Research firm Investment Trends’ new study notes that an estimated 1.8 million Australians use financial advice, however this figure has fallen at a rate of 100,000 since 2020.
The report states that perceived high costs and lack of investible funds are the biggest barriers for people seeking professional advice with an estimated 12.6 million (61 per cent) Australians having unmet advice needs.
In fact, more Australians are reaching out to their super fund for advice. In the last year alone, around 1.5 million Australians have engaged with a super fund representative with additional super contributions and changing investment options the most common inquiries.
However, Investment Trends’ research shows that there is reason to be optimistic as Australia emerges from the COVID-19 pandemic, with an estimated 3.2 million individuals open to engaging with a financial adviser in the next two years.
“The pandemic has prompted many to consider their financial situation and many Australians are now looking to expedite their decision to seek or consider advice options,” Investment Trends’ associate research director Kurt Mayell said.
“Over the next two years, there is likely to be significant demand for advice in areas such as tax reduction strategies, capital preservation, and ESG investing.”
Individuals who did engage with an adviser in the last 12 months have seen the benefits and 75 per cent intend to continue their existing adviser relationship; an increase from the 62 per cent reported in 2020.
Meanwhile the average portfolio of advised clients in the last year has grown by $140,000.
“Honesty and integrity are key considerations that new advised clients look for when selecting an adviser by a significant margin, followed by independence,” Mr Mayell said.
On a recent episode of the ifa Show, Midwinter chief commercial officer Steve Davison said it is a fact that some people don’t engage with advisers because they think financial advice is too expensive.
“The cost to produce advice today, it’s a lot, and there’s sticker shock when people would say, ‘Oh, that’s a lot of money. I can’t afford that,’” Mr Davison said.
“They also don’t think it’s for them. So they actually think advice is for people that are wealthier, or for rich people. And so we’ve actually got to help them understand that that’s the paradox, right?”
Listen to the full ifa Show episode with Mr Davison here.
I’m surprised it is only 2 in 5, it will be 4.5 from 5 shortly.
totally agree
Going to get even more expensive with number of advisers declining so rapidly. This combined with massive increases in costs to do business because of ever changing compliance obligations will simply mean higher cost for consumers.
Ask a practitioner, I’m going to say “it’s unfortunate, but not my problem either”
Why initial financial advice is not tax-deductible is beyond me. This would allow many more people to obtain advice and help to improve their future. For all the damage that has been done to FP, surely the Government can look at this measure as a priority.
Making it tax deductible just makes it easier for advisers to convince clients to pay. Taking this self-centred approach is exactly why the industry has the issues we currently have with inflated regulations.
Making fees tax deductible does not fix the inherent problem. It is too costly for most people to pay for advice because of the way we are forced to provide advice.
The solution is surprisingly easy and the government need only do two things. An industry regulator should directly licence all advisers and they should have a cleanout of the current regulatory BS.
Whenever advisers work for a company that wants their products (or ones their employer gets some financial benefit from) to be sold there will be problems. It doesn’t matter how these advisers are paid, there is a conflict. They can write whatever they want in the SOAs, there is a conflict.
In the whole financial advice space their should be four parties.
1. The regulator. They should have the following functions. Ensure all advisers are licenced and comply with the rules. Be the link between Gov’t and advisers to ensure the landscape allows for consumers to be given the best advice at the most affordable price (note this is very different to ASICs current role of having the starting point that every adviser is out to rip off their clients). That’s it.
2. The product manufacturer. Their sole purpose is to be the fund manager, or insurer, or whatever. Just as drug companies don’t have shares in doctors surgeries, product manufacturers should have no relationship with AFSLs or advisers. This is where the big banks, TAL, AMP, IOOF, etc should stay.
3. AFSL (or whatever they will be called in the future). Their only purpose is to help advisers run efficient practices. They shouldn’t need compliance teams, they shouldn’t need to have their own APLs, they don’t own their advisers’ clients.
With the cleanout of regulations, they need to restart and have the minimum. Use the medical code of conduct, etc as a starting point. It would also be helpful if the regulator had templates just as the doctors have standard prescription forms.
Have to go, it was enjoyable being in fantasy land there for a while. Pity all the conflicted stakeholders would be bending the ear of the Ministers to make sure this never sees the light of day.
“Making it tax deductible just makes it easier for advisers to convince clients to pay. Taking this self-centred approach is exactly why the industry has the issues we currently have with inflated regulations.”
Yet this is how the accounting profession operates and doesnt have the ‘inflated regulations’…
Explain to me why accounting fees should be tax deductible and financial planning shouldn’t?
Many things you pay cold hard cash for seem expensive. Mortgage Brokers take a clip out of the rate & many clients either don’t know or don’t care.
The industry is over regulated – WHAT’S NOT TO UNDERSTAND ?
Of course it is not affordable. I don’t even think it affordable and I’ve been a planner for 20 years.
The federal Liberal government have done all they can to ensure this is the case; only now can they make a case for expanding intra-fund advice and allowing banks to introduce robo-advice. It is all going to plan.
The saddest part of it all is that there are still financial advisers who a) will still vote Liberal and b) are still members to the FPA & AFA who sold them out years ago. I actually feel embarrassed for them.
Memo to government :
1. Make financial advice tax deductible starting from the current 2021/2022 FY which will encourage more Australians to seek advice
2. Reduce the compliance burden on advisers to enable them to deliver more affordable advice
3. Start talking with advisers and their clients (not the FSC or FPA or ISN) to find out which other barriers are preventing more Australians seeking advice
Sounds easy when you say it like that. The issue with your approach is that this would only require a small number of bureaucrats to do it. Much better for them all if they make it more complicated and drawn out.
Congratulations Josh, Kelly, Jane et al…..at true refection of the Liberal Party’s effort to trash small businesses over the past 7 years!! You have successfully alienated many of your past, long-term supporters and will feel their wrath at the next election.
disgraceful outcomes for those operators, present and past, who have done nothing wrong … and only choosing this career to help people.
There is a very good reason. The cost, the time and compliance overreach has caused us to reflect on our own values. We don’t have the time to see as many people and those of us who have the required qualifications and spent years developing our practices, cannot afford to give our time away at a diminished value. Of the 40% surveyed and have responded to lack of affordability, have they actually contacted a financial to meet, or is it their perception based on here say?
Unaffordable!!!!…..,you don’t say !!
I wonder how that could possibly have happened under the watch of this current Liberal Govt!!
Why advisers are dumping the FPA in droves