In traditional economics, utility theory assumed that investors work off probability-weighted outcomes. Prospect theory can better explain actual investor behaviour and is a better tool for designing retirement plans.
‘Suitability’ of financial advice is something unlikely to be addressed by the Royal Commission, but its adoption and regulation is crucial to the improvement of the wealth management industry.
Bernard Salt’s smashed avocados are now part of our lexicon, even if the way we are using it was not his original meaning. Whatever, lots of expenses such as concert tickets add up significantly with compounding over time.
The Royal Commission will change financial advice, focussing more directly on conflicts of interest and client best interests. What can you flush out of your adviser immediately?
Many people have changed their minds on whether the Royal Commission was a good idea. What the fact-finding reveals though is an age-old lesson in economics: outcomes gravitate toward incentives.
The Royal Commission is asking whether percentage-based fees offer the wrong incentives and why administration is not a flat fee business. Where might this go in wealth management?
The Royal Commission is exposing the product / advice disconnect, and different rules are required for aligned and non-aligned advisers to recognise the conflict in vertical integration. The medical profession is a model.
The Royal Commission’s attention switched from the big players to a small independent advice firm with only six staff, but it showed the potential for conflicted advice runs deep.
Following the Ripoll Inquiry in November 2009, the Labor Government formulated the Future of Financial Advice proposals. A lot has happened since, and the Royal Commission is dealing with the consequences.
The success of this claim on John Hemmes’ estate and the unexpected amount involved provides a reminder to ensure you have a robust estate plan in place.
Financial advisers, especially in vertically-integrated firms, attached a product sale to the advice, confusing clients and setting off a chain reaction where regulators stepped in. The reputation of financial advice was compromised.
Despite the publicity and hype and almost a decade of operation, robo advice businesses in the US have gathered less than 0.1% of assets under management. Why is adoption much slower than expected?
Superannuation is a good long-term savings vehicle, but it comes with restrictions on contributions and lack of access to money. Retirement savings may be supplemented by other tax-effective structures.
Noel Whittaker shares his 20 Commandments of wealth management after decades of advising clients, writing bestselling books and reaching millions of people every week on radio and television.