Global economies must urgently bridge the ‘advice gap’ if the bulk of older citizens are to retire with confidence and with the biggest nest eggs possible, according to a new report from retirement technology company Smart.
The finding comes as robo-investment companies report a surge in investments and the federal government plays down the need to rein in the power of social media financial ‘influencers’.
Smart surveyed 6772 adults in the UK, US and Australia in late 2020 on their retirement views and concerns and concluded that reliable and trusted advice was a critical concern.
Read more: Planners know they need to build trust
This comes as planners and advisers leave the industry in droves as a result of requirements mandated after the scathing findings of the financial services royal commission.
In examining three of the world’s largest defined contribution retirement savings markets, the research uncovered a series of trends in global retirement, with the top concern being the advice gap.
The report says we must bridge the advice gap, before it’s too late.
“There is a huge ‘advice gap’ that the retirement industry needs to address quickly. Fifty per cent of those nearest to retirement (aged 55-plus) have never received financial advice about retirement.
“Professional advice is an option, but is costly. Technology can unlock the ability to provide this at scale, without either prohibitive costs or the inefficiency of blanket education programs.”
Narrowing the survey findings to Australia only, the report says that one-third of older Aussies approaching retirement had never received any advice and, of those who had, many said the results had not lived up to expectations.
Read more: What is a robo-adviser and should you use one?
“Following a lifetime of saving for retirement, many Australians still do not understand the options that will be available to them at the point they begin taking retirement savings,” the report says. “One-third of all respondents, and one-quarter of those over 55 say that they do not have a good understanding of the options that would be available to them.
“Despite high numbers saying they have little understanding, more than one-third (34 per cent) of respondents approaching retirement, and four in every 10 (38 per cent) of the 45-55 age group, say they have never received any advice on retirement.”
In terms of where respondents had sought advice, they said: financial advisers (53 per cent), their superannuation fund (50 per cent) and government websites (41 per cent). However, when asked where they had received useful advice, 29 per cent of respondents aged 55-plus said financial advisers and only 16 per cent mentioned their superannuation fund.
Read more: ETFs explained
The power of financial ‘influencers’ has been acknowledged by the government – and dismissed.
Financial services minister Jane Hume has rejected calls to tackle the burgeoning legion of influencers who have taken to social media to provide financial advice.
“We have to back Australians to be sensible enough to judge for themselves whether to put their hard-earned money into higher-risk assets,” she told a conference of the Stockbrokers and Financial Advisers Association.
“Some of the information and opinions that consumers receive from online forums will be bad but some of it will be good, and a lot of it will better engage younger generations in investment and financial markets.”
Meanwhile, the robo-advice area would appear to be exploding in Australia. Stockspot, which launched the first robo-advice/robo-investing platform in Australia seven years ago, has recorded a record 12 months of growth, despite – or perhaps because of – the pandemic.
In the past 10 years the robo-advice model has increasingly gained popularity in the US, Canada, Germany and Japan, with the largest independent robo-adviser in the US (Betterment) achieving $37.5 billion under management.
“The US and Europe have always been a few years ahead of Australia when it comes to robo-advice due to their more developed ETF [electronically traded funds] markets,” says Stockspot chief executive and founder Chris Brycki. “We are just at the beginning of the growth curve for robo-advice in Australia though, especially because of the recent exponential growth in ETFs and new financial advice models after the royal commission.”
Mr Brycki says 17 per cent of Stockspot clients were aged 50-plus and research by Deloitte shows that robo-investing is the fastest growing area of wealth management.
Have you sought robo-advice? Do you follow any financial social ‘influencers’? Are you in the minority of Australians who have sought financial advice and been satisfied?
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