#254 Michael Miller – Transcript

Episode details

SUMMARY KEYWORDS

determinations, client, financial planners, dispute, people, financial planning, decisions, advice, downturn, bit, guess, cash, markets, conversations, africa, complaint, practice, global financial crisis, financial, fantastic

SPEAKERS

Michael Miller, Fraser Jack

 

Fraser Jack 

Welcome back to the Expert Advisor podcast. I’m Fraser Jack and today I’m joined by returning guest, Michael Miller. Welcome.

 

Michael Miller 

Hi, Fraser.

 

Fraser Jack 

Thanks for coming back. Now it’s been 12 months since you’re almost 12. And since you were on the podcast, it I guess we’re about to find out what sort of changed and from their own looking forward, I guess. But how have you been?

 

Michael Miller 

I’ve been well, we’re in lockdown here in Canberra, but much shorter than some of the other cities and states. So can’t complain about that.

 

Fraser Jack 

Yep, absolutely. No, you’re on episode 100. Sorry, 206, which came out in October 2020. So if anybody is, is thinking about listening back to that episode, go go hunting for it in that particular space. Now, tell us about now there’s a few things I wanted to talk to you today about. One of those things is you’ve been writing a lot of papers on some of the determinations that are coming out of the Australian Financial complaints authority or Africa. And we’re going to get into that a little bit later. But before we do that, I wanted to jump back in time. You’re obviously a planner in Canberra, you’ve been working for a number of years, you’re you’re a licensed planner, you’ve you’ve been operating your own practice. Last last time we had you on the podcast, you’d recently moved your licensee, but obviously you’ve sort of settled in there now. But I want to go back a bit further. Let’s go back to your background as in, I really want you to sort of talk to talk to us about your the story that you tell about your name.

 

Michael Miller 

Yeah, I can certainly do that. My Nan so my dad’s mom. She her husband’s so my sort of grandfather passed away quite young. So she was very involved in sort of managing the finances and worked as a bookkeeper and did some investing herself. And like many people, yeah, name would send a every birthday card, and there was a little bit of a sort of cash gift or a check in there, which is all sort of fairly standard. And yeah, maybe a sort of a 510 or a $20 note sort of back in those days. But one of the stories that I sort of tell it was for my 21st birthday card came there was a checking it. And I can’t remember the the actual amount there was something it was $52.86. It was a really strange number. And you just thought What on earth is going on there? Why, what why that amount. And it turns out that what Nana had been doing is she gave an amount to the first grandchild that turned 21. And to be completely fair with everybody, she had been indexing that amount to inflation, as each sort of grandchild hit 21 along the way. So that’s that’s why I had this very, very strange amount.

 

Fraser Jack 

Yeah, it’s a magical moment in your life, right? Where you start working out that Oh, okay. That’s that’s a that’s a real thing. It’s important, it actually works that way. In a pretty good lesson from your name.

 

Michael Miller 

Yeah. And I think it’s, it’s an interesting part of how we practice in that there’s a very numbers component to it. And I don’t think people get into this without having some interest in the numbers. But there’s a there’s a people and values component as well that probably people outside of the sector Don’t think about or see as much, but certainly, when we’re in realize how much it actually drives everything that we do.

 

Fraser Jack 

Yeah, I agree. I think it definitely drive some of the stuff we’re doing now tell him Tell me about Now, obviously, her name is Zoe, tell me about the Zoe Mila award.

 

Michael Miller 

I’m guessing that that’s not what I set up a number of years ago, just with the local university here, the University of Canberra. That’s, that’s where I did my undergraduate degree. And it’s basically for the introduction to financial planning subject, an award for the highest achieving female of $500. And the idea behind that, particularly the way the course was sort of structured at university, there is introduction to financial planning is the first subject in a sort of a minor or major that specializes in financial planning. But you get a lot of people who go into sort of very broad sort of finance or commerce degrees, and this was certainly for me, not necessarily specifically with that idea of, Hey, I’m going to target financial planning, you know, when they first enroll, so, yes, tried to just make it a bit of an incentive to say, Well, hey, try this introduction to financial planning subject as one of your electives. And hopefully that sort of grows on you as something that you want to pursue because there’s We are definitely severely underrepresented in terms of women in financial planning. So just trying to, I guess, do something locally towards that.

 

Fraser Jack 

Yeah, fantastic. This is an amazing initiative. Now this is just an initiative that you’ve taken to help promote the, you know, that new financial advisors coming through women in financial advice. And all, you know, you just take this initiative where you provide a voucher or an incentive an award of $500 for, you know, a top student.

