How can Australia lessen the advice gap?

The advice gap is more acute in Australia than other parts of the world, according to a panel of industry experts, and is lagging behind in digital advice propositions.

Speaking at the Stockbrokers and Investment Advisers Association (SIAA) conference in Sydney, Irene Guiamatsia, head of research at Investment Trends, said regulatory changes had led to an advice gap.

“If we define the advice gap, which is the disconnect we have between those who want to access advice and those who can afford it, is that different in Australia? I would suggest that yes, it is more acute in Australia than in other jurisdictions where we do research.

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“In 2011, the wealth of advised Australians reflected the wealth across the population. If you looked at market segments of mass market, mass affluent and high net worth, 63% of advised people were in the mass market. Now we find it is a third [in each segment].

“This is a very, very acute problem in Australia.”

Even within high-net-worth individuals, those with $1 million available to invest, she said Investment Trends’ research had found 59% had unmet advice needs and needed help with portfolio construction and investment selection.

Discussing how it could be addressed, Balaji Gopal, head of Vanguard Australia Personal Investor, said Australia was behind the US and UK in the uptake of digital advice tools. In the US, he said, there was greater adoption and awareness of financial advice over the last five years while the UK was seeing people seek advice around retirement as the country lacked a mandated superannuation system.

“Australia, we feel, is slightly behind in advice adoption and digital advice adoption - predominantly we have robo-advice solutions. Pleasingly, ASIC [the Australian Securities and Investments Commission] is taking a view to try and look at scaled advice or fractional advice to make it accessible so hopefully things will change.”

However, the panellists said experiences in the US had indicated people still sought human engagement when it came to advice.

Guiamatsia said: “Our research in the US when you look at retail investors uptake of robo-advice solutions shows what investors really want is the ability to dial up or down the presence or engagement with a human. So for each of those market segments, there needs to be a human at the end of the process, it just varies by degree”.

This echoed findings by a previous Vanguard report earlier this year of 1,500 US investors which found human and digital advice played different roles with clients preferring the emotional support of human advisers but the tax optimisation and diversification offered by digital advice.

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The advice gap is caused by bad regulation. The solution is not carve outs for online product spruiking (aka "roboadvice"). The solution is fixing the bad regulation!!

Thankfully a small step in that direction was taken on the weekend by removing a bad government with an extremely bad financial services minister. Now it's time to get on with the rest of the regulatory fixes.

The solution is very simple. Remove the ridiculous levels of regulation that make advice hard to provide, costly to provide and time consuming to provide. Stop putting up robo advice as a solution, unless the regulation issue is fixed it won't work either.
Imagine if when you went to your doctor for a simple issue they had to complete a full fact find. Then research the whole market to provide a recommendation in writing. Also document alternatives they looked at and why they weren't recommended. They would also have to disclose and then avoid any potential conflict of interest. Also if they made any minor error they would be named, shamed, fined and jailed at a drop of a hat due to a vindictive regulator and biased complaint process.
Financial planning is a profession but too many leeches have a vested interest in keeping the regulation unchanged, most of them lawyers and public servants who see financial planners as easy prey. The overwhelming majority of financial planners are doing the right thing, but too many are leaving due to the environment of fear we work in. Stop talking about technology as a fix, when the real fix is the regulations and the regulator.

Here Here ! perfectly said

Yeah, it looks from the questions on the QAR consultation paper that carveouts are the number 1 tool being looked at.

This is treating the symptom, not the disease and I put this in my submission. The answer is at least in part to get rid of dealer groups. But to do this the legislation needs to be simplified so the individual adviser can understand what their requirements are as opposed to the current system where we need an army of lawyers in the compliance department to attempt to understand it.

how about if the adviser pays the client to provide the advice. then the cost is $0, free advice is affordable right?. the client is happy. consumer groups are happy. ASIC is happy. the product manufacturers are really happy. everyone is happy.

what am I missing here?

why isn't this a solution?

why don't doctors, dentists, lawyers, and barristers, all work so clients can benefit? surely they are all professionals, right? and the work they do benefits the clients and societies as a whole so they should just think about how to provide their services at the lowest cost possible.

what am I missing though? everyone else gets to charge a fee to provide a service. people who make a good get to sell that good and earn a fee but when it comes to a financial planner all and sundry want to make it cheaper.

why? why is the cost of advice an issue for me the financial planner to resolve? people have to pay a fee to receive advice just like they do to receive everyone's advice. it's not some birthright people automatically have a right to.

how come lawyers don't band up together and try to address the exorbitant cost of legal advice?

ever heard of a lawyer say they are really expensive?

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