The reputation of advisers isn’t what it should be, but all is not lost, explains Hugo Sampson, financial adviser and authorised representative of Advice Evolution.
I believe the biggest stumbling block for Australians in seeking financial advice is that they believe they don’t have, earn or know enough to warrant a visit to a financial planner.
There is also a misconception that financial advice is too costly and that commissions play too big a role in recommendations. The reputation of advisers isn’t what it should be.
There are three key ways in which Australians can be encouraged to seek financial advice from a qualified financial adviser:
improving adviser training;
creating tax benefits for those who seek financial advice; and
educating children about the importance of financial security.
The image of financial advisers is improving, but we need to aim for a trust level similar to that of a client-accountant relationship. This way we can become the first port of call for anyone wanting financial advice.
One way of encouraging more Australians to seek financial advice from a qualified adviser would be implement a higher threshold for adviser qualification, by:
making sure that from this point onwards every adviser is degree qualified;
increasing the education requirements to become an entry-level adviser; and
making it compulsory that all advisers complete either FChFP or CFP.
This in turn could force advisers to charge for their quality advice rather than relying on commissions.
An article in Wealth Professional today last month suggested that Australians face a $1 trillion retirement shortfall for those who outlive their life expectancy. The government is already taking steps towards bridging the gap between retirees’ superannuation capability and their needs, for example via the 12% compulsory employer superannuation contribution – an initiative I support. But it could bridge the gap further by encouraging Australians to seek financial advice through tax breaks.
If the costs of financial plans and the associated implementation of those recommendations, not just ongoing advice fees, were tax deductable, ordinary Australians would be incentivised to seek advice. This would, in turn, start to bridge the retirement gap and make many more Australian’s less reliant on government assistance after their working life.
A further change for the better would be a reduction in superannuation contributions tax for those working past preservation age or a reduction in their income tax, which must be contributed/directed to superannuation, and to increase the preservation age from 60 to 62.5.
Learning to read and write as a child is paramount, but financial literacy does not seem to be high on the curriculum agenda for our schools. All Australians need to know the basics of saving, spending and investing.
I believe we would not only see a rise in the demand for advice, but would also see a reduction in the retirement gap referred to above, if the government included educating students about saving, spending and investing in the school curriculum. The lessons could reference real family life situations such as going to work, buying food for the household and paying bills.
Once these students understand the basics, I would hope that their interest in their financial situation would increase as they age and experience moving out of home, buying their first house and thinking about superannuation. Empowering individuals so that they want to learn and understand financial security would encourage them to seek advice from a qualified financial advisor in the future, and to be engaged in devising a strategy with their adviser.
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