 

Michael Miller 

Yeah, yeah. Okay. It’s, it’s pretty easy to set up if you contact universities, yeah, they’re all quite happy to receive these donations and put them towards these sorts of awards or prizes.

 

Fraser Jack 

Yeah, I think it’s an I think it’s a fantastic initiative. And I would encourage other people to do the same thing. So so thank you for sharing that story. Now, I remember just on that, I remember talking to Dr. Dr. Kathryn Hahn from Griffith Griffith University, who teaches the Masters there, and she was saying that very similar thing that a lot of people go Come away, they find out about this financial advice thing, they really love it, and then they go away on their, you know, end of the semester, or or spend some time with their family, they come back and they say, oh, now I’m going to be an accountant. It’s sort of a it’s a weird thing, isn’t it? Where there’s a, you know, trying to create that interest in the financial planning as a profession rather than just sort of falling back on that your standard accounting degree?

 

Michael Miller 

Oh, yeah, I agree. And those pathways haven’t been there for as long as they have for other professions. Yeah. When I was studying my undergraduate degree, I went to the University and said, hey, what does this thing get me what was at the time, you know, the ps 146 qualification? And they sort of looked at me and said, What’s that? And it that was a while ago now. And I think things have gotten much better. And I know, the FDA in particular, is doing some work with all the universities towards that. But if, at that time, I had said, I want to be an accountant, there, there’s a very clear pathway that certainly wasn’t there at the time, given that it’s not all that recent anymore. For final year planning,

 

Fraser Jack 

yeah, fantastic. So if anybody wants to check out that does emila Award, there’s a there’s a website, Toby Miller dot info, they can go and have a look a bit a little bit more about that. And I do encourage people to sort of, you know, adopt the similar award at their local university. Speaking of the work that you’re doing for the FDA, you’ve done a fair bit of work on there in the conduct reviews and disciplinary board, tell us about what you’re doing there.

 

Michael Miller 

Yes, so that the five point Association sort of before, you know, the face code of ethics sort of came around, it has its own Code of Professional Practice, and all of the practice standards that go behind that. And if somebody has done the wrong thing, then you can be held accountable to that code. Now, part of that is the people who I guess, sit there and make decisions about whether there has been a breach and any potential sanctions are drawn from your peers. So it’s practicing financial planners, such as myself.

 

Fraser Jack 

Yeah, fantastic. So it’s giving that overview of somebody who’s, you know, got their boots on the ground and having conversations with clients. So it’s not, it’s not coming from a point of view that, you know, we wouldn’t understand you don’t, you don’t, you don’t get it. And that’s probably a little segue also into some other work that you do. In, I guess, with, with that kid themselves, where you do actually perform a role where you, you can you can help them come to a determination or you can give them an oversight or review of what it might be, I think you call it a panel member? Is

 

Michael Miller 

that correct? Yeah, that’s right. So part of Africa’s sort of process a can be a determination made by an ombudsman. Now, there are a lot of stages that come before that, where there might be sort of negotiations, mediations, and conciliation between somebody who has a complaint and the Africa terms of financial firm. But But if it isn’t resolved at those stages, it can go to that determination. And as part of that, sometimes the Ombudsman forms a panel and what that will have is a practitioner member. So that’s the category that I sit in, and a consumer representative just to I guess, broaden the perspective to somebody who is regularly sort of representing consumers interests, but then also somebody who’s practicing in financial planning so might be able to speak to, you know, what, typical practice or what what might ordinarily be expected to happen.

 

Fraser Jack 

Yeah, fantastic that I didn’t know that was part of the process. So that’s fantastic. Um, speaking of the process, Can Can you give us a quick overview of what the process is if if A consumer has a complaint and wants to make a complaint. What What do they do? And then how does the process work?

 

Michael Miller 

Yes, it certainly and this substitutes I guess a little bit, pre AP curries is the first step is always going to the financial firms. So that might be if you have a dispute about advice, it might be a financial planner. But it may also be a dispute with a financial product provider, and it’s going to them and they’re all required to have a compliance process in place. And that’s always your first port of call. If that hasn’t resolved the the issue to that person satisfaction, they can then go to Africa as an external dispute resolution body. And they then have, I guess, a bit of a process where, you know, they tried to find a resolution between the complainant and the the the person or the institution responding to that with I guess, as little fuss as possible. In that there’s there’s often a at the start of that process, just everybody sort of restating, you know, what’s going on? what’s been done so far, can we come to some sort of resolution? And then, depending on how that goes that can pro progress through that that process? Whether I guess the final sort of stages, is that determination that’s made by the external ombudsman?

