Should American financial advisors always be looking out for the best interests of their clients? Should our government intervene to ensure they do so? Australia thinks so, and has passed new laws to make it happen.
To illustrate, let’s imagine that your credit card company offered to exchange your old card for a new one, and advised you that it was a good deal. After a while, you notice that dollars were often being added to your charges. You pull out your magnifying glass and read the very fine print for the new card. What you discover is that you’ve been charged extra, a lot extra. You would have been better off keeping your old card, but the company wasn’t forthright about it.
Australia concluded that some of its financial advisors were behaving similarly with people’s retirement savings. So that they passed the Future Of Financial Advice Act (FOFA). Under FOFA, financial advice must put clients’ best interests (not the advisor’s enrichment) first. FOFA makes it very difficult for someone delivering advice to also receive sales commissions. Advisors must provide easy-to-understand explanations of exactly how they’ve made money off their customers every year. And every two years, customers must sign, or opt – in, to acknowledge that any ongoing commissions or fees their advisors are receiving should continue with the customer’s blessing.
What’s the difference between an advisor and a salesman? If I sell you something when I know you could get something better and less expensive, am I really your advisor? When it comes to investments, it appears that Australia and FOFA are trying hard to defend the consumer from deception. Britain and South Africa have done the same. Here in the U.S., the financial services industry has some work to do to restore trust and confidence with the consumer. Maybe we can learn from our friends down under.
Similar to Australia’s aim, Guidepost Financial Planning has a fiduciary responsibility to act in your best interest, not our own. We sell no investments, annuities or insurance. Please give us a call at 970-419-8212 so that we can discuss your financial goals in a no-charge, no-obligation initial meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.