Melbourne Cup Day

As a child growing up in country Victoria we celebrated the Cup at school and it was a yearly tradition.  The very first Melbourne Cup was run in 1861with 17 horses. However unfortunately 3 horses fell and 2 died during the race.  Back then, not as many people were worried about animal cruelty.

Times have changed and the race that stops a nation is rapidly losing its prestige after 158 years.  Despite the large amounts of money that it generates, a backlash is growing against the horseracing industry.  Punters also now have many other options for gambling and entertainment.  It is possible that the industry could shrink if it is unable to improve.

Sadly, it is not the only industry suffering from controversy.  We’ve had institutional failures by religious bodies to deal with child abuse, wage theft by retail & restaurant businesses and abuses in aged care.

Not to mention the revelations of unethical conduct in the Financial Services industry from the Hayne Royal Commission.  Many examples of poor advice, excessive fee charging, incompetence and misconduct were exposed.  It is clear that most industry participants were aware of these problems but nobody did anything about it.

How does this happen?

The factors that tend to contribute are:

  1. Pressure to grow profits.
  2. Organisations putting their own interests ahead of the other stakeholders.
  3. Lack of regulation and/or lack of enforcement.
  4. A complacent attitude among participants.
  5. Misplaced sense of ethics.

Clearly, doing the wrong thing was profitable for the decision makers at the time.  However, it is now costing billions of dollars to fix those problems.  Both NAB & Westpac have recently announced lowered profits as a result.  All of the big 4 banks are going to cease providing financial advice in future.

In the aftermath of the Hayne Royal Commission, there have been many improvements made to regulation of Financial Advisers.

They include:

  • Higher education & training standards.
  • A compulsory code of ethics.
  • Tighter regulation of fee charging.

There is still a way to go as it takes time for attitudes to change.  Also many of the regulatings covering the industry are confusing and inconsistent but over time there will be a noticeable improvements in the conduct of financial advisers.

It seems likely that these measures will also lead to a substantial improvement in the way business is conducted over time.  The downside will be that the industry will shrink, as substantial numbers of Financial Advisers leave and revenues decline.

Fees directly charged to clients will need to increase but there will be greater transparency and control put back into the hands of clients. There are substantial amounts of hidden costs in the industry and they will reduce.  The overall result for clients should be better.

We are also part of that change and have simplified our fee structure.

We will:

  • Charge hourly based or flat dollar fees for our service going forward.
  • Cancel commission payments on new life insurance policies. This usually results in a 25% reduction in the annual premiums.
  • Reduce ongoing fees for clients that need little service.

This will mean that new clients will pay higher upfront charges but lower ongoing charges.

In the short term our revenue will fall so we will need to find new clients to increase our revenue.  If you know anyone you feel would benefit from our service we would be very happy for you to introduce them to us.


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