 

Fraser Jack 

Yep. Now, you mentioned financial firm a couple of times there is, is this scenario a bit like asik? with the with the Corp sec, they regulate corporations or firms, rather than the advice provided that we’ve seen is the terminology used for, say, the tax practitioner board or the officer? Hey,

 

Michael Miller 

yes, I guess in a way, so to bring a dispute to Africa, the, the dispute has to be with a member of Africa, you can’t complain to Africa about a firm that’s not a member. Now, effectively, all financial services licensee, license holders or their representatives are required in the Corporations Act to be a member of efika. But of course, there are also, for example, mortgage brokers are required to be members of Africa as well. So it’s, it’s it’s wider than just that sort of financial planning, or financial product manufacturing part that we live in. Yeah.

 

Fraser Jack 

And there’s been some conversation in the press recently about the the actual amount of complaints that come from financial advisors versus other areas of Finance. And you mentioned mortgage brokers and a lot of other finance areas that are involved. What are you seeing in that space with regard to the, you know, the low levels of financial planners being dragged in?

 

Michael Miller 

So I guess, the parts that I play in terms of as a panel member, and then even just reviewing those determinations, I tend to focus on that financial planning side. So I don’t necessarily see that quite a picture. But certainly, banking disputes go to Africa. So while not everybody will necessarily have a financial plan, or where do I dispute with a financial plan, nearly everybody will have a bank account, potentially a loan of some sort. So if there are a lot of other sort of issues that they’re dealing with, which then certified through to vs. Financial Planning is certainly not the biggest generator of disputes in what they handle.

 

Fraser Jack 

And does the as the disputes generally, because of a financial loss. Is that going to be is that the one of the key requirements?

 

Michael Miller 

Look, I think there’s two parts of that is people probably don’t go through that compliance process if there isn’t some sort of loss there. So that that probably influences it. And certainly the role of that dispute resolution is it is it is about, I guess, putting the client in the position they should have been. So it’s more of a compensator II function, rather than a sort of discipline or professional practice type function. So So yes, if somebody has potentially done the wrong thing, you know, that they haven’t conducted themselves in the way that they should, but there has not been a resulting loss to the client. Then after is not really where that’s going to play out. That’s more where things like that, obviously, it’s not finalized the structure just yet, but your single disciplinary body with the Financial Planning Association, their conduct Review Commission, it’s less about that you’re compensating the client or putting the client where they should be and more about will actually work. Appropriate conduct. And what, what needs to happen if if it hasn’t been to ensure that that there isn’t continued continuing poor conduct?

 

Fraser Jack 

Yep. Yeah, fantastic. And we’ll get we’ll get into a little bit more of that. Sure. Surely I want to ask you about the single disciplinary body. But before we do that, obviously, with your work as a panel member there with Africa, and also had sort of led you into reviewing a lot of the determinations that have been made. Tell us about the papers that you write.

 

Michael Miller 

Yes. Okay. It actually doesn’t so much come out of the work as a panel member as for the textbook I’ve been working on. Yeah, part of that. So that’s about ethics and professional practice in financial planning, and very much sort of, I guess, focusing a lot on some of the face here reforms, but also the other things, so things like that sort of disappointment and compensation type system around that. Now, part of that was I, there’s effectively a chapter in that way. Here, we’re saying, Well, what what can we learn through the decisions that have been made in the past, and this is one of the things that’s been said with a lot of the failure code of ethics is because it’s new. People are saying, Well, how does this apply to actual real life scenarios and facing the body has sort of pulled out some case studies and guidance around that. But what we have with after is a lot of published determinations, where they’re, they’re effectively case studies, this is what had happened, this is what was found about whether it was good practice or not. So it’s really just, I guess, going through reading those and trying to draw those lessons out. Because we can all learn from experience. And as we get more experience, it would be terrible if we weren’t learning something along the way. But particularly around some of these things, it’s good to learn from the experience of others, rather than just having to learn yourself through mistakes that have been made.

 

Fraser Jack 

Yeah, and a percent agree and what I want to get into some of these decision conversations in the in the work that you do with publishing these and providing some commentary around them. But just before we did, you mentioned the book there, the book you’ve been writing, you sort of talked about that in the previous podcast we did with with you tell us about the book, how people can get hold of it, and what sort of about

 

Michael Miller 

1. So it’s somewhat in the hands of the publisher at the moment. So I don’t know the exact date. But I have some hopes that by the time this goes to air, it may actually be published. So the publisher is LexisNexis. They have an online store. So the title is ethics in professional practice. And I think if you sort of just Google that with LexisNexis, or you can go to their website and start sort of looking through the financial planning category, that that one is there and available so that they’re certainly they’re taking pre orders now. And hopefully not too far away from those actually being sort of printed and delivered.

