The growing level of unmet financial advice needs is making it harder for clients to plan their retirement and execute those plans with confidence, argues the head of an industry association.
The level of complexity in the system and the continued volatility in investment markets, where most of the risk sits with the individual member, are stressful for retirees, said SMSF Association chief executive John Maroney in an address to a Sydney event run by communications consultancy Pritchitt Partners.
“Although some longevity protection is provided by the Age Pension for those with modest assets at retirement, or at older ages, for many retirees it is very difficult to share or manage their retirement risks,” Mr Maroney said.
“For this reason alone, the association believes the future role of financial advice regulation is crucial. We believe that a more customer-centric advice framework is needed, where consumers can receive trusted and professional advice.
“Consumers want affordable advice, delivered with the help of sophisticated technology, via a system of open superannuation similar to the open banking environment with clear consumer data rights.”
Advice profession to resemble medical profession, says SMSFA
Mr Maroney said he expects market dynamics will continue to evolve and that the financial advice profession will gradually look more like a medical profession, where regular health checks can be undertaken using real-time data that is readily available for consumers and can be shared with their advisers.
“Efficient initial advice could be more like a half-hour discussion with a doctor reviewing the results of general blood tests and measurements of height, weight, blood pressure, family history, rather than requiring extensive manual data gathering and days of manual analysis and report preparation that is primarily focused on risk mitigation for advisers rather than value-adding for consumers,” Mr Maroney said.
However, Mr Maroney stressed that the SMSF Association does not want to reduce any consumer protections provided by the existing regulatory frameworks.
“However, we believe more effective regulation can be developed in practice and can be much better by focusing on what consumers really want and need. Mechanisms are needed whereby most Australians can have access to affordable advice with significant trust in the system,” he said.
“This will require continued advancements in technology, rebuilding in trust from all participants in the financial system and from focusing on what is in the best interest of the consumer in reality instead of theory. Protecting retirement savings and financial health of all Australians is at the forefront regardless of which forms of retirement savings are chosen.”
High hopes for Retirement Income Review
Finally, Mr Maroney said he has hopes that the Retirement Income Review will play a significant role in addressing these critical issues.
“Although the nature of the review is to develop a fact base and not a list of recommendations, the fact the panel has put a long list of important questions before the Australian community is an important step,” he said.
“Many of these questions have been asked from time to time over the past 30 years and we are still grappling as a community to provide answers to such basic questions as what is the goal of the retirement income system, including superannuation, age pension and voluntary savings, including home ownership.
“We are hopeful that the review will deal with these important questions by gathering an evidence base and providing projections, illustrations and options that will lead to a more informed community debate on important issues once it has been completed.”
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