Australia: Concerns over super advice nod
Financial advice has become increasingly scarce and expensive in Australia due to regulatory burdens, leaving millions of Australians without access to the advice they need to make informed financial decisions. The government has recognized this issue and proposed reforms to lower the cost and improve the accessibility of financial advice. However, concerns remain about the effectiveness and impact of these reforms.
Low accessibility and rising costs
According to the federal government, only 26% of Australians approaching retirement or already retired have sought financial advice from licensed professionals. This low percentage highlights the difficulties in obtaining advice and the potential consequences for individuals’ financial well-being.
The decline in the number of licensed practitioners, from 26,000 in 2019 to around 10,000 today, is largely attributed to tighter regulatory obligations. This reduction in supply has led to a significant increase in the cost of advice, nearly doubling its price for consumers.
Government’s reforms
In June 2023, the federal government unveiled its ‘Delivering Better Financial Outcomes’ package, which aims to address the issues surrounding financial advice. The reforms focus on two key changes: removing ‘safe harbour’ provisions for meeting the ‘best interests’ duty and replacing the statement of advice with a financial advice record.
The intention behind these changes is to lower the cost of advice and encourage more providers to enter the market. By allowing non-accredited providers, such as superannuation funds and fund managers, to offer personal advice, the government aims to create a competitive playing field and increase investment in advice solutions.
Quality and affordability
The Quality of Advice review, initiated by the previous government, aims to deliver affordable and accessible advice services for everyday Australians. However, the current system is burdened by complex legislation, which has impacted affordability and accessibility.
With recent retirement income covenant regulations requiring super funds to provide members with access to suitable advice, the need for good advice has become more imperative. This demand is set to rise significantly as the retiree population increases. AustralianSuper and Australian Retirement Trust, managing a combined A$500 billion, anticipate their retired members to grow from 165,000 to 700,000 by 2030.
Conclusion
The concerns over the availability and affordability of financial advice in Australia are well-founded. The proposed reforms show a commitment from the government to address these issues, but their effectiveness remains uncertain. It is crucial to prioritize the interests of consumers and ensure that quality, affordable, and accessible advice is available to all, regardless of their financial status.
Related Facts
- 26% of Australians approaching retirement or in retirement have sought financial advice.
- The number of licensed financial practitioners has decreased from 26,000 in 2019 to around 10,000 today.
- The cost of financial advice has nearly doubled due to regulatory burdens.
- In June 2023, the government proposed reforms to lower the cost and improve the accessibility of financial advice.
- AustralianSuper and Australian Retirement Trust anticipate their retired members to increase from 165,000 to 700,000 by 2030.
Key Takeaway
The availability and affordability of financial advice in Australia have been a concern for successive governments. The proposed reforms aim to address these issues by removing regulatory burdens and allowing non-accredited providers to offer personalized advice. However, the effectiveness of these changes remains uncertain, and it is crucial to ensure that quality, affordable, and accessible advice is available to all Australians, regardless of their financial circumstances.
