It is critical for advice services to reach Australians at a younger stage of life and to take into account an individual’s whole of wealth and household retirement picture.
You need look no further than the recently released Intergenerational Report to see that Australia’s retirement landscape is changing at a rapid pace.
Over the next 40 years the number of Australians over retirement age is projected by Treasury to more than double. Meanwhile, fewer people will rely on the full Age Pension or other income support, with personal superannuation savings expected to be the key source of retirement income by 2062-63.
Those dynamics suggest the demand for financial advice from Australians – both pre and post-retirement– will likely continue to grow.
On that front the government has recently announced welcome plans aimed at making financial advice easier for more Australians to access at scale and for a lower cost.
As advice costs skyrocket, there needs to be recognition that the cost of doing nothing is high for those who would benefit materially from being able to access affordable advice through the most appropriate, cost-effective service for their needs.
In exploring ways to simplify access to advice, the government aims to test how its proposals could operate under different advice models. This includes digital advice, with technology likely to play a huge part in increasing access, providing tools and guidance in the retirement space, and enabling advice practices to become more efficient.
That’s not to say human advisers won’t continue to add great value through developing a personal relationship and a real understanding of financial needs, especially where people have more complex financial situations.
Vanguard’s U.S. research quantifies this, showing three times as many investors report having strong peace of mind when working with a financial adviser compared to going it alone.
Vanguard’s recent How Australia Retires report also found that 44% of respondents who had received professional advice were extremely or very confident of funding their retirement. Of those who hadn’t, only 25% were confident of being able to fund their retirement.
The study also showed many current working-age Australians expect to take some form of extended break from work between their 20s and 50s. What impact will this have on superannuation savings and retirement confidence, and will there be an increased reliance on non-super investments for retirement as a result?
Super funds are well placed to assist their members with simple but tailored retirement guidance. Every working Australian has a super fund, and while engagement with super funds is generally low, appropriate targeting could ensure professional advice reaches more people at critical life stages. This will include increased partnerships with comprehensive financial advisers for those with more complex needs.
Increasingly, funding retirement involves much more than super accounts alone and non-super assets including investment funds and property are playing an important role in the retirement mix.
So, reforms to explore new channels to enable the delivery of advice will become more important to ensure scalable advice offerings can meet Australians’ complete retirement and advice needs.
The debate often fails to acknowledge the broad range of advice needs of the average Australian investor, so it will be important for retirement advice to take into account other factors relating to an individual’s whole of wealth and household retirement picture.
Nonetheless, this advice can remain simple yet personalised to assist Australians in meeting their needs where they are at, whether through digital tools, human advice or a mix of both
Our research highlights that Australians often start their working lives feeling confident about retirement, but this confidence wanes the longer they go without a plan and purposeful preparation.
But still, almost 2 in 3 working age Australians have never engaged a financial adviser, despite financial information remaining overwhelming and confusing to ‘go it alone’.
It is critical for advice services to reach Australians at a younger stage of life to ensure retirement planning is not left to the eleventh hour.
To really move the dial, the financial advice landscape needs to be transformed to keep up with Australians’ diverse retirement needs, work patterns and our ageing population.
The government needs to ensure all the gaps between those looking for different levels of financial advice, and the industry’s ability to deliver it, are closed as quickly as possible.
For further assistance, we are here to offer guidance to help you achieve your financial and life goals. Reach out to us by calling 08 82314709 or at info@centrawealth.com.au.
Article courtesy of Vanguard.