 

Fraser Jack 

Fantastic. And Michael Miller dot help forward slash book is a URL where you can put a pre order in for that as well.

 

Michael Miller 

Yes, yeah. Well, that’s, that’s just me sort of collecting. And with that, when it is available, I can send those details through.

 

Fraser Jack 

Fantastic now, just while we’re on Michael Villa dot help. Tell us about that brand?

 

Michael Miller 

Yeah, well, it’s not so much a brand is just a sort of website I set up for things like publishing, you know, these sort of writing up these decisions. And, you know, if you sort of have a marketing campaign where you need to direct somebody to a specific sort of page about that, that’s somewhere that I can put that up.

 

Fraser Jack 

Yeah, I think this is actually a really interesting part of what what plans around the country can be doing is creating their own brand. Having a having a space or a website where you can put individual type information or accreditation that may or may not be necessarily linked to the business that you’re in, or the existing business that you’re in now. I think it’s I think it’s a good idea. And if anybody wants to check that out and jump on namaqua Milla don’t help, I think it’s a, it’s a great place to, to have a look at something that of what somebody has done that might help you. Now, let’s get into these, these decision papers and these termination papers that you write. I’m looking at one that talks about, I don’t know if it’s published yet or it probably will be by the time this goes out. But it talks about the the q4 decisions that were made in 2021. Let’s let’s dive into it. Tell us what you tell us what you’re seeing in this space, because I think a lot of it was reflective of the last sort of 12 months where everybody was sort of, do they go to cash do they do they get out of cash, all those types of conversations? Yeah, that’s

 

Michael Miller 

right. So what that particular one He’s looking at his the decisions from effectively first of April 2021, through to 30th of June. So I’m basically doing this every quarter now. And what’s what’s been interesting there is that you’re probably starting to see some of the complaints that were generated by issues that came out of that very sharp market downturn, from the first COVID walk down, which was sort of around about April 2020. Because once again, sort of thinking about that processes, when something like that happens, which might generate things that might may have caused a loss or a perceived loss for the client. And they need to see that result, they sort of have to go through you make a complaint to a financial firm. And if that’s not resolved, that starts going through those Africa processes. And once again, what I’m looking at is the determination. So they’re often at the end of that process. So there is there’s a reasonable sort of timeline that it’s really that sort of 12 to 15 months after that substantial market downturn, that you’re starting to see the determinations that reflect that. What I thought was interesting is, as we started to sort of look at these determinations, was just thinking about, I guess, my own practice and experience where I really sort of started advising sort of, right, I just got right into the teeth of the global financial crisis and the downturn that came with that in share markets. But actually, once we were sort of through that, and I’ve been running my own practice for sort of nine, maybe coming up to 10 years now. Yeah, so in that period, that I’ve been running my own practice. So we are responsible for not just my advice, but the whole sort of operation there. Prior to COVID, we really didn’t have much of a downturn. Yeah, there were a couple of sort of flat spots and a few sort of periods where, if you picked a particular sort of six or 12 months, you might have seen a negative return, but for the most part, diversified portfolios were just up so you didn’t get these. Certainly these moments of negative returns. But I think in particular, are those really sharp downturns of which COVID was similar in scale to the global financial crisis and the draw downs on markets, but it was completely different. And very, very quick, both on the way down and on the way back up compared to the global financial crisis, which was actually much more extended in time by comparison.

 

Fraser Jack 

Yeah, that’s interesting, isn’t it? Because this leads to the conversations that you’ve had with the client in in the past and for for the difference between planners who have been through those conversations with clients, the first time or the or the second time to be able to then reapply those types of conversations versus planners who haven’t had those conversations

 

Michael Miller 

yet? Absolutely. I think when you get those moments, there’s there’s a big difference how much, maybe not so much of the plan is experienced, but even the I guess, the pre work you’ve done with the clients to sort of say, hey, at some point, this is going to come. And this is, you know, this is sort of what it’s going to feel like, and let’s make sure we’re sort of set up for that. Yeah, it’s, I think you do see a bit of difference in clients, partially reflecting said, What pre work you’ve done, also, what prior experiences they’ve had, and decisions they’ve made in the past as well.

 

Fraser Jack 

Yeah, so understanding the importance of that pre work conversations, setting, setting all lining up for the prospect of when the next market downturn is we don’t know when it is better, there will be one at some point. And during that time here, as well, here is here is what our expectations are, how we will behave, you know, keep you know, keep the plan on track, etc, etc. That’s right. And do you think that then stems up a lot of these, you know, they’re the go to catch complaint moments that came out of of the last sort of quarter that I pulled to the gym period? Do you think those pre conversations could have a lot to do with these complaint?

