Retirees shun advice on misconceptions of access and cost

22 June 2020

Nearly 80% of current and prospective retirees failed to get any financial advice during the recent market crash, according to Allianz Retire Plus, despite four-in-five feeling their investments are not safe from a downturn.

The firm’s survey of over 1,000 current and prospective retirees found only one-in-five retirees felt they could easily receive access to professional financial advice and a third felt that advice was only ‘for the rich’.

This was concerning as it indicated there were still misconceptions about access to financial advice, although those who did see an adviser said they felt more confident after.

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Allianz Retire Plus chief executive, Matt Rady, said: “We have to change perceptions of financial advice among retirees and increase access to affordable advice. The advice proposition is proven to be an integral part of providing individuals with confidence and certainty in retirement. Those who use an adviser told us they feel more confident and secure in their financial position.

“Some 68% of those who were advised during COVID-19 said they were sticking to their financial plan. That means advice is definitely deterring people from making sub-optimal decisions based on a fear or lack of understanding.”

Three-in-four retirees were not confident about how long their money would last in retirement and 18% felt their investments would be safe in a market downturn. Nearly half of respondents said they had been monitoring their investments during the downturn.

Those approaching retirement were most likely to be affected by the downturn with 40% of prospective retirees said they lost money during the recent downturn.

“There is an enormous sense of uncertainty and clear dissatisfaction that needs to be urgently addressed if the system is to work as intended. We have a huge opportunity to get the Australian system right and while there are pressing matters to attend to post COVID-19, this is one of them. There’s a real danger here if policy change isn’t swift and imminent,” added Rady.

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Matt Rady, said: “We have to change perceptions of financial advice among retirees and increase access to affordable advice.

What a pity ASIC and the government see it exactly the opposite way and have actively legislated to ensure that personal advice is only available to the super wealthy.

I agree with you. Every review talks about making advise better and more available (ie cheaper) and then ignores the cost of implementing the changes???? Does anyone actually review the changes they make???

It won't be long before the minority perception becomes the truth. I wonder whether current regulators will ever own up to what they have done.

Consumer fees for advice easily drop from $3,000 pa fee down to $2,000 pa, by simply eliminating the bi-ennial or annual opt in requirements. This is an ongoing regulatory cost burden that makes it harder for consumers to access financial advice.

If a retail client provides written informed consent to pay an on-going monthly advice retainer fee, just like Telstra, Optus, St John Ambulance, or a sophisticated/wholesale investor, then there should be no requirement of bi-ennial or annual opt ins/fee agreements.

When a new Statement of Advice is issued (which might be 1 to 4 years later), then the monthly fee change requires a new informed consent, at that point. However the insistence of chasing up & reporting on this unnecessary red tape, increases the regulatory burden by approx $1,000 pa.

If Opt Ins / annual fee agreements were done away with, most advisers wouldn't care too much about the lack of informed consent & lack of opt ins / bonuses etc enjoyed by Intrafund advisers. And the proposed Haynes RC / Draft Treasury legislation is going to make access to ongoing advice worse, not better.

Asics own financial advice fee sample, has 3500 Soa fee, and 1500 implementation fee for a single retiree with 400k to invest. They think that's affordable, and as always ASIC create more issues then they fix.

I recently spoke to a BDM of a major super fund who revealed that they have 20 intra-fund advisers and each adviser conducts 7 member meetings a day.
Yet I got the impression that the rate of referral to external advisers for comprehensive retirement advice is minimal.
Intra-fund advice is "free" yet comprehensive advice is seen as expensive by comparison.

I believe the "free" advice is a large reason why super fund members are not seeking non-aligned advice in huge numbers.

Yes agree, and I don't for a minute believe that they are sticking religiously to the parameters of simple asset allocation type advice. There will be a lot of general conversations that are much more implied - of course consumers are happy with this approach, it is cheap and potentially effective - it just need to be a level playing field.

Absolutely. The "bonuses" that the intrafund advisers receive will ensure they remain totally vertically integrated. Plus cross-subsidised advice is very attractive to a handful of canny calculating fund members, who are quite happy to bludge off the thousands of fund members who receive no advice. To ensure a level playing field, the Govt should mandate bi-ennial opt-ins from all members, gaining informed consent to have their super funds pay fees for no service (fund by those members). Otherwise, get rid of all fee opt-ins for all advisers.

It's like Animal Farm. All animals are equal, but some animals (intrafund advisers) are more equal than others.

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