We’re reluctant to help ourselves

The evidence would appear to be conclusive.

CPA research reveals 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.

Challenger’s chairman of retirement income, Jeremy Cooper, says you can take your chances, go out and spend and worry about the future when you run out of money, or be miserly and make sure your money lasts well beyond your life expectancy. The better solution, he says, is a good financial plan.

Super Consumers Australia director Xavier O’Halloran says Australia is the only OECD country that has a mandated, pre-funded accumulation structure without a mandated decumulation structure. Which makes creating a retirement plan complex.

A survey conducted by YourLifeChoices and Challenger in the middle of the first wave of the coronavirus pandemic last April, 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.

Financial advice would appear to be critical for most Australians nearing and in retirement.

But … new research commissioned by global retirement technology provider Smart and carried out by YouGov has found that an astounding 34 per cent of Australians aged 55-plus (and 38 per cent of Australians aged 45-55) have never received any advice on retirement. 

The research also found that two thirds (66 per cent) of respondents considered online tools important when planning for their retirement, with 30 per cent believing that following the COVID pandemic, managing retirement finances online was more important than before.

And flexibility in retirement was found to be increasingly important as one-third of respondents expected to continue to work part time during retirement.

Will Wynne, Smart Group managing director, said: “Retirement is complex and we know people need help if they are to make the most of their savings.”

Dr Jane Rennie, general manager-external affairs at CPA Australia, said that more than 60 per cent of the Australian population did not currently receive professional advice.

Its research involved modelling the impact of making professional advice available to the entire population. It found that if properly implemented and 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.

The arguments are compelling, yet the task of convincing the population remains a work in progress. The findings of the financial services royal commission did nothing to convince Australians to seek financial advice. And an October report from actuarial firm Rice Warner further raises doubts. It says, in part:

Our research and analysis show that the goals of improving financial advice and making it more accessible to Australians have failed despite 20 years of change driven by legislation. The situation today is dire (and worsening):

  • The number of financial advisers is falling, leaving a severe shortage of practitioners.
  • The cost of delivering financial advice is rising and is much higher than most Australians can afford.
  • Many superannuation funds have withdrawn from offering comprehensive financial advice on the grounds that they cannot do so without a financial subsidy from the fund.
  • The rules for delivering some forms of simple advice remain unclear – note the different opinions held by superannuation funds as to the validity of intra-fund.
  • Many unlicensed advisers, describing themselves as ‘money coaches’, provide valuable advice on budgeting, debt management and other strategies around saving. If a financial adviser provided these services, the documentation would be more voluminous and complex even for similar advice.
  • Current legislation does not differentiate between complex advice, where consumers are taking financial risks, or simple advice that is largely risk-free and cannot lead to major financial harm.

Have you sought financial advice? What were the challenges if you did? Were you happy with the advice? If you haven’t sought financial advice, are you confident you are handling your affairs as efficiently as possible?

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Janelle Ward
Janelle Wardhttp://www.yourlifechoices.com.au/author/janellewa
Energetic and skilled editor and writer with expert knowledge of retirement, retirement income, superannuation and retirement planning.
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