Advice ‘out of reach’ for under 35s despite strong demand: CALI

New research from the Council of Australian Life Insurers (CALI) revealed that around half (49 per cent) of Australians between 18 and 35 want financial advice; however, just one in 10 (11 per cent) actually receive it.

Demand for risk advice is particularly strong among this younger demographic, with 57 per cent saying they want more personalised advice that helps them decide how much cover they need.

Comparatively, just 16 per cent said they only want basic information.

Looking deeper, the research found that changes in financial circumstances, witnessing a loved one face illness, and experiencing their own health challenges are common triggers for considering life insurance.

Even so, access continues to be a challenge, driving many young people to other, potentially problematic, sources of information.

In particular, they are turning to friends and family (41 per cent), social media (20 per cent) and online forums (34 per cent) for assistance, all of which can be rife with misinformation.

“Instead of getting help from a qualified adviser, younger Australians are piecing together advice from friends, Google searches and TikTok videos; sources that aren’t always accurate, tailored or in their best interests,” CALI said.

This, CALI chief executive Christine Cupitt suggested, is where the Delivering Better Financial Outcomes reforms come in, making it critical that the progress of this legislation stays on track.

“We have a growing generation of Australians who are motivated to make smart financial decisions, but for many, professional advice is out of reach,” Cupitt said.

“The federal government’s introduction of a new class of adviser would be a win-win for all Australians by increasing access to advice while providing a clear pathway for those looking to enter the advice industry.”

Under the current legislation, life insurers are unable to provide personal advice to customers.

However, the proposed legislation would open the door for a new class of advisers who, in theory, could operate out of institutions such as life insurance providers to deliver guidance to customers, expanding the accessibility of financial advice.

“Younger Australians deserve support and advice to build the right safety net and have peace of mind about their future. We welcome the government’s commitment to reform, but action is needed now to close the gap between demand and delivery of financial advice,” Cupitt said.

Last week, CPA Australia also raised the alarm on the importance of clearing up red tape, making financial advice more accessible, saying millions of Australians on the cusp of retirement are at risk of making questionable investment decisions.

The association said unless urgent action is taken to reverse the increasing shortage of advisers, many Australians will start their retirements without receiving the professional advice they need to ensure they have secure and reliable retirement incomes.

Richard Webb, CPA Australia’s superannuation lead, said a “mountain of red tape” is a key contributor to financial advisers quitting the profession.

“More than 2.5 million Australians will retire in the next decade – and many will be shocked to discover there are fewer than 15,300 professional financial advisers to assist them with some of the biggest decisions of their lives,” Webb said.

“With the increasing propensity of retirees to leave their super funds and seek higher investment returns through risky investments, expert financial advice is needed now more than ever.”

He has also recommended the government prioritise clarifying the role of the new class of adviser.

“Investing retirement savings is complex and carries with it intricate tax and super settings, asset tests and administrative burdens, however, getting the right advice is only becoming harder to find and more expensive,” Webb said.

“The federal government must take action to help alleviate the burden of regulation and costs faced by advisers before the shortage becomes an irreversible crisis.”