Government’s approach to advice gap faces criticism amid new research findings

Research commissioned by Colonial First State (CFS) appears to cement an earlier argument that allowing superannuation funds to provide advice won’t actually plug the advice gap.

Namely, in unveiling the government’s response to the Quality of Advice Review (QAR) earlier this year, Financial Services Minister Stephen Jones threw his support behind the expansion of superannuation funds’ advisory services and expressed confidence in their ability to effectively cater to the diverse needs of their members.

In the months since that initial announcement, which took place at a private ASFA event, the minister has doubled down on his support of funds. Most recently, in a statement issued by his ministry, the minister is quoted as saying that the government’s Delivering Better Financial Outcomes package of reforms is, in fact, aimed at ensuring that Aussies at or approaching retirement have more access to advice through their fund.

Critics of this interpretation of the advice gap have previously suggested that Mr Jones’ understanding of the advice industry appears to be very limited. Their argument is that funds alone cannot bridge the gaping advice gap given their limited expertise.

Back in May, Adele Martin, the founder of My Money Buddy and The Savings Squad podcast, told ifa that younger generations “don’t care about their retirement”.

“Someone in their thirties or even early forties does not care about retirement,” said Ms Martin.

“They want to create a life that they don’t want to retire from. They don’t want to work for 40 years, slug it out 50 hours a week, they want to create a life where they can work three days a week, where they can do months of travel.”

Ms Martin still maintains this view, and on Thursday, told ifa that the government’s response cemented for her that it still views advice as a product.

“[People] want help with managing their mortgage, maternity leave, day care planning, buying a house, starting a business, asking for a pay rise, starting investing, dealing with ageing parents...

“That’s got nothing to do with super.”

In its response to the QAR earlier this year, the Financial Services Council (FSC) presented a similar argument. It cautioned that the government is “at risk” of “unnecessarily restricting” access to advice if it only heeds the QAR recommendation regarding funds and leaves out the banks and other institutions.

“Superannuation funds will play an important role in providing retirement advice, however, if the government narrowly implements key reforms, they could fail to attract the industry investment that is necessary to deliver quality advice to the millions of Australians that would benefit from it at different stages of life,” said the chief executive officer of the FSC, Blake Briggs.

The notion of “stages of life” has become a common argument among advisers, who insist that Millennials, in particular, are currently less focused on retirement and may remain locked out of advice under the government’s proposed model.

CFS’ latest research appears to support this idea.

Namely, it has shown that 53 per cent of Australians aged 16 to 39 are open to financial advice, compared with 36 per cent for those aged 40 to 59 and just 15 per cent for those over 60.

However, despite being open to advice, more than a third (35 per cent) of under 40s said they couldn’t afford it.

Commenting on the findings, Josh Grace, group executive – customer office at Colonial First State, said: “It is critical that younger Australians who clearly want advice are able to access it.”

He added that digital advice and other alternative advice models could bridge the gap for these Australians until they are able to afford more comprehensive, face-to-face advice.

The problem, however, is that the government doesn’t seem open to digital advice.

While the QAR reviewer Michelle Levy has, on many occasions, said that digital was front of mind when compiling her findings, Mr Jones has widely ignored its importance in disseminating advice to a larger cohort.

However, if CFS’ research is anything to go by, what Aussies really want is a digital means to access advice suitable to their stage of life. Namely, the research highlighted that more than half of all Australians (53 per cent) are open to digital advice, while 20 per cent are not and 28 per cent are unsure.

The demand is even stronger among younger Australians, with 63 per cent of under 40s admitting they are open to a digital advice solution, while one in four said they had already used them.

Ultimately, whether these latest findings and advocacy from advisers have an influence on the minister’s mindset should become apparent towards the end of the year when Mr Jones is due to announce the government’s final QAR response.