Quality of Ad­vice reforms an opportunity to lift our financial confidence

Addressing the financial advice needs of Australians is key to more people feeling confident about their financial circumstances and reaching their goals.

Financial advice has become prohibitively expensive for most ­Australians.

The latest data from Investment Trends shows the cost of financial advice has increased 25 per cent in the past 12 months alone. The cost of a financial plan is now close to $5000, which explains why the typical new client that sees a financial adviser today walks through the door with close to $1m in investible assets.

The regulatory burden and risk associated with providing advice is one of the most significant cost drivers.

It’s clear the system is not working for consumers or ­advisers.

One solution being suggested is for super funds to provide more advice to their members.

This is one approach that could see people of different ages and with different levels of wealth receive advice when they need it.

While affordability and accessibility are core issues, awareness and understanding are also important. Financial advice is still a mystery to most consumers.

Many people struggling with the rising cost of living couldn’t tell you what financial advice is. But ask those who have an adviser how they feel about their financial circumstances and the results speak for themselves.

A recent CFS survey found that two in three advised Australians are positive about their current financial situation, compared to less than half (45 per cent) who don’t receive advice. You might be thinking those findings simply reflect the financial circumstances of those that receive advice compared to those that don’t.

Not the case.

These results show the very different outcomes experienced by people with the same levels of wealth and income. Both advised and unadvised Australians agree that the rising cost of living is currently their greatest concern. However, where they differ significantly is in their financial outlook. Almost three quarters (71 per cent) of advised Australians said they feel ‘‘very positive’’ about their financial future. Only 44 per cent of unadvised Australians could say the same.

Our research also found that Australians with a financial adviser are more confident about their finances and are significantly more financially literate. These are tangible benefits that too few Australians are aware of.

Superannuation funds will no doubt play an integral role in what will hopefully become a new era of accessible advice. There is already demand for this.

Our contact centre team receive around 3000 calls each month from customers looking for guidance in areas such as their investment strategy, retirement planning, insurance and contribution strategies.

While there is a critical need for retirement advice, our research shows those most open to receiving advice are under the age of 40. That is why the government’s wider proposed advice reforms are so important. The reform task is to help these Australians and the many others who want and need advice but have no prospect of ever being able to afford it.

Financial advice is about more than superannuation and retirement. It’s about financial security and financial wellbeing.

The strongest advocates for advice aren’t super funds or financial advisers but those who receive it.

That is why CFS supports the Quality of Ad­vice reforms being implemented in full by the government. These reforms provide the best prospect of helping millions of Australians to get the good advice they need – no matter their age or financial circumstances.

We want more Australians to get good advice from as many different providers as possible.

This means we must move away from the straight jacket of the current regulatory approach that inhibits advisers and others offering more cost-effective tailored advice.

Advisers need to be freed up to be able to provide more scoped and limited advice at lower cost. Similarly, as funds we need to be able to help our own members more easily with the decisions they face about planning for retirement, the suitability of the investment option they are in and the contribution strategy they will need to achieve their goals.

There appears to be sufficient consensus among both advisers and super funds about what needs to be done to fix the system. With millions of Australians set to retire over coming decades, we will fail them if we don’t do something about the current framework. 

Our focus is on getting more help to consumers to understand and implement their plans and make it easier for financial advisers to provide advice to those who need it. We stand ready to do whatever we can to improve access to advice for our customers and all Australians.

Kelly Power is CEO of superannuation at CFS.