The CoreData survey presented by the FPA has shown consumers are shifting their behaviour as a result of the coronavirus crisis, with four in five Australians taking action to minimise the impacts on their personal finances.
Cutting down on discretionary spending was the most common course of action, as voted by 63.5 per cent of consumers, followed by reducing spending on essentials (47.8 per cent), cancelling memberships (36.7 per cent), seeking additional work or jobs (16.9 per cent) and applying for financial support/loans (12.8 per cent).
Despite the actions individuals have taken, more than twice as many households were found to be in a fragile financial position compared with before COVID.
The most popular option for support in recovering financial positions was “tips and advice from companies I pay regular bills to on how to reduce bills” (31.9 per cent) and a website or other free resource that explains financial services and supports available.
Affordable advice and support from a financial adviser came in at third, for 25 per cent of consumers.
Around 65.6 per cent of consumers said they didn’t think they had enough assets or wealth to need advice, while 61.5 per cent said it was not yet the right time for them to seek advice.
A majority (60.5 per cent) did not believe they could afford advice, while just under half (49.4 per cent) said they would prefer scoped advice to assess the value or build trust before seeking comprehensive holistic advice.
Around 43.9 per cent said they saw the value in receiving advice from a planner.
Consumers were seen to place strong scrutiny on fees and utility, with 66 per cent saying they would want more information about the costs of seeking advice before seeing a planner and 44.6 per cent saying they would like more details about the products and services an adviser would offer.
A little over two-fifths (43.9 per cent) said they would want more information about how their money would be invested while 41.4 per cent signalled they wanted more information about the benefits of advice.
But trust among advised clients remained high through the pandemic, with them being more likely to recommend their adviser during COVID.
Speaking at a recent FPA keynote event, Paul Clitheroe, chair of financial literacy at Macquarie University, pointed to the current regulatory framework with rising compliance costs meaning advisers could only support high-net-worth individuals and other well-off consumers who could afford advice.
“That satisfies the top 10 or 20 per cent of the population of Australia,” Mr Clitheroe said.
“What do we do for the other millions of people who want to talk about everything from their credit cards to investing a hundred dollars, to talking about [whether they should] put a thousand dollars in super or [towards paying off their] mortgage? That remains the challenge.”
FPA chair Marisa Broome echoed that advice is inaccessible for most Australians.
“We at the FPA want to change this,” Ms Broome said.
“We want more Australians to seek financial advice but to do that they need to be able to access it and afford it. I passionately believe that helping Australians to build their financial capability and understanding is critical, not just to them individually, but to the nation.”
But she added the association was not against increased professional standards.
“Where we are concerned is that we have regulators who do not seem to want to work together, who’s interpretation of rules is vastly different and this creates uncertainty and conflict,” Ms Broome said.
“We have licensees closing up, leaving hundreds of financial planners without a place to work. And those who are staying are doing so with the lens compliance, where they have often lost sight of clients’ best interests, but rather they have focused on mitigating business risks.”
FPA – seriously – how can it be so hypocritical – advice unaffordable and wants to change – where have you been for the last 10 years?
Every ridiculous idea in legislation and regulation was either promoted or supported by the FPA.
they’ve been hiding in the pockets of the banks.
If only there was a pro-advice but independent business that provided an affordable consultation service for clients to explain the costs, benefits, risks, processes and positive outcomes of financial advice to help clients understand what they will be dealing with before they commit to advice. Oh, there is 🙂 Insider Out
What fasea qualifications must one have to run/work in your business can i ask ?
There are none because I do not provide advice. I explain the advice process and refer people to appropriate financial advisers to provide the advice once they understand how it works and what it is likely to cost. As per the article above, people do not understand why it costs so much and what the benefits are. They are much more likely to take that information from someone who is not the adviser quoting them the fee.
My service is pro-advice and sets people up to get advice from an Authorised provider of advice. They are morel likely to have a successful interaction with an adviser if they know what to expect. I often explain the difference betweeen financial advisers, financial counsellors, mortgage brokers and accountants and refer them on accordingly. And no I do not receive any commissions or referral fees. And yes I have ethics, but no requirement for an exam with what I do.
The FSG is very clear, the SOA is very clear, the FDS is very clear, the ongoing interaction is able to provide clarity. How much does the TV you buy at Harvey Norman really cost ? We are the most over disclosed profession of all yet they want more.
The problem isn’t that each document isn’t clear. The problem is ASIC think it is realistic that clients have to read through the FSG and privacy policy before they get advice, they have to provide a comprehensive fact find (even if they want scaled advice), then they have to read through the SOA and PDS. For some people this could mean they are expected to read 100-200 pages, most of which goes over their head.
How about getting rid of any vertical integration, keep insurance commissions where they are and get rid of most of the paperwork.
Is the cost of advice really a mystery ? Compliance is insane and someone needs to pay for that. That someone is the client. This in and by itself not unusual. That is what happens in all professions.
How much to go and see a doctor to get help with hayfever. How much to go and see a financial planner to see if they are in the right investment option in their super?
The quicker we separate advisers and product providers, the quicker we can ditch alot of the compliance (like SOAs) and just get on with helping people.
They will never ditch SOA’s. It simply isn’t going to happen. My last plain vanilla risk SOA was 58 pages long. The client looked at me as she flipped through all the pages and said – you’re kidding right ? I think she kept shaking her head for the next hour after which she said – “Surely all this isn’t necessary”. They will never be ditched and clients don’t want them or read them. They still need to pay for them though.
I provided advice to a general insurance broker and he couldn’t believe what we had to go through
perhaps people need to understand from the outset that advice isn’t free (although the cost can be reduced or ‘amortised’ over the life of the advice period with commission – on no, that’s illegal)
Unless the Treasury Draft legislation is dumped & Opt in is removed, get ready for more Aussie being dumped by their advisers, or paying twice as much as they are now. The FPA’s lack of action in these areas mean they have a lot to answer for – mainly deserting the small mum & dad client seeking advice.