To really improve access to advice for lower socio-economic groups, a clear-cut three-pronged strategy must be put in place according to a study put out by academics from the University of South Australia.
This strategy involves, in the words of professor Chandra Krishnamurti: “…increasing awareness of the benefits, government rebates on advice fees, and a streamlined advice format for these groups”.
The study – funded by Magellan Asset Management, Centrepoint Alliance, the Financial Planning Association of Australia and the Financial Planning Education Council – proposes targeted policy support for financial planning on these three lines.
Neither of the three measures are new, but the study provides a succinct blueprint for policymakers leading into the Quality of Advice Review, which is due to hand down its findings in December.
The first measure – increasing awareness – involves “shifting the perception that finanical planning is just about helping rich people”, the paper notes.
The second proposal involving government rebates for upfront advice is a long-held policy plank of the FPA and has been touted as the key to unlocking financial advice to the masses.
“There was strong support – from both consumers and financial planners – for the idea of a government rebate for initial advice fees,” Krishnamurti states. “If this rebate were targeted at consumers who are seeking retirement planning and superannuation advice, it could greatly improve the financial security of this group and reduce pressure on the age pension system.”
The third measure is a “streamlined advice format” aimed at delivering retirement advice for low-income earners.
“It would be possible to reduce compliance time – and thus cost – for financial advice providers by establishing a short-form statement of advice format for retirement-age people from lower income groups who are seeking retirement planning advice,” says director of GAP Financial, Geoff Pacecca.
“Many people from this group have relatively low levels of complexity in their financial advice needs, so a short-form approach would help reduce costs while still delivering valuable advice.”
It is always the focus of Retirement and Investment Planning that comes up when discussing how the Industry should move forward.
Yet the foundation of everything people do, which is to earn an income to pay their bills and inevitably take on debt which requires Life and Disability Insurance to protect people today and for their future, is usually not part of the conversation.
There is a reason for that and one that never seems to see the light of day, due to ignorance and a total lack of understanding, which has led to a strategy that is destroying the Advised Wealth Protection Industry.
What is this fog that blurs the view and takes away total clarity?
Vested Interest and an unwillingness to look closely at the problem, find the best solution and DO IT.
The solution to plummeting risk Adviser numbers and an unwillingness to provide Life and Disability Insurance Advice, is to make the path easier to follow and stop throwing obstacles in the way.
How do we do that quickly and cost effectively?
The answer 10 years ago and is still the answer today, is to separate Investment Advice from Insurance Advice, have initial and ongoing study that ONLY relates to Life Insurance advice and make it viable and profitable for firms to want to bring on new Advisers, which will then solve the issue around WHY would I, as a person who is deciding on a career, want to specialise in risk planning?
To all people, there has to be sufficient incentive to want to go down a certain career path.
What we have for Wealth Protection Advice is a Regulatory regime that causes fear and uncertainty, a never ending maze that for the handful who make it through, find declining revenue streams due to a mountain of compliance that even the Lawyers find confusing and rising costs that destroy any profits.
And we wonder why there are thousands of Advisers leaving and the rest cutting back on risk advice?
I challenge anyone out there to criticize or debate what I have been saying for a decade and put your case forward as to why your solution may work, though be prepared to have your findings questioned.
The longer we talk without actually getting to a proper solution, which must pass the “What / Why / How test, then the bigger this sink hole gets.