Advice gap ‘clear to see’ as cost of living bites
Over half of Australians aged 50 and over have concerns about outliving their savings, new research reveals, emphasising the role of advice in supporting clients’ financial futures.
A joint study conducted by National Seniors Australia and Challenger, which surveyed nearly 6,000 people aged 50 and over, has highlighted growing concerns regarding longevity risk.
More than half of those surveyed (53 per cent) are worried about running out of money later in life.
The research also found that older Australians who are concerned about long-term cost of living struggles are five times more likely to be concerned about this longevity risk.
The latest Association of Superannuation Funds of Australia (ASFA) Retirement Standard found the annual expenditure needed to reach ASFA’s comfortable retirement standard rose another 0.5 per cent in the June quarter, slightly lower than the 1.1 per cent increase recorded in the March quarter.
It now stands at a record high of $70,806 per year for couples and $50,207 for singles.
Having an income that increases with inflation is a top financial priority for 81 per cent of older Australians, alongside 91 per cent needing a regular income for essentials, and 86 per cent needing to afford medical costs to achieve financial confidence.
“Financial wellbeing is critical to quality of life in older age and rapidly increasing living costs are undermining the financial wellbeing of retirees,” said Aaron Minney, Challenger’s head of retirement income research.
“In general, older people’s sense of financial resilience and financial security have fallen since the start of the pandemic, and the increasing cost of living has further undermined long-term planning and financial goal setting of older Australians.”
He urged that after a near 30-year run of relative stability in cost of living, financial advice needs to better address the potential effects of inflation in undermining retirees’ financial confidence.
The benefits of retirement advice are further demonstrated by research commissioned by Colonial First State (CFS), which emphasised the positive impact clients are seeing from seeking advice.
The firm surveyed over 1,800 Australians who have never received advice and more than 700 who currently have an adviser.
Even when net wealth and household income was equal between the two groups, the research found notable differences between advised and non-advised consumers.
Over 70 per cent of advised Australians feel very positive about their financial future, while only 44 per cent of unadvised individuals could say the same.
Australians with an adviser have a better understanding of investments, with 57 per cent of advised reporting a ‘very good or excellent knowledge’, compared to 30 per cent of unadvised.
The advised group are also more open to taking investment risk with their savings (64 per cent), while just 38 per cent of unadvised respondents feel the same.
According to Kelly Power, chief executive of Colonial First State Superannuation, the findings address the alarming need for advice in this financial climate.
“The vast majority of those who have a financial adviser do feel positive, which suggests that advice has a tangible impact on how we feel about our finances despite concerns about the cost of living,” she said.
Some 67 per cent of those with an adviser are confident to make decisions relating to their superannuation. Only 40 per cent of those who have never received advice feel this way.
Power described the number of unadvised Australians who aren’t confident about making super-related decisions as a “wake-up call”.
She continued: “Compare that to the vast majority of advised Australians who are confident, and the advice gap is clear to see.”
AUTHOR
Jasmine Siljic
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The only way we will "close the gap" of unmet advice needs is to eliminate the Annual Renewal Consent Forms. This is ubiquitous expensive red tape that simply doesn't exist in any other nation on earth. Until this red tape is gone, the advice gap for low income / working families will grow, and the cost to access advice will continue to skyrocket. About time the the Board of the FSC get busy & push to eliminate it.