A Nobel Prize-winning economist has called on domestic governments to introduce subsidies for financial advice services in order to safeguard citizens against market failures.
In an interview with the Washington Post newspaper, Yale professor Robert Schiller – who was awarded the Nobel Prize for Economics earlier this month – said professional financial advice can play an important role in alleviating the structural problems he has identified in his study of global capital markets.
“I have a very idiosyncratic recommendation,” Professor Schiller said. “People should be encouraged to get professional help with their investing. We should be subsidising financial advisers.”
Now that the United States has “come around to the idea” of government subsidies in the medical sector, it is time to consider similar arrangements for financial services, Prof Schiller said.
Offering an Australian perspective, Association of Financial Advisers chief executive Brad Fox said direct government subsidisation is not the ideal policy – but that there are ways governments can help grow the number of people engaging professional advice services.
“I think there are two essential steps before looking at subsidies,” Mr Fox told ifa.
“The first is providing tax deductibility both for initial advice and for ongoing advice and the other in boosting financial literacy in schools. Until we get those two steps right, subsidisation should stay on the backburner.”
Mr Fox said this two-pronged approach will help those Australians who are “unable to afford to pay for advice” and “those who need it most” to have access to professional financial advisers.
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