Financial advice in high demand but access far too restricted, costly

Adviser numbers are continuing to fall as new professional and educational standards come into effect. At the same time, the “advice gap” – those who want advice but are not receiving it – is growing.

Good advice is well worth the fees paid but not everyone needs full-service, comprehensive advice, where there is a formal financial plan and regular meetings with an adviser.

Many consumers just want a single piece of advice on a particular topic, such as what to do with the proceeds of an inheritance or whether they should contribute more to superannuation.

We are seeing a good example of how a simpler financial planning system can work with specific advice allowed to be provided to people considering accessing their super early under a COVID-19 financial hardship scheme.

Under the scheme, those who have had their hours of employment reduced by at least 20 per cent were allowed to withdraw up to $10,000 during the first half of this year. They are allowed to access up to another $10,000 before the end of this year.

In order to speed up the delivery of advice to those considering whether to access their super early, ASIC made a change earlier this year so that financial advisers need only provide a “record of advice”, instead of a more comprehensive “statement of advice”.

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The exemption for guidance on withdrawing super was also extended to registered tax agents, provided the person is already a client of the agent. And the advice fee was capped at $300.

Although it is a one-off exemption to cater for the special circumstances of the early access scheme, it would not have escaped anyone’s attention that it could provide a model for the future provision of limited advice.

Actuaries Rice Warner, in a report commissioned by the Financial Services Council, offers ideas for making advice more affordable and accessible.

Rice Warner recommends that advice be divided into categories depending on whether it is simple, complex or specialised, such as information on aged care or Self-Managed Super Funds. There would also be a “general information” category, which includes education, information and general advice.

The idea is that there would be less documentation required for the simpler categories of advice, which should help to drive down costs to make it more affordable.

Rice Warner also recommends some limited tax deductibility for the cost of receiving advice.