‘Mutual benefit’ key for servicing young Aussies in need of advice

It can be easy to make costly mistakes in your 30s as you look at getting on the property ladder and think more about investments and retirement planning.

The issue comes when these decisions are made without access to reliable financial information and guidance – and could end up costing you thousands of dollars.

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In order to address this need for guidance, Omura Wealth Advisers director Terry Vogiatzis suggested that advisers need to use their professional judgement to develop and deliver services that are fit for purpose for the younger generation.

“I think the key here is for an adviser to just use their honest – keyword is honest – professional judgement of what is a mutually beneficial scope that does not over-service the clients and provides the client with a net benefit,” Vogiatzis said.

For example, he explained that a younger client may simply need some education around setting up their superannuation and whether they should be directing more money into their mortgage, super or other investments.

“The likelihood is that they’re not going to benefit from a full holistic review cycle that charges them $5,000 a year from the super fund, as an example,” Vogiatzis said.

“Whereas they might benefit from a one-off consultation to set up their super funds as a high-growth investment, get that early education to say that market drops will occur but don’t ever panic and switch to a conservative option. That cost can be taken from their super fund.”

While there is compounding value when it comes to long-term financial advice, he argued that, while clients are still in these early stages of building the foundations of their future wealth, scoped or once-off advice may be of more use to them at the time.

Though, the important thing for advisers here is ensuring they can deliver this type of service in a way that is still financially viable for their business, which is where the idea of “mutual benefit” comes in.

“The adviser should be able to do the math internally. ‘Well, if I charge them $3-4,000 for this initial advice, what is the expected long-term outcome’, not necessarily based on the assumption that your portfolio will do better,” Vogiatzis said.

“It’s just more so the long-term benefit with increasing their risk profile and educating them about future drops in the market so they don’t panic. These things can be very accretive long-term in excess of, you know, the cost in some instances as well.”

While it is important that young people do have access to crucial services such as financial advice at an accessible price point, it is equally vital that advisers are being adequately compensated for their time.

“The key is to be honest about what the client, or the level of service that is beneficial for the client. The client may benefit from the first 30 minutes of your time, but not the incremental two hours,” Vogiatzis said.

“So, just be upfront to say that we’re only spending 30 minutes to an hour a year on you. I don’t believe that there’s any incremental value for any further service.

“It’s just about using your professional judgement to be honest about what scope of advice and your time will create a benefit for the client in excess of your cost.”

As it stands, research from the Association of Superannuation Funds of Australia last year found that Australians aged 18–34 were twice as likely to source financial advice from social media than 35 to 49 year-olds.

According to the research, among those in the under-35 demographic who had ever sourced financial advice relating to retirement or superannuation (51 per cent), social media was identified as the second-most common source of advice (15 per cent) and very few had actually sought advice from a professional adviser (6 per cent) or through their super fund (6 per cent).