Andrew Boal, chief executive of Rice Warner and convenor of the Actuaries Institute’s retirement strategy group, has called for a new regulatory regime governing advice that can ensure people can access low-cost guidance on managing savings and retirement.
“We need a regulatory framework that allows for affordable access to information and guidance for the majority of retirees,” Mr Boal said.
“That advice could cost as little as $200-$300. It could be a single issue scaled advice or a modified version of intra-fund advice.
“While the retirement experience is generally quite heterogeneous, there are still a lot of people in quite large cohorts who have very similar circumstances with similar needs in retirement. We should be able to come up with a system to give the people the guidance they need at an affordable price.”
The FPA has benchmarked the time it takes to provide a piece of advice as currently being 26 hours and costing between $3,715 and $6,063.
Face-to-face time with clients is meant to take somewhere between six and 10 hours, with the rest of the 26 hours being occupied by constructing the financial advice document and implementing, along with related compliance burdens.
Mr Boal added that only retirees in the top 5-10 per cent of savers typically “have the level of complexity to justify expensive personal advice”.
Other issues that the Actuaries Institute has called for includes changes to retirement strategies and products, taking into account how they work together, particularly with the effects taper rates and the asset test have on spending and age pension access.
Further, it wants a review of targeted assistance for retirees in need, such as single renters and an assessment of longevity risk products.
Mr Boal has said in an Actuaries Institute dialogue paper that while Australia has one of the best systems for accumulating retirement savings, it struggles with a retirement “spendings system”.
The body has estimated during the next 20 years, more than 60 per cent of superannuation balances at retirement are expected to reach $250,000 or more, while 40 per cent will hit $500,000 in today’s dollars in the next 40 years.
“The system needs to be efficient so that the cost to taxpayers meets its core objectives; it must be affordable and sustainable, and produce adequate outcomes that still allow some flexibility to meet an individual’s needs and be simple enough so that retirees can optimise their position without having to spend a lot of money on advice,” Mr Boal said.
He expects further super industry consolidation, resulting in fewer funds and continued downward pressure on fees.
The sector has already undergone a wave of reduction in investment fees, with operational fees expected to also gradually fall – but Mr Boal said there will be pressure on funds to spend more money on financial information and guidance for members.
“The industry does need to spend a lot more time and money on the future provision of information and guidance, as well as the future retirement income products, which might mean that some of those fees might not fall by as much,” he said.
A Treasury spokesperson confirmed to ifa that the final Retirement Income Review report is due to be given to Treasurer Josh Frydenberg this week, but it remains to be seen when the findings will be revealed to the public.
New headline “Actuaries say Santa Claus and the Tooth Fairy are real, and that World Peace needs to feature in Government overhauls”
One of the most out of touch things I’ve read this year.
If, I could diagnose & prescribe like a GP and see 3 clients an hour – that price would work.
However whilst we are guilty until we can prove ourselves innocent (hence the horrendous quantum of paperwork) it will NEVER be a possibility.
“200 – 300 for retirement advice” Tell him he’s dreaming!
If annual Opt-ins are changed to Opt-Out, then it is possible to charge $330 pa ongoing service support on small clients, who need our advice as much as wealthy clients paying $3,300 pa. It’s that simple. Notice which advocacy groups are kicking goals on Opt-Outs, versus the other membership groups who have caved in on this.
So, Actuaries are effectively recommending to repeal FOFA, Royal Commission, LIF, FASEA, TPB etc etc?
Get rid of bloody statements of advice and records of advice. Clients don’t want them. No other profession is required to write them. That is the impediment to cost reduction. Until that elephant in the room is dealt with, we will be going around in circles. Hume could drop them from the Corps Act right now and become a hero for consumers and the advice industry. There is a valid argument to keep them for life insurance products, where commission is paid, and for employed advisers working for a product manufacturer. But in all other cases they are working against the interests of consumers. Get rid of the damn things!
so we are heading for full-blown standardised pricing in financial planning
So what happened to fuel pricing?
All cars will now be priced the same as they all do the same mode – transport?
How about food – every shop the same price?
Clothes no issue we can all wear the beautiful one colour fits all?
Does even gambling have different prices?
And for actuaries, how about prorata your rates the same method as advice
It is called competition. If you don’t like the price then shop elsewhere, usually, you only get what you pay for.
$200 – $300 ????. That only buys you 30 minutes of a degree qualified Lawyers time but yet a degree qualified Financial Planner is expected to cop this. Perhaps the Einstein’s at Rice Warner would like to show the industry, ASIC, APRA and Canberra how this can be achieved, even with the stifling red tape removed (i.e. what?….do we just “Google” it). Simply mind blowing !!!
$200 – $300 ? A truly puzzling statement.
We have been evolving our technology over many years and yes- It is possible to deliver scaled advice at very low cost.
There is zero chance that even scaled advice could be provided at $200 – $300.
Oh David… Such a silly thing to say…
David, im sure scaled advice can be delivered by technology at a very low cost. But you over estimate the level of intellegence and financial knowledge of people and the vast majority will need someone to help them through the robo advice process (other than simple rollovers of funds) . As soon as a human needs to get involved with the process the costs get blown out.
I’m sure you can use some technology to provide scaled advice for $300.
The issue (which you’ve touched on) is that people don’t know what they need. Because they don’t have the knowledge. You and I (and Rice Warner who have an understanding) can say ‘ use this technology and with these inputs it will give you the correct output’ But normal people don’t know the question they are asking and what information is relevant and where / how it needs to be factored in.
I say the answer is for qualified advisers to be able to drive this technology on behalf of clients to bring the total cost of service down. But qualified advisers still need to be paid for their expertise.
Think of it like a surgeon. It’s a robot doing the operation because it is far more consistent. But it’s a surgeon making all the decisions and being paid handsomely. The robot can do it, but how does it know what it is operating on?
A plumber will charge more than $200 to $300. What is the value of advice to these so called actuaries even for a single scaled advice? They think it is just a flip of a switch.
A plumber will charge you $200 to come to the front door.
$200-$300??? Hahahahahahaha in what world will it EVER be that cheap… So out of touch even if you removed 99% of the red tape