We live in a complex financial world. Whether you are buying a home, building wealth, choosing life cover, saving for retirement or funding aged care, there are difficult decisions to be made, each of which could benefit from specialist advice.
But that comes at a cost, one that most Australians find unaffordable.
Government Review
Numerous government reviews of the financial services system have been made over the past three decades. The latest, the Quality of Advice Review, announced in March, aims to assess how the regulatory framework could deliver better outcomes for consumers.
It will investigate whether there are opportunities to streamline and simplify regulatory compliance to reduce costs and duplication; to improve the clarity of documents; and whether parts of the regulatory framework have created unintended consequences.
Actuary Michael Rice highlights that “while there is now much-improved consumer protection, the heavily bureaucratic legislation pertaining to advice, together with the ultra-cautious approach of the regulators, is a severe hindrance to the industry delivering sound financial advice at a fair price for most Australians.”
Current legislation requires an adviser to know and consider, their client’s overall financial needs even if only dealing with a small part of those interests. As a result, few ordinary Australians can afford to purchase the financial advice they need.
Currently, all advisers need to do a full analysis of a consumer’s financial needs when delivering simple advice. “Provided the advice is likely to make the consumer better off, it should be possible to deliver most simple advice using digital engagement, akin to the current treatment of intra-fund advice,” says Rice.
Xavier O’Halloran, director of Super Consumers, says the current regulatory setting exists for a good reason. “It’s there to provide quality and safe advice to those seeking it.”
A national survey conducted by Super Consumers of those over 45 found it was only wealthier consumers who relied on financial professionals. “They want trained professionals to help them and tend to have the financial resources to pay for them.
“It requires us to think about what role the design of the financial system and the government can play in making it easier for consumers to navigate,” says O’ Halloran. “We need to make retirement planning easier. To do this, we need solutions that make sure everyone can get a good outcome from the retirement system regardless of wealth or financial knowledge.
“Our key recommendation is that the government be tasked with connecting up Australia’s public retirement services and tools through a single portal to provide quality, impartial guidance, delivered via digital channels with in-person and over-the-phone support as required.”
He says the government should merge important information sources like the ATO, Centrelink and MoneySmart and go further to help people understand the types of products and strategies that will help them manage the financial risks they face in retirement.
“Everybody deserves world-class advice.”
We, at Alman Partners, have always believed that everybody deserves world-class advice, but as stated above it is not a viable option for everyone, particularly those starting out, or with smaller amounts of capital. Whilst our self-directed online investment service, AP Direct Invest does not include personalised financial advice, it does give investors access to a low-cost platform allowing them to grow their wealth through a diversified investment portfolio. Along with ongoing educational articles, an investor can gain an understanding of the investment process. Then, when they reach a point where they will most cost-effectively benefit from comprehensive financial advice, we can offer that service to them. With the pace of technological advancement, we look forward to a future, making financial advice more affordable for consumers.
Jason Kirk (CFP® Professional, SMSF Specialist Adviser, GradDip. App.Fin&Inv, B.Econ) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Any information provided to you was purely factual in nature. It has not been taken into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001 (Cth). It is recommended that you obtain financial product advice before making any decision on a financial product such as a decision to purchase or invest in a financial product. Please contact us if you would like to obtain financial product advice.