Australia’s substantial ageing population continues to grapple with limited access to essential financial advice due to the persistently low number of advisers and the high associated costs.
Vanguard’s 2024 How Australia Retires report, released this week, revealed that with over 5 million Australians at or approaching retirement, and only 16,000 advisers practising as at December 2023, “unmet advice needs will continue to grow if the barriers to seeking advice are not effectively addressed”.
Despite the government’s insistence that it is working to cut the cost of advice, the advice profession continues to struggle under the heavy burden of over-regulation and excessive red tape. In its report, Vanguard said that “increased compliance obligations” have, in part, driven up the cost of advice, “which has in turn reduced accessibility” for those in need of financial advice.
This, Vanguard said, is concerning given that good financial advice can “improve more than just returns and go beyond portfolio and financial value”.
“Importantly, it can improve financial peace of mind and preparation, with 37 per cent of advised Australians feeling highly confident about retirement and 43 per cent having a clear retirement plan,” Vanguard said.
Moreover, the asset manager said only 24 per cent of non-advised Australians feel highly confident about retirement and just 19 per cent have a clear retirement plan.
But Vanguard’s findings delved deeper into Australians’ interaction with advice, revealing that affordability has emerged as the major barrier preventing people from seeking financial advice, with 51 per cent of respondents citing high costs as the primary reason for not consulting an adviser.
Other respondents stated they didn’t think they needed advice, 27 per cent, while 20 per cent said they lacked trust in advisers, and 15 per cent claimed they didn’t know how to find a good adviser.
Interestingly, while one in five Australians said they currently don’t require a financial adviser, they expressed openness to consulting one later. Among them, 24 per cent are open to an ongoing relationship, 25 per cent to a one-off consultation, and 5 per cent are open to both scenarios.
Vanguard also explored the most valuable aspects of financial advice for retirement planning as perceived by its respondents.
What it found is that Australians mainly flagged emotional support, including ensuring their money sustains them throughout life (44 per cent of respondents) as key aspects of an adviser’s services. This was followed by feeling confident in retirement preparations (39 per cent), understanding spending limits (37 per cent), and ensuring a comfortable retirement (36 per cent).
Interestingly, investment aspects were ranked lower in importance compared to emotional support, with only 22 per cent mentioning “protecting my investments during market declines” and 29 per cent citing “earning higher returns on investments” as expected benefits of financial advice.
Finally, Vanguard’s survey revealed that most respondents preferred an annual review of their financial plan (40 per cent), with 35 per cent willing to pay for ad-hoc advice and 36 per cent interested in a one-off comprehensive plan to start their retirement planning.