 

Michael Miller 

I think there’s a number of things that you can sort of look at these complaints and what I would say is actually, for the most part that complaints have been found, I guess in favor of the financial firm or the financial planner so that they they have done the right thing in terms of their conduct. But I think It’s sort of highlighted is probably looking more at what Okay, the client has these complaints exists because the clients are unhappy with the results of what has happened. And yet, what are the things that we could potentially do in advance to? I guess, build that that awareness and understanding of, I guess even the reasons, for example, that a financial planner will, for the most part, never, ever say, yeah, you should go to cash because about changing markets or a downturn in markets and things like that. Yeah, one of the things we could do to actually explain that, sort of in the good times, so that we could, I guess, draw on that in the bad times?

 

Fraser Jack 

Yep. There are a lot of these. It’s an interesting, it’s an interesting sort of complaint, because it to me, it sort of spanned out over time, right, you mentioned sort of the 12 to 15 months. And of course, a lot happened in that 12 to 15 month period, obviously, you know, markets dropped substantially, people got upset and nervous and worried. You know, we know that people make decisions emotionally, and often, you know, you know, if they’d wanted to go to cash prior to that, though, can be extremely upset that they hadn’t got moved to cash before that. But then obviously hindsight, a wonderful thing to look back on and to be able to say, Well, you know, if you’d start if you, you know, done, if you’d follow the advice, you know, when you’re going to be in a better position now than you were, you know, prior to the downturn, but how much of this is around really emotive and emotional factors versus logical and practical factors when it comes to the terminations? Because I mean, as I said, people make decisions emotionally, not necessarily logically.

 

Michael Miller 

So I think that’s where, again, the determinations are very much for that logical sort of thought pattern, whereas the, the actions and the realities of that moment, and perhaps the client perception is, as you said, extremely emotive. And so that’s where I think it’s looking at that, that disconnect where the determinations are saying the financial point and largely deep what they should have. But also at the same time, the outcome for the client has been one that we would all do anything we possibly could in our power to avoid the client doing that Yep. It’s obviously if there’s a complaint made against you, it’s a hugely stressful time for a financial planner, and somewhat relieving if that is resolved in a way that you haven’t been found responsible for that that poor outcome and but if you step aside from that, for a moment, every single financial planner would just prefer that there wasn’t the poor outcome for there to be in dispute about who was responsible for that. And that’s where I think we can draw some some sort of lessons and perhaps even build some better processes and into our practice, so that you’ll probably never get rid of these sort of disputes completely, but maybe we can minimize that you know, the incidence of a poor outcome for clients or these sort of misunderstandings and in the light there yep, yeah, I think some some of these some of these disputes have come from that a client has come in with a portfolio and said hey, I’m concerned about this market forming you know, quite a lot and the financial planner has as we said, done what logically they should is the correct advice and said, Hey, we’re going to realize a large loss if we sort of cash out now we need to stay the course or which is very, very good advice. But as markets have continued to fall, yep, it’s effectively gotten past that part of that risk tolerance point for the client and they’ve they’ve made the call to cash here. And in some of these examples, they have cashed out and then lower point than when they first started expressing that concern to their planner and that’s what behind a lot of these disputes is it then becomes quite or becomes disputed At what point did it move from a client concern to a client instruction? Yeah, the and that’s that tends to be what sort of drives these these disputes.

 

Fraser Jack 

Yep. So tell us about some of these war stories because there’s a few of them that have come out of this in this quarter. Let’s get into some of these because I love the way that you approach this from the point of view of you know, what, how can we be better you know better at our jobs better plan is better advisors from the outcome of these by by looking at these determinations and working out what could have been done to to cut it off. Tell us about some of these these exact cases that we’ve we’ve got here yet. So

 

