Financial advice has become too expensive and too difficult to obtain, according to the Actuaries Institute, and that is hurting retirees’ lifestyles.
In a paper published before the release of Treasury’s Retirement Income Review – the report is to be handed to the government today – the Actuaries Institute says retirees and pre-retirees must be able to access affordable information and guidance and argues that super funds are in a perfect position to do just that.
Better and cheaper access to advice services would allow Australians to improve their lives in retirement, says Andrew Boal, convenor of the Actuaries Institute’s retirement strategy group.
“We need a regulatory framework that allows for affordable access to information and guidance for the majority of retirees,” he said. “That advice could cost as little as $200 to $300.
“We should be able to come up with a system to give people the guidance they need at an affordable price.”
Mr Boal says the retirement experience is “quite heterogeneous” and that there are a lot of people in quite large cohorts in very similar circumstances and with similar needs in retirement, Nestegg reports.
Complicated personal advice can cost thousands of dollars, says Mr Boal, adding that “only retirees in the top 5 to 10 per cent of savers typically have the level of complexity to justify expensive personal advice”.
But for many people, with less complicated arrangements, low-cost financial advice could have a big affect on their understanding and management of retirement funds.
The Actuaries Institute paper argues that Australian Financial Services (AFS) licensing rules have made the provision of advice difficult and expensive and that a revision of the rules or new rules could encourage more Australians to seek financial advice to help them make better decisions about money management.
The paper’s author, Anthony Asher, says that super funds could offer more comprehensive advice to their members, adding that members are “poorly served” by the current system, which often prevents funds from offering any kind of advice.
“Allowing superannuation funds to safely provide a wider range of personalised support is important. This could include personalised education,” Dr Asher said.
“Research shows that superannuation funds are a trusted source of information and help. Indeed, thought should be given as to ways in which the current position should be reversed.
“Members and their beneficiaries are prejudiced by the absence of options to obtain a suitable income stream product, and trustees should be at risk if they fail to make such an option salient.”
YourLifeChoices members were polled on super funds, longevity products, advice and their level of financial confidence in 2019. While they reported a degree of confidence in managing their affairs, most were unsure whether they were doing a good job and, as a result, were concerned they might outlive their savings.
In the Ensuring Financial Security in Retirement survey, respondents were asked how confident they were that their savings and income would enable them to maintain their lifestyle for as long as they lived. Of the 3169 answers, 11.8 per cent were confident, 33.2 per cent somewhat confident, 26.4 per cent not very confident and 11.8 per cent not at all confident. Another 16.8 per cent were neutral.
Less expensive and more readily available financial advice might dramatically alter those figures.
On a separate topic, respondents were asked about longevity products – another area the Actuaries Institute says super funds must consider. We asked: Do you agree that financial advisers have a responsibility to present financial products that provide guaranteed lifetime income in retirement as an option to their clients? The response was comprehensive, with 90 per cent saying yes.
A further question asked: Do you agree that super funds should provide retirement options with some guaranteed lifetime income in retirement for their members? Again, respondents were emphatic with 91.3 per cent saying yes.
Would you take advantage of financial advice from your super fund that might cost as little as $200? Does the current cost of financial advice stop you from seeking help? Would you like super funds to offer longevity products?
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