New Government Rules are Making it Cheaper for to Access Quality Financial Advice
Good financial advice is essential for you to make the right choices and adopt appropriate strategies for your future, and the Australian Government agrees. With the prevalence of unregulated online sources and the so called ‘finfluencers’, the federal government is seeking to increase the numbers of qualified financial advisers, so everyone can access the quality guidance they need, at a cheaper cost.
According to the government, Australia has lost around 10,000 financial advisors since 2019 after the release of the Hayne royal commission. That has created a vacuum where the demand for quality financial information has been filled by online sources that are unreliable and often agenda driven or connected to financial scams.
As a result of those losses of financial professionals, there are just 16,000 financial advisors left in Australia and with the increase in costs for advisors from government red tape, this has caused a cost increase for consumers. The median cost of obtaining professional financial advice has risen by 41% in the three years from 2018 to 2021 and has continued to rise since. This has put quality professional advice out of the reach of many Australian households as it has simply become unaffordable.
By increasing the number of financial advisors and removing costly barriers, the government believe it will enable easier access to advice for Australians, particularly members of superannuation funds who are approaching retirement. One of the ways they intend to do this, is by encouraging current financial advisors to stay in the industry. Targeting those with a minimum 10 years’ experience and a clean regulatory record, the aim is to allow these professionals to keep practicing, even if they don’t possess the current university degree requirements.
Government Strategy for the Future Financial Industry
The changes have been driven by reports and recommendations published in the Quality of Advice Review, which set out to improve the accessibility and affordability of quality financial advice for all Australians.
With the Quality of Advice Review completed and the final report released, the measure to retain more financial advisors is just one of the government’s responses. Accepting 14 of the 22 recommendations in the report, government intends to roll out legislation to accomplish this rebuild of the financial advice industry over the next year, with the increase in numbers of professionals at the core of the strategy.
These new initiatives will be rolled out in three phases:
- The first stage will focus on reducing barriers to quality financial advice and simplifying existing channels for Australians to use. The first of these was announced by Assistant Treasurer and Minister for Financial Services, Stephen Jones, who explained that the government would be “Introducing legislation to parliament to follow through on the government’s election commitment to create a pathway for experienced advisers with a clean record to continue practising without the need to undertake further education.”
- The second phase of this strategy will look at retirement incomes. The average Australian retiring with around $200,000 in superannuation, but only 26% actually seek professional financial advice on how to best manage that money. Rather than being a lump sum to leave in a will, which is how 1 in every 3 superannuation dollars are currently used, superannuation should be a tool used to improve the quality of life during retirement. However, current rules prevent those conversations with superannuation fund operators, and so as per the report recommendations the government will seek to expand the areas of advice they can provide as part of this second phase.
Describing the move, Jones pointed out “there are thousands who miss out on the Age Pension and other benefits that they are entitled to, simply because they didn’t know who to ask. Or because they assumed their super fund was already doing this for them. As such, we will adopt the review’s recommendation for superannuation funds to expand their provision of advice. We will also provide legal certainty for funds on how to collectively charge for advice.
Super funds are well suited to safely meeting the needs of their members. They are already governed by strong obligations to act in the best financial interests of members and act for the sole purpose of providing retirement benefits to members.”
- The third phase of the government strategy will look at the roles of other institutions, including banks and insurers in providing information and guidance for financial decisions. However, while the first two phases are well fleshed out and ready for implementation, this third phase, considered much less urgent, is yet to have the exact approach finalized to achieve its goals.
Targeting Misinformation
The reason the government is taking a serious stance of the subject, is simply because of the amount of misinformation that has filled the void created by a lack of professional financial advice. Unregulated information is considered capable of significant consumer harm, but for those who cannot afford or don’t have access to professional advice, they will often rely on these sources of misinformation.
The government is ready to roll out the first two phases as soon as possible, ensuring there are more professional advisors and easier access to information, with more affordable solutions. This will essentially reduce the risks from this misinformation and avoid the problems it may bring.
As professional financial planners, we are here to help, if you need guidance on any aspect of your finances, talk to us today and we can help you develop strategies to achieve all your wealth goals.
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