Michael Miller 

fit There was one determination, and you can look all these up on the Africa website. And that’s where I get them from. So the number for this one was 746832. In there now, this is probably more to do with, say, some of the, the actions before the downturn, because that there had been some discussions with between client players saying, hey, look, maybe I want to reduce my risk profile. And this was around sort of August 2019. So that probably puts aside, you know, six, seven or eight months before it markets really started falling quite severely. Now, with the benefit of hindsight, the dispute has been well, hold on. I said, Yeah, from the clients perspective, back in August 2019, I was saying we should be more defensive. You know, that hasn’t happened. And now we’ve gone into this severe downturn, they’ve cashed out in March 2020. And in this case, they probably had a fairly sizable portfolio because the the resulting loss or or the, the, I guess, the difference between moving to cash in August 2019. And moving to cash in March 2020 was a $200,000. So substantial amount of money. Now, in this instance, that that firm had, they were found to have done the right thing, in that there certainly was these indications that the client may wish to reconsider their risk profile, but they’d, they’d made quite substantial efforts to, I guess, address that with their client. And also, ultimately, the client had not responded to. And there was a number of records of advice in, in in between the August 2019 and the march 2020, that sort of showed that the financial planners had been listening to their client. They just they hadn’t gotten that that information. But But certainly, I think it’s the sort of dispute that once again, if the record keeping had have been a little bit poor, if there hadn’t been those advice documents issued in the period between that there could have been potentially a different outcome, because it might have been more difficult for the planet to have demonstrated that they had done. What what they sort of it should have all said they would. I thought there was there was an interesting sort of sometimes you get these interesting quotes in these determinations. They, they asked this question, but didn’t answer it. But it talks about To what extent should a planner I guess, anticipate the COVID-19 downturn. So what they said is, in normal circumstances, an advisor failing to meet his obligations to a client in respect to market based investments must take responsibility for losses sustained because of market volatility. However, there is a question of whether the impact of COVID-19 a one in a 100 year event on the investments is too remote to be reasonably foreseeable. Now, in this case, they go on to say, I find that because of the actions of the complainant and his wife, I do not have to resolve this question. So nice and easy for them to sort of raise a very difficult question and then just say, look, in this case, nobody needs to work it out. Yeah, I think I, I read that. And I guess what one sort of, say disagreement I had with that is certainly you might say, COVID is a one in 100 year event. I think we would all certainly like to hope so that it’s not a yes. It’s frequently repeated. But I certainly think in practice, a severe market downturn, we should not be approaching the possibility of that, like a one in 100 year event. Yeah, I think even in recent history that the last 20 years is we’ve seen it Yeah, they’ve all been slightly different from each other. But in the last 20 years, we’ve obviously seen the COVID downturn, but we saw the global financial crisis, which was a little bit more sort of banking and financial system inspired. We’ve also seen the bursting of the.com bubble, which was to do with the specific technology sectors. So I don’t think we should be approaching our planning like these things don’t ever happen. We can sit. I don’t think that people can anticipate the timing. But I think that with some sort of reasonable frequency, we should be expecting that. That will happen. So that’s probably my I don’t think you could actually Excuse conduct, you know, just by saying, well, COVID itself was one in 100 years who would ever see it coming? Because we’re talking really more about just the impact of a severe and sharp market downturn.

 

Fraser Jack 

Yep. And and we’ve always been taught that there are market cycles, and, you know, any, and there’s, there’s no real number, but you know, eight to 12 years is sort of a, you know, very a moment that’s been talked about. So, it really you’re absolutely right, you know, expecting that and enlightening your clients up to anticipate that, I guess, is the key.

 

Michael Miller 

Yeah, that’s right. Yeah, there, there was another determination, which was really that there was a lot sort of going in this one, but some was 707 61581. In this case, it just highlighted that a client had completed a risk profit profile questionnaire in the past in about 2018. In 2019. Yeah, the, the fact that clients didn’t want to complete a new questionnaire. So the financial point that they just really sort of reaffirmed that that risk profile that was completed in the past. And yet that that was seen to be that that was an appropriate sort of process. And I would say that reflects what I’ve seen from most licensees tend to have some sort of policy where they say, look, you don’t need to do this every year. But they might have a threshold on that, they might say, but after three years, you probably should, or maybe it’s five years. Like it’s also reflecting on our own practice. We might think about well, there’s some time factors that are quite common in saying you can’t use the the same sort of questionnaire profile without redoing after five years. But also, what are some of the events that might trigger that even if you’re still within your three or five year time period is that might retirement via trigger, it might divorce or you’re inheriting new money, have one of those events that we might say, Okay, I know I’ve done this in the past, and maybe it was reasonably recently. But circumstances are different in a way we didn’t anticipate we should go back and do that again.

 

Fraser Jack 

Yep. Yep. And I think with risk profiling, it can get a bit blurry from time to time, but you mentioned risk tolerance, previously, completely understanding what their client’s risk tolerance is, and understanding At what point they’re going to completely freak out and want to switch to cash. Yeah,

 

Michael Miller 

that that’s right. I think that it’s, it’s very important, because ultimately, again, we are advisors, but the client is in the driving seat. So So one thing that I think is very important is recognizing that it’s the client’s risk tolerance that is more important than what our personal risk tolerance might be. Because it’s probably fair to say that on average financial planners have a higher risk tolerance, then the wider public, because we’ve had a combination of we certainly had a lot of education on the way which shows the value of the holding through thick and thin. But we’ve also just had a remarkable amount of exposure, because even if we’re actually not doing any investing ourselves, we’re just seeing that in real time happening with our clients. So you just you actually, you sort of build up a very thick skin in terms of risk tolerance, that it then becomes incumbent on us to set to realize that the client has not had the same experience. So they may not have the same tolerance.

