In the past year, Australians have seen their lives change socially and financially, and these are extremely challenging times for many people.
Our recent Retirement Realities research found that almost a quarter (23 per cent) of Australians aged 30-65 say they will be forced to delay retirement and work longer as a result of coronavirus. Nearly half (45 per cent) are either scared or do not feel financially confident about retiring.
One in three Australians (34 per cent) have saved less than usual because of loss of income and/or an increase in bills, and half are planning to change their financial habits after the pandemic, reducing spending and keeping an eye on their budget.
A number of Australians have also accessed their super early, potentially losing many of the benefits that come with building their super balances and being unable to replace the money as they head into retirement.
This means more Australians are likely to need professional advice on how to get their finances, or retirement savings, back on track. Figures from the ASX Investor Report in 2020 showed that 63 per cent of Australians are open to receiving financial advice, and nearly two in 10 are likely to seek advice after the COVID pandemic.
We can see that the need for advice is becoming realised.
The growth of mum and dad investors
According to the same report from the ASX, Australia continues to be a nation of investors, with close to 9 million adult Australians holding investments outside their super and primary dwelling. Almost a quarter have also only started investing in the past two years.
Unsurprisingly, the extreme volatility and sudden decline in asset values caused by COVID-19 in 2020 has had a considerable impact on investors. Retirees have been the worst affected group, with a significant number being forced to revisit their plans to manage the dual challenges of ongoing market volatility and ultra-low interest rates.
Across the board, investors have become more focused on diversification and risk management, along with sustainability of returns.
Many investors have also taken advantage of opportunities to capitalise on falling asset prices by adding to their portfolios. While some have been doing this with long-term goals in mind, others have taken a shorter-term view.
There has been an influx of new and young investors into share markets around the globe, helped by low-cost platforms that allow for easy trading. Research suggests that almost two-fifths of Millennials and Gen Z-ers began investing in shares last year, whether directly or through a micro-investing app. In addition, a growing number of influencers on social media also promote this style of investing, with ‘#robinhoodstocks’ on TikTok videos clocking up 8 million views (to October 2020).
In May, financial regulator ASIC warned investors away from day trading stocks, following a huge rise in speculative trades. ASIC warned that this type of activity was “likely to lead to heavy losses – losses that cannot happen at a worse time for many families”. While there are Australians looking to DIY invest, the value of engaging a financial adviser cannot be underestimated in how to build a comfortable nestegg for retirement.
Making financial advice affordable and accessible
These factors, combined with the phasing out of government support initiatives including JobKeeper and JobSeeker, point to the fact that sound, affordable and accessible financial advice is more important today than ever before.
Affordability has become an increasingly significant problem for the financial advice market in Australia. There is a mismatch between supply and demand with few providers actually able to provide advice on a scale that works for ‘every Australian’. ASX research shows that 25 per cent of next gen investors and 27 per cent of wealth accumulators would like to engage an adviser but they’re too expensive. Generally these advice models work for more affluent Australians, which has left the ‘mass market’ feeling priced out.
We need to give Australians a reason to engage a financial adviser. Offering people advice that is tax deductible can go some way to increasing take up. Making the process completely transparent from what you can expect from a financial adviser to their function, will also enable the mass market to see the value they could get.
But more broadly, the industry must find more ways to make advice not only more affordable for Australians, but profitable for financial planners.
Advice key to navigating retirement incomes
Financial advisers have a key role to play in helping older Australians to navigate an increasingly complex retirement income system, which also interacts with the aged care and tax systems.
The final report of the government’s Retirement Income Review asserts that misconceptions and low financial literacy have resulted in people not adequately planning for retirement or making the most of their assets when in retirement. I believe Australians have a strong desire to be self-sufficient throughout retirement. Retirees may understandably be reluctant to draw down too heavily or too quickly on their savings, given concerns about possible future aged care costs and outliving their savings.
And this is where financial advice can play a part, leading to better outcomes for retirees. A financial adviser can help with managing income and cash flow, increasing confidence and providing peace of mind. This can lead to better investment decisions, particularly in times of economic and social crisis.
The value of advice
Australians have become more engaged with their superannuation and investments; in some circumstances this has led to some of the short-sighted behaviour outlined earlier. Ultimately though, I believe this increased engagement, and some potentially negative DIY outcomes for investors, will lead to a significant increase in demand for quality financial advisers as the profession evolves to meet people’s changing needs.
In a post-pandemic world, many younger Australians will be focused on ways to bolster their retirement nestegg. Many will have to start over rebuilding superannuation balances after seeing contributions fall as a result of reduced working hours or in some cases having had their super account drained to make up for lost income through the early release of super scheme.
We are also likely to see more seniors turn to financial advisers for reliable information on how to facilitate a comfortable standard of living and live a dignified retirement.
Advisers have a crucial role to play in helping Australians meet their retirement goals. Access to affordable financial advice is more important than ever before.
Bryce Quirk, general manager, CFS Advice Relationships
🙂 The views and ideas of someone who works for an organisation prepared to deal only with aligned “advisers” sic are always going to be viewed with suspicion. Bryce mate – I reckon you need to leave CFS before you’ll be taken seriously.
Love your optimism Bryce. There is no doubt Australians need more professional financial advice. However at the moment our regulatory environment makes it too difficult for them to access it. The solution to that problem is not the oft touted technology gimmicks such as “roboadvice”, which are really just product sales tools, or intrafund advice, which is really just hidden commissions. The only solution is regulatory reform.
This reform needs to be at two levels. Firstly it needs to get rid of unnecessary, complex, overlapping financial advice regulations that do nothing to increase consumer protection, but do much to increase cost and complexity for consumers. But it also needs to go further than that and address the chronic bias against professional financial advisers within our regulators.
Perhaps with Shipton moving on from ASIC it would be a great opportunity to install a leader there who can remedy ASIC’s toxic anti adviser culture.
Well said. 100% agree. I would just add it needs some accountability by advisers also. With that said I’m off to sign up with AMP and get discounted marketing support and I’ll make sure I advertise AMP in the smallest font possible.
CFS have been taking every opportunity to shaft advisers these past 2 years, they have no credibility when they come out with these puff pieces.
You want to talk about affordability and accessibility? How about when you removed intra fund advice from your corporate plans? They had access to advice, both general and personal if they needed, could attend seminars and could reach out for help. How many clients lost insurance cover due to PYS & PMIF, that could have been kept had they an adviser attached and engaged to their plan? How has your ‘lost client’ rate gone since?
Hey, remember when you went around telling clients they could cancel the adviser service fee?
Do you remember when you forced advisers to complete additional annual opt-ins, because you wanted it on your forms too?
How many clients have you had to compensate these past few years due to smoker rates problems, savings rates errors, IP duplication, the list goes on.
It’s not what you write Bryce, it’s what you do.
ASIC and government you wouldn’t piss on them [u][/u][u][/u]