As a large population of Australians approach retirement, the demand for affordable advice is set to rise but at its current cost, many will be unable to access it, leaving them navigating retirement on their own.
Increased complexities and regulatory hurdles for the financial services industry since the royal commission in 2019 have pushed the cost of the provision of advice up and many advisers out of the industry, causing further strain on those remaining.
In an opinion piece on Australia’s retirement system, AMP chief executive Alexis George stressed the value of financial advice, particularly for those approaching retirement, as well as the importance of technological and legislative improvements to help bring the cost down.
Highlighting the importance of financial advice in the later stages of life, George said that with the price of accessing advice so high, most will be left unable to afford it.
“Comprehensive advice provided by professional financial advisers continues to be the most effective way to make decisions about retirement. Yet, it’s only currently accessible to a wealthy minority,” she said.
“Making quality, personal financial advice more affordable and accessible to the wider population is one of the most impactful ways we’ll improve retirement outcomes.”
George argued that the changes coming out of the Quality of Advice Review (QAR) reforms would help increase efficiency and bring down the cost of advice.
“Rapid implementation of the Quality of Advice Review recommendations, including simplifying the advice process and expanding the role of superannuation funds in providing advice, will help,” she said.
Echoing the opinions of others within the industry, George said that “new forms of digital advice will also play a role” in helping bring down the cost of the provision of advice.
“It’s up to industry to innovate with the backing of supporting government and regulatory policies,” she added.
George also stressed the importance of addressing financial literacy, noting that while the collective balance of superannuation continues to grow, there are still sections of Australian society that are “under-served by the retirement system, and for who retirement is not comfortable, or in some cases attainable”.
“Financial illiteracy is a root cause,” she said.
“It’s a barrier to engagement with superannuation and contributes to conservative drawdown behaviour and lower standards of living in retirement. It also increases vulnerability to financial abuse, investment scams and, critically, lower retirement incomes for women, First Nations peoples and those with lower levels of income and assets.”
Speaking with ifa’s sister brand Super Review earlier this month, the general manager at Chant West, Ian Fryer, said that not all clients need comprehensive, ongoing advice and allowing institutions to provide smaller scale advice as needed will help more clients access advice.
“We need to work out a way that advice can be delivered in smaller chunks and, indeed, the majority of people probably don’t need that $5,000 SOA,” he said.
“They probably just need some simple help, maybe a couple of times through their working life, but also at the point of retirement. Retirement is the key time that someone needs advice.”