 

Fraser Jack 

Yeah, that understanding of own bias is an interesting is an interesting point of view, isn’t it? Understanding that our tolerance, based on our experience is actually a bias and to be able to make sure that we’re either helping the client through it or understanding what there is, is, that’s right. Now just on this, because there’s a number of determinations, obviously, with markets falling, and people wanting to switch to cash, generally, as we said before, for emotional reasons. But tell us about like a lot of these determinations were in favor of the of the advisors when they Yes, yeah.

 

Michael Miller 

There hasn’t been too many that were there was really only sort of two or three that really reflected on that in that quarter. I’d hazard a guess that when it comes time to do the next quarter, there’s probably going to be a few more that sort of look at that particular topic as well.

 

Fraser Jack 

Yeah, I feel like there’ll be there’s going to be a few more that refer to the, you know, the, the early release of superannuation monies taken in the in the possible losses that could incur with it.

 

Michael Miller 

Yeah, okay. I think and this probably doesn’t come into the ones that I will get, because mostly they would have actually been advised so but you’re right, there’s potentially, if you will have disputes with superannuation Trustees, I think potentially a lot there and know what to do with timing of processing because at that point in time, you know, whether a withdrawal was undertaken on a Tuesday or Friday? Yeah. There were times during that downturn where that’s an eight or 10% difference in in the value of the portfolio over the course of three days, and that these are the sorts of things that really generate these disputes just yet. In that case, probably less frequently with financial advisors more more so with the superannuation trustees themselves.

 

Fraser Jack 

Yeah, no doubt there was a bit of fear and panic. Apart from the switch to cash conversations, what else do we see in this quarter? Look, I

 

Michael Miller 

think what one that I thought was really interesting, more so from a long, long term perspective is, it was actually in relation to somebody who’d taken out an equity release type product. So so like a reverse mortgage. And the dispute was actually with the, the reverse mortgage provider. The now what what had happened in in that case, is they’ve basically taken out a reverse mortgage with a long term fixed rate, but they’ve done this in the sort of, I don’t remember the exact time, it was probably a year or so prior to the global financial crisis. Now, that’s when interest rates have been steadily increasing sort of a quarter of a percent or every sort of month and things like that. So for probably, you know, the course of two or three years, yeah, rates were just going up going up. And people’s great fear then was, Oh, my gosh, these rates are just going to keep increasing. So So they’ve actually taken out his reverse mortgage and effectively fixed the right. So at the time there, it was probably at something like eight or 9%. What we’ve subsequently seen it from, from the financial crisis, and then beyond is just interest rates have absolutely sort of fallen through the floor. So there’s been a big differential rate opt in there. What was interesting is once again, a really terrible outcome for the individual. But the determination sort of reflected that the this reverse mortgage provider, they really followed all the steps, they should have to warn about the risks and things like that. And this sort of determination, I think, would be very instructive, destructive. If financial planners weren’t more involved in things like equity release products, but also the pension loan scheme, which is somewhat like a reverse mortgage. Yeah, was quite expanded. I think that that’s something that in the, I don’t know the timeframes yet. Maybe the medium term financial planners will be much more involved with I certainly think they should, because what these decisions really are retirement planning. And often, people who are looking at these sorts of equity releases are also in receipt of age pension type benefits, and potentially moving into aged care. So there’s a lot of interaction with the Social Security system. And there’s a big issue right now that most of these products sort of sit under the credit licensing regime where most financial planners don’t actually have the authorization to provide advice. That’s something that I think that it would be great for that to be shifted, because I think that because of the retirement planning and social security aspects, you really do need financial advice to go with it. But it wasn’t once again, you’re able to see from a very extreme case where a client has had a very poor outcome, but the Africa is the body has looked at the outcome was poor, but the conduct was in this case, spot on they they gave they did what they will have to investigate at that. So if we get to the stage where actually we are able to provide advice on these types of decisions under the licensing system. It’s a really good indicator for them will what are the steps and how thorough Do we need to be because particularly in this space, but typically very large and very irreversible decisions? So yeah, it was really good.

