The benefits of financial advice have been oversold

We’re finally waking up to the fact that most people simply didn’t need the services that were being rammed down their throat.

Screen grab of celebrity financial adviser Sam Henderson giving evidence at the financial services royal commission last month.

The mass exodus of the banks from wealth management is a belated acknowledgment that the benefits of financial advice for most Australians are way over blown.

For the 85 per cent of people on PAYE income and with a home loan, the obvious advice is simply to pay off your home loan, put any excess into your super and protect the wealth through insurance tied to your mortgage.

Until you are nearing retirement when some advice makes sense, that’s the end of the story.

The trouble is, we’re all told we need advice and if we do as we are told that’s when the problems can start.

The advisers are conflicted and it is in their interest to complicate your investments because they earn money on multiple approaches.

Then there is the lunacy of somehow charging people more because they have more money under management even though the level of service is the same.

Just how that works is hard to comprehend and is another rort in the system on top of commission-based selling.

The most over used word in banking now is “simplification” but what it should mean for most customers is less fees because they don’t need the services that were rammed down their throats.

Granted there are special times when financial advice is welcome and, for people wealthy enough or with special circumstances, where ongoing advice is necessary.

But for most people it is an expensive distraction which, with the structural problems in the industry, is also potentially dangerous.

That means when we do want the service we will have to pay more, which people won’t like but the benefits are clear and in time will be accepted.