The mass wave of retirees hitting the Australian market, and the lack of advisers to help them through the transition, is a catchy, but maybe tiresome headline. But the fact remains, advice can lift confidence in retirement, and the sector is largely unprepared to do this.
CoreData founder Andrew Inwood helped put the exact numbers into perspective at last week’s Evolution of Advice Summit: “[According to Australian Super], there will need to be five million pieces of guidance in the next five years to satisfy retiring Australians. If you break that down, what’s missing from that statement is the word advice, which is really interesting.”
“[Australian Super] also said we expect 98 Australians to retire every working hour for the next five years. Think about that in terms of supply into the system. In the time that you’ve been here today, 500 people have announced their retirement, either passively or actively, and they’re going to need to think about what to do and how to do it.”
Inwood then presented a very simple equation, around five million Australians will need some form of advice in the coming years, but there are only 15,000 advisers to fulfill that task, revealing a stark capacity problem.
“There will be 1.748 million Australians who want advice and can’t get advice. If you constrict supply and increase demand, what happens to price? It goes up.”
This is concerning, especially if Inwood’s assertion that advice provides more retirement confidence than home ownership.
“We had two very brilliant young mathematicians come to work for us. We’ve got 20 years of data and mystery shopping with people who’ve either got advice or not got advice, and we parallel-ran the data back-to-back. We found that advice fundamentally changed the outcomes of their lives,” he said.
“Advice is more important than owning your own home. Understanding your costs, understanding what your expectations are and understanding what’s coming next becomes a really powerful driver. The act of getting advice changes people’s confidence in a way that we didn’t expect.”
CoreData’s findings are in line with an ever-increasing number of studies, all meeting the same conclusion. One such CFS reportfound 85 per cent of pre-retirees receiving advice were on track to reach their retirement goals, compared to only 49 per cent of those not receiving advice.
Moreover, the latest edition of Russell Investments’ Value of an Adviser report found, generally, that nearly 90 per cent of advised clients felt that service made them more confident about their finances.
For Inwood, firms that are able to adapt resources, deploy the technology at their disposal (yes, that includes AI) and communicate effectively and efficiently will fill this gap and pull ahead of the pack.
“You’re going to have to choose the size, shape, scale and speed of your business, but value is really shifting,” he said.
“The ability to out-manufacture people and supply more services to more clients is going to be incredibly important. The message about this is getting through. There is a retirement wave coming through the system and the reality is you’ve got 20 years of tailwinds because of the baby boom and because of the rich countries being net importers of people.”
