Some two million retirees could spend $22.5 billion in retirement by the year 2040 if the Quality of Advice Review proposals go through according to research commissioned the Financial Services Council.
The study, which was done via NMG Consulting, also found annual bequests from retired Australians paid out of super would halve from the current projected path, down from a current forecast of $53.7 billion to $26.8 billion by 2060.
Advice review lead Michelle Levy proposed a ‘good advice’ regime in August which she believed would entrust professionals in the industry to use their judgement to work in a principles-based regime. She will deliver these proposals, largely unchanged, to Treasury next month.
The FSC said the reforms would increase the provision of information, products and advice for those unable to afford comprehensive advice, although it notes that this would be done through offering consumers more choice by using super fund tools, and retirement calculators and estimators.
The research suggested 100,000 additional retirees receiving advice each year would more efficiently draw down their super equating to $10,000 in increased retirement incomes per individual every year.
FSC chief executive Blake Briggs said unchanged advice policy settings will not allow Australians to reap the full benefits of compulsory superannuation.
“A generation of retiring Australians would benefit from high quality and affordable financial advice that is fit for purpose, on the topics they want, when they want it,” Briggs said in a media release accompanying the research findings.
“The review’s proposals would help millions of Australians put in place a plan to spend more of their superannuation with confidence and in a way that improves their financial wellbeing throughout their retirement.”
The finding is in contrast to CoreData research from July which casted doubt over whether the advice review could improve affordability and accessibility although this was before Levy released her interim proposals.
Risky business
In late October, the FSC released research that found a scaled advice model would help some 432,000 Australians receive life insurance.
That same study found less than 10 per cent of risk advice was given without any commission.
The findings on commissions lined up with the argument of much of the industry – including the two major professional associations – that most consumers were not interested or unwilling to pay an upfront fee for advice.
While the FSC has partnered with NMG Consulting to conduct research for the advice review, the Financial Planning Association partnered with CoreData to find the true cost of giving advice.
Professional Planner was previously told by CoreData founder Andrew Inwood and FPA head of policy Ben Marshan the motive for undertaking the research was to present the data to the advice review and Treasury.
Public concerns
The advice review proposals have been largely welcome by the financial services industry, particularly with Levy moving to quash any concerns of a return to vertically integrated models.
However, consumer advocacy groups have raised concerns about any reduction in consumer protection.
While the financial services associations combined to create the Joint Association Working Group to advocate for industry change, four consumer groups – Choice, Consumer Action Law Centre, Financial Counselling Australia and Financial Rights Legal Centre – have opposed any deregulation of the financial advice industry.
In addition to keeping any commission structures in place, the groups have used their submissions to the review to support the retention of a principles-based best interest duty.
“Affordability barriers continue to exist for many consumers when accessing professional services such as lawyers or financial advisers,” the submission stated.
Instead, it argued the review should consider the UK’s Money and Pensions Service as a complementary model.
