Australians don’t like the way financial advice is being currently offered to them and would prefer piece by piece advice when they need it.
Michael Blomfield, chief executive of Investment Trends revealed one result of this is that 53 per cent of Australians are not feeling prepared for retirement.
Speaking on a panel at the SMSF Association’s National Conference on the Gold Coast, Blomfield says: “It’s a really poor number and if you overlay the ageing demographic to that time frame it doesn’t get much better.”
Investment Trends data shows a staggering 10.4 million Australians have a financial advice need that is not met.
“There are 18.5 million Australian adults, so this is a very high proportion of Australians who are not getting the advice that they need.”
John Maroney, chief executive of the SMSF Association agrees: “Currently, SMSF trustees who wish to seek simple SMSF advice are either required to seek formal costly financial advice from a licensed adviser or they must act without advice. As such, many choose to go it alone and consequently have important unmet SMSF advice needs.”
Maroney says this is due to the high regulatory costs and uncertain SMSF laws that advisors are faced with.
In addition, Blomfield notes the reason for the unmet need or advice is that they do not like the advice model.
“They don’t want to go and have a meeting with a stranger for hours and tell them everything. At the end of this, the planner will say you can get your advice in a week and they do not know how much it will cost.”
“Australians want piece by piece advice. They don’t tend to get advice until they need it and they just need that single piece of advice. Overtime as they get more advice, they will transition to full advice quite comfortably.”
Blomfield says that 3.6 million Australians are using a financial planner which is half the number before the Future of Financial Advice reforms.
This group typically has a net worth that is double those that were accessing advice in 2008.
“You need twice the amount of money now to get advice and half the number of people are getting it.”
A further 47 per cent of pre-retirees still do not believe the products they need for their retirement are available in the marketplace.
This results in retirees trying to manage their asset allocation extending both their reliance on the aged pension and the period over which their financial stress remains a significant factor in their lives.
Blomfield says: “We have to align government services and government departments to devise a system towards solving the retirement problem.”
Jeremy Cooper chair of retirement income at Challenger agrees and is calling on the government to license calculators that show retirees exactly how much money they will need in retirement.
Blomfield says: “Australia has a brilliant, world-class accumulation system but is really pretty bad at retirement.”
In addition to not being prepared, 50 per cent of Australians in retirement retired before they expected to due to ill health or redundancy. Older Australians are realising going into retirement that they will live longer than they had prepared for, they will have to fund their own aged care or a medical expense and the risk of reduced cognitive capability.
Blomfield says: “My problem with ASIC is that they’ve never addressed the issue that old people are vulnerable and old people read the Sunday newspaper and see ads that promise 10 per cent returns and believe it.”
