Financial planning’s shrinking numbers hit retirees hard

Retirement is becoming more expensive and complex just as financial help for seniors sinks to multi-year lows.

An exodus of financial planners is robbing retirees of crucial advice to navigate the money minefield of pensions, superannuation and other strategies for older Australians.

Seniors are being “left to fend for themselves” after financial planners – battered by a royal commission and tough regulations – have quit in large numbers in recent years.

The remaining planners are mainly working with wealthier clients who can afford to pay to cover their advisers’ surging compliance costs that have pushed plan fees above $5000.

The median super fund balance of Australians aged 60 to 64 is $179,000 for men and $131,000 for women, which means paying for a financial plan takes a big bite out of their life savings.

The latest data from Rainmaker Information shows adviser numbers plunged 30 per cent between 2018 and July 2021 to 19,382.

Rainmaker executive director of research and compliance Alex Dunnin said numbers continued to shrink in recent months.

Financial planners were “thrown under the bus” and as a result retirees are suffering.

Mr Dunnin said the federal government had “thrown the planning sector under the bus” following the 2017-2019 royal commission, leaving many advisers shell-shocked and many retirees unable to afford advice.

In the mid-2000s bank financial planners would often charge less than $500 for a simple plan, but now the average cost – to be paid upfront after commissions were banned – has jumped from $3300 to $5500 in two years.

“A lot of these people are now left to fend for themselves,” Mr Dunnin said.

“They may not be seen as wealthy but they still have a couple of hundred thousand dollars that they want to figure out what to do with, and the way the system has been reformed it’s almost like these people have been cast aside.

“The reforms have kind of shafted them and I’m not sure what the solution is there.”

Later Life Advice founder Brendan Ryan said many seniors were reticent or too confused to investigate the complex rules, benefits and strategies that could save them money.

“The big end of town doesn’t have to care about these rules,” he said.

“There’s aged care, the age pension, the workings of how tax impacts people at different ages and income points. You’ve got the Low Income Tax Offset, the Seniors and Pensioners Tax Offset, the government Work Bonus scheme that allows you to earn money that doesn’t impact the Centrelink test of the age pension.”

Mr Ryan said a vast-group of older Australians were under-advised, even though “their money is more important to their day to day survival”.

“The unintended consequence of authorities trying to protect people has made the process so onerous that the cost of delivering advice is very expensive.”

Tribeca Financial CEO Ryan Watson said it was “extraordinary how the levels of compliance and complexity have gone up”.

Mr Watson said it was frustrating for advisers, who “got into advice to help people”, that their services were unaffordable for many.

And the planners who remain in the industry are becoming busier than ever. “Our new client inquiries are up about 100 per cent on last year’s January and February,” Mr Watson said.

Originally published as Financial planning’s shrinking numbers hit retirees hard