Recent research commissioned by Colonial First State (CFS) has surprised not only the wider advice industry but the team at CFS itself.
Namely, based on a survey of over 2,000 individuals, it showed that over 50 per cent of Aussies under the age of 40 are open to financial advice, compared to 36 per cent of those aged 40 to 59, and just 15 per cent of those 60-plus.
This contradicted what had previously been considered a truth – that those over the age of 55 are more inclined to seek an adviser than younger generations.
“The research was surprising from that perspective,” Kelly Power, chief executive officer of superannuation at CFS, said.
“What we observe, both from our calls from our membership but also our experiences in the market is that it’s typically the 55-plus cohort where they start to take an interest in their super, they start to question how much they need and prepare for retirement, and at that point, engage with advisers.
“And so, to find that over half of the people we surveyed, and it was a representative sample, under the age of 40 were open to advice was something that really did open our eyes to the fact that, I think, the current cost-of-living pressures and what we’re really seeing happening at the moment, has meant that people need help.”
As ifa previously reported, Financial Services Minister Stephen Jones has really thrown his support behind the expansion of superannuation funds’ advisory services as he sees the advice gap as being most prominent among the cohort approaching or in retirement.
Critics of this interpretation of the advice gap have previously suggested that Mr Jones’ understanding of the advice industry appears to be very limited. They argue that funds alone cannot bridge the gaping advice gap given their limited expertise.
Commenting on this, Ms Power said that “it’s not logical” for superannuation funds to provide advice regarding budgeting and expense management to the growing cohort of younger Aussies seeking advice.
“I think there are some aspects that super funds can provide, and we’re looking at some of those around investment selection and contribution strategies and insurance, but that’s insurance within super. But outside of that, general insurance and other things, there isn’t an obvious solution for that at the moment,” she explained.
Ms Power added that she does believe digital advice tools can play a role in meeting the advice needs of the under 40s regarding things such as budgeting and expense management but acknowledged that a hybrid model is usually the more preferred approach among clients.
“The typical questions you get from a younger cohort are, ‘How much should I put aside?’. I suppose a bit simpler in terms of the strategies. So, ‘Where should I invest, am I in the right investment option?’, and those can be provided in a more efficient way digitally,” Ms Power said.
“But more broadly, not only our research but our knowledge globally, shows that it’s more difficult to entrust your life savings and some of the really hard decisions without having a person there to support that. Some form of hybrid advice is needed to support that.”
Touching on the Quality of Advice Review (QAR), Ms Power said Michelle Levy’s report is “very comprehensive, very thorough, and very considered review of all of the issues across the industry, not just that pre-retiree segment”.
“One of the things that our investment research shows us is that the average balance for an advised client is $980,000. I mean, there is a problem that needs to be solved. What about all the other clients too?”
While the CFS did advocate for the QAR to be passed as a package, given the interrelatedness of the recommendations, Ms Power now says that, given the elapsed time, CFS’ position is “one of pragmatism”.
“Anything that we can get that will actually make advice more accessible and more affordable, and get help to more Australians, is something that we’ll support.”
Hear more from Ms Power by tuning in to our podcast next week.
The solution is very simple. Eliminate annual fee renewal consent forms (that do not exist in any other nation on earth) & a lot of advisers can service their younger clients for as low as $30 a month – providing they don’t have to chase them for pointless paperwork/emails that even our clients don’t even want. When we get the Federal Govt out of our daily business admin, younger clients can be easily supported.
Stop being sensible, there is no place for that in financial planning in Australia
And what service could you possibly provide profitably for $30 a month?
Sounds like a way for you to collect fees for doing nothing.
Excuse me, isn’t that exactly what Michelle Levy is suggesting?
No, not at all?
“Open to advice” DOES NOT mean willing to pay for advice. Advice costs could be lowered if strategy papers replace SOAs. This would make advice mutually feasible.
Hopefully, the day will come when we are treated as professionals and allowed to self-regulate, like accountants, without the need to fund AFSLs. Whoops, that last bit was off-topic. Apologies.