’ve turned to products like ours because they value transparency and do the right thing by the client. Have a look in our partner directory if you want to find a high quality planner. We have several in every major Australian city. However

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There are undeniably big problems in the industry. Fees have crept far too high (combination of commissions and investment fees), disclosure is inconsistent, and reporting requirements are paltry. Vertical integration makes sense if you’re a bank, but even with the best intentions, putting client money into a bank-built product is at worst incentive laden and at best convenient (due to portfolio admin). Paradoxically, compulsory superannuation creates problems for ordinary savers. With all that guaranteed money coming in, advisers don’t need to hustle for business.

Changing an entire industry overnight and ferreting out all bad actors is impossible, but from our perspective, an area that can be easily improved is reporting.

One of the questions put to banks is whether or not they can identify bad apples before it’s too late. One of the banks even admitted that they didn’t provide documented annual reviews.

We’d argue that a system like Sharesight would go a long way towards solving the current reporting deficiencies. Words like “annual” and “report” are archaic. Showing a client what happened to their portfolio last year is a waste of time.

Here’s an idea for the Senate: mandate a live login to a portfolio. Australian banks’ mobile apps are some of the best in the world. Why can’t their financial planning apps be just as good?

With Sharesight, investors can login and see exactly how their investments are going in real dollar terms. You don’t need to be Warren Buffett to make sense of our interface.

And from the top down, banks and financial planning groups could identify poorly performing advisers, portfolios, and even individual investments with the click of a mouse. Institutions and compliance teams could take a firm-wide view across all client portfolios to ensure they’re within model portfolio rules. This is achievable today with our Dashboard feature and our API.

It’s convenient to conjure up a scene of a smoke-filled board room filled with moustache-twisting fat cats, but the problems facing the financial planning industry today are as much the result of decades of bureaucratic inefficiency and sclerotic technology as they are reckless profiteering. Ironically, from an investing standpoint, this serves as a handy reminder that the big banks are insanely profitable and likely deserve a spot in our portfolios!

As we noted in our response to Cuffelink’s take on the future of wealth management, investor-led advocacy will come from a collection of purpose-built technology working in unison.