Access to professional advice could reduce the reliance on the pension

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The recently released Retirement Income Review revealed that as at June 2019, around 71 per cent of people aged 65 and over received the Age Pension or other pension payments and more than 60 per cent of these were on the maximum rate.

The review did not make any recommendations, but the 638-page document included many observations about retirees accessing the equity in their home to fund their retirement.

There could, however, be another way to increase the number of self-funded retirees and reduce the number of those relying on the pension, and the key could be as simple as providing more people with professional financial advice.

New CPA Australia research, conducted with independent research house CoreData, revealed that greater access to professional financial advice could increase personal incomes, deliver half a trillion dollars to the economy, and reduce reliance on the Age Pension.

A survey conducted by YourLifeChoices and Challenger in the middle of the first wave of the coronavirus pandemic in April 2020, found that those who had spoken to an adviser were more likely to be confident or very confident that they would be able to sustain their lifestyle for as long as they live. 

They were also much more likely to report being happy with the amount of money they had for retirement.

However, Dr Jane Rennie from the CPA said that over 60 per cent of the Australian population did not currently receive professional advice.

The research involved modelling the impact of making professional advice available to the entire population.

Professional advice included accounting, taxation, financial, superannuation, business, and mortgage broking advice.

The modelling found that if properly implemented professional advice was available to all Australians, spending on the Age Pension could be reduced by 21.6 per cent and the economy would be boosted by $630.3 billion per year.

“While the potential economic benefits are tremendous, realistically it’s unlikely we will ever have a fully advised population,” Dr Rennie said. “However, any increase in the uptake of professional advice from its current level could deliver an economic windfall.

“If an additional 10 per cent of the population received properly implemented professional advice, the potential contribution to Australia’s economy could be approximately $112.8 billion per year.”

The research also found that retirees could add an additional 35.7 per cent to their annual income by seeking out professional financial advice.

“Our survey revealed improvements in almost every aspect of people’s lives when they receive professional advice,” Dr Rennie said.

“Respondents reported benefits to their physical and mental health, family and social life, relationships and work satisfaction from receiving professional advice. The impact was even more pronounced for women.”

The survey of 1244 consumers also explored the reason why more Australians don’t seek professional advice and identified a range of barriers including a widely held belief in their own abilities, affordability and a lack of trust.

These figures are also reflected in YourLifeChoices’ Financial Literacy Survey, which found 86 per cent of members managed their own financial affairs and over 70 per cent said they had managed their finances well or very well in the past few years.

Have you ever sought professional financial advice? Did it help you better plan your finances? Would you have been worse off without it? If you haven’t sought financial advice, what is the main reason you haven’t?

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Total Comments: 42
  1. 0

    Most people spend their entire lifetime trying to be financially independent but won’t spend two weeks learning financial literacy. The financial industry plunder them.

  2. 0

    The financial planning industry takes no responsibilities for poor advice. The only sure thing is being charged for their advice, the rest is depending on your luck.

    • 0

      Correct daydreamer:
      I followed financial advisers advice on two occasions and suffered financially for trusting their advice the first time losing about 90% of my savings. I advise others to stay away from them.

    • 0

      I noted that the article is made up generalities, May, Could, Has the Potential to.
      However the guarantee if followed would be excessive costs and poor advice.
      I undertook the Financial Planning Diploma through Deakin Uni about 10 years ago, one of the assignments was to engage with 3 Financial Planning organizations and rate them on 5 criteria. Not one was worth engaging.

    • 0

      Tend to agree with most here. Also my experience with financial advisors is the opposite to what is described in the article. A few years ago after providing the advisor what our assets etc were she said she could arrange our financial situation in such a way so as to then be eligible for the aged pension. I thought we would not be able to get an aged pension.
      In the end we did not proceed with the advisors suggestion as my opinion at the time was it is fraudulent. The advisors will try this tactic on so as to get the business.
      So the article should say instead
      to decrease the number of self-funded retirees and increase the number of those relying on the pension, the key is as simple as providing more people with professional financial advice

  3. 0

    I enquired about a reverse mortgage and was told that because I live in a mobile home village which is an over 55 village land lease I wasn’t eligible for a reverse mortgage even though I would have plenty of equity

    • 0

      Lucky for you not to get one. My mother had one and lost most of the equity in her home in a few years due to bad advice, poor and expensive management and very high interest rates. An unregulated industry operated by private business to increase their profits, not to benefit you.

  4. 0

    I would never reverse mortgage my house and even if I did as I live in a regional area it’s value is not high enough to provide much additional income. Reverse mortages are a trick to defraud home owners out of receiving a full pension, nothing more, while non-home owners continue collecting their full pension plus rent assistance.

    • 0

      Thankyou for your advice

    • 0

      You’re 100% correct Dave R. The govt bean counters dish out this BS. “Yes, just use your equity in your home to increase your spend during retirement”….and save the govt money by not having to pay you your rightful pension entitlement.
      I’ll need my home till the day I die and have no intention of eating it away to “nothing” beforehand. But this is exactly what the govt wants. Just ignore this BS and make sure you kick charlatan Morrison and his LNP govt out of office at the next election.

  5. 0

    I try and stay abreast of the financial industry but it’s hard work.
    Don’t trust them either, so go it alone. Their fees are far too excessive.

  6. 0

    That half a trillion would be 99% advisors fees, of course!
    I have met 3 advisors, none knew much about the subject, the were just commission salesmen selling any junk which the could get a commission on, and they had almost no knowledge of the Govs rules and restriction re assets, income and pension eligibility.
    Total waste of time , and one even had the cheek to try and bill me $600- for a 10 minute introductory interview in which no advice was asked for or given!

  7. 0

    Interested to hear from any Financial Advisors and how they determine their costings.
    Example .. about 5 years ago, visited an FA for a free Introductory meeting .. his costing to produce a Plan was around the 6k, with 2k per year for the Annual Review. I queried as to why the high cost and he indicated that it would take him a number of days to put the plan together. My asset base was 4 investment properties, no Superannuation other than Employer contributions ..
    As above, my understanding is that they ascertain your risk profile, feed the data into a program/app which will provide a number of scenarios for their consideration and recommendation.
    Appreciate feedback from FAs as to the why the high cost.

  8. 0

    Once again YLC is pushing the financial advisor barrow. Why? Do you people get backhanders from these bludgers and parasites?

  9. 0

    “Those that deal with or spoke with a financial adviser – were more confident”. Possibly true, as they most likely had substantial assets to warrant some advice and guidance. And financial advisers would not be working if there was no gain for them (which I understand). But not at the detriment to investors who lose even when the advise is a dud.

    • 0

      It’s interesting to note that when I was assessing one adviser I stated that I would be willing to pay for his service by providing him with up to 15% of the capital gain in my portfolio.
      However if there was no gain he would get ZERO. He kindly explained that they don’t work like that.

  10. 0

    Important to learn about money yourself and not having to rely on financial advisors. I sought advice once but was not impressed with the questions asked nor advice received.

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