 

Fraser Jack 

Yeah, it’s interesting just on that, that a lot of planners can’t provide advice on it, as you said, because they’re not accredited to or they licensees won’t let them provide advice on it. It kind of feels to me like it’s a zone where there’s a lot of advice warnings, not necessarily financial product advice, but a lot of, you know strategy type conversations should be had and warning should be had outside of the box.

 

Michael Miller  

Yeah, okay. I think it’s something that and yeah, coming back to the global financial crisis and storm, is it margin lending used to be regulated as a credit product, and was actually brought into that financial products regime. Because it was seen as more tied to financial advice than it was to credit advice, I think ultimately, possibly needs to be some sort of wedges sort of change or things like that, I think around these equity release type products, and probably particularly that that pension loan scheme, which used to be quite narrow in its application, but the government has changed the law to really expand that. I think there is a process for us to be going and say, Hey, we think we should be providing advice on this, we would like to help people with this. But here’s, here’s the reasons why I think those licensees have been quite sensible under the current rules to say, No, you can’t do that. Because the it doesn’t line up. So what we need to do is sort of say, Hey, here’s the reasons we think it’s a good idea that we should be involved. And here’s what we need you to change so that we can do that.

 

Fraser Jack 

Yep. Fantastic. Now you got a little section at the end of your report called odds and ends, let’s quickly dive through some of the hosts.

 

Michael Miller 

Yeah, I think this is where sometimes, sometimes it’s just maybe interesting or funny, or just topical, but not much. Yeah, there was one determination. Yeah, we’ve seen people losing money in cryptocurrency scams. So not just because that particular currency has actually performed poorly, it’s just been a fraud. And, you know, when people have lost a lot of money, they’ll, they’ll quite sort of naturally try just about anything. And often they’re trying to say, the bank that you transfer the money often overseas in large amounts, should be responsible. There’s been a couple of decisions along the way, which basically say, That’s not a duty that a bank really has. So there was one day there was one around rate contribution strategies, which Yeah, just was this is something that doesn’t necessarily get examined a lot. Yeah, actually said, Look, it wasn’t poor advice that a real contribution strategy was done, because it was reasonably likely in the circumstances here that the superannuation would have been exhausted in the super anyone’s lifetime, not with substantial sums passed to non dependents. So yeah, you just don’t get that sort of in writing a lot of the time. So it was interesting to see that there was a decision that came out of one of the courts in Queensland, perhaps two and bank here. What that sort of establishes that as financial planners, we have a very, very broad duty to warn clients about the risks of what they’re doing. And I think what was a little bit perhaps eye opening about that decision? What was their duty was probably found to exist quite extensively beyond the scope of the engagement with the client. In that particular case, the the engagement with the advisor was more to do with investing some funds. What the client did that was some money was more some starting their own private business. The end, the advisor was found to have a responsibility in that particular set of circumstances to have more comprehensively warned the client of the risks of what they were doing. There’s a decision here where that’s probably just come back a little bit in that they they’ve said, Look, you have a duty to warn clients about risks of what they’re doing. But if their client is also experienced in that particular area, so in this dispute, it was about property investments. And it’s reasonable to not to have to give them every sort of warning under the sun that you can assume that they actually had some experience that they can draw on themselves. And then a final one. Look, I think, I don’t think anybody would find this surprising. I can’t believe they actually did it, but somebody who issued a statement of advice I think it was in something around 2006 or maybe 2007 and was providing advice with a record of advice 10 years after that, with no sort of advice in between that’s definitely there’s a lot of gray areas sometimes in the rules about Watson so I Watson IRA away. I don’t think there’s any gray about a 10 year differential between the two. But you know, somebody tried,

 

Fraser Jack 

yeah, you’re right there you know, sometimes those finer things give you the best learnings. Think that when you’re right In a doing ROI, 10 years after the soI in referring to the essays is not know exactly your best practice and no real learnings for that one. I don’t think just just highlighting that that, of course crazy. Michael, thanks so much for coming on and talking about the paper. I know you do these every quarter, which is fantastic. Tell us about where people can go to find them.

 

Michael Miller 

Yeah, so I’ve typically, I guess I published them on my website. So the Michael Miller dot help there and then the two places I typically share them is just myself through LinkedIn. But then where the majority of people probably see it is I typically post those on x y, as well, just as a bit of a post there.

 

Fraser Jack 

Yeah, fantastic. And they get a fantastic response. The x y community looks I think they look forward to them now, but they certainly love interacting and reading and having styling conversations and threads are conversations about each one so very much appreciate it. Michael, thank you so much for coming on the podcast again and telling us all about that.

 

Michael Miller 

No problem.

 

Fraser Jack 

We’ll have a look. We look forward to continuing the conversation.

 

Michael Miller 

I’ll keep reading the determinations.