Retirees have been ‘robbed’ of crucial advice needed to navigate the retirement income landscape and the financial services royal commission has stripped seniors of the resources required to formulate pension, superannuation and other strategies for a successful retirement.
That’s the opinion of wealth adviser Rainmaker Information, which says older Aussies are being “left to fend for themselves” after tougher regulations enforced by the royal commission have led to an “exodus” of financial planners.
Adviser numbers plunged by 30 per cent between 2018 and July 2021, according to Rainmaker data.
Those who remain are working with wealthier clients who can afford their surging compliance costs.
The number of advisers has continued to shrink in recent months, says Rainmaker executive director of research and compliance Alex Dunnin.
The federal government has “thrown the planning sector under the bus”, he says, with the royal commission leaving many advisers shell-shocked and retirees unable to afford advice.
Read: Need a financial planner but scared of the cost?
Financial planners who once would have charged less than $500 for a simple plan now charge between $3300 and $5500.
“A lot of people are now left to fend for themselves,” says Mr Dunnin.
“They may not be seen as wealthy, but they still have a couple of hundred thousand dollars that they want to figure out what to do with, and the way the system has been reformed it’s almost like these people have been cast aside.
“The reforms have kind of shafted them and I’m not sure what the solution is there.”
Many older Australians have trouble understanding the complexity of the retirement income system and miss out on entitlements and concessions that could help them through retirement, says Later Life Advice founder Brendan Ryan.
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Many older Australians are under-advised even though “their money is more important to their day-to-day survival”, he adds.
“The big end of town doesn’t have to care about these rules,” he told the Herald Sun.
“There’s aged care, the Age Pension, the workings of how tax impacts people at different ages and income points. You’ve got the Low-Income Tax Offset, the Seniors and Pensioners Tax Offset, the government Work Bonus scheme that allows you to earn money that doesn’t impact the Centrelink test of the Age Pension.
“The unintended consequence of authorities trying to protect people has made the process so onerous that the cost of delivering advice is very expensive.”
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) was established in December 2017 and the final report published in February 2019.
One of the myriad referrals to ASIC for investigation – fees for no service – was found to be a systemic issue resulting in significant financial loss for consumers and billions of dollars in remediation by the institutions involved, the commission found.
The royal commission found hundreds of examples of serious non-compliance by advisers, which resulted in poor outcomes for consumers.
Under the law, financial advisers and advice licensees are obliged to protect the interests of consumers, including that the advice they receive meets their needs and objectives and is provided by advisers acting in their best interests.
Many financial advisers from large and small institutions, as well as a number of individual advisers, fell short of these expectations.
The resulting investigation led to bolstered guidelines for financial services institutions. These include:
- always putting customers first
- fulfilling any promises made to customers
- ensuring all consumers are treated fairly
- ensuring they do not take advantage of vulnerable consumers
- implementing correct and legal compliance processes to monitor their activities, and
- maintaining the appropriate governance, oversight, and systems over those compliance processes.
“ASIC’s work throughout this broad slate of matters reinforces our commitment to investigate where there are failures in the activities of our regulated entities,” says the watchdog’s summary of enforcement actions published last week.
“Based on what our investigations show, ASIC will continue to seek court outcomes, including civil penalties and criminal prosecutions.”
Read: Pandemic heightens need for trusted financial advice
Many financial advisers are complaining about the renewed levels of compliance and complexity involved in the financial services industry.
And those who say they got into financial advice to help people now fear their services are unaffordable for many, says Tribeca Financial chief Ryan Watson.
Do you think financial advice is unaffordable? Would you rather pay more for reputable advisers or roll the dice on cheap advice? How much do you know/trust AI financial advice (robo-advice)? Why not share your thoughts in the comments section below?
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