1.3m Australians seeking advice, cost still a barrier

In the 16th edition of its Financial Advice Report, financial services industry research firm Investment Trends found that there are 11.8 million Australians with unmet financial advice needs, yet many are not even planning to seek advice.

Among this pool, Investment Trends said the 1.3 million that plan to seek an adviser in the next two years are “potential adviser clients”, while there are 9.1 million with needs that don’t plan to seek the help of a professional adviser.

The main areas that consumers would like to receive financial advice from, but are not currently, include investment strategy (31 per cent), longevity risk (27 per cent), and growing their superannuation (24 per cent).

According to the report, cost is a persistent barrier to seeking advice, with those unadvised (and with unmet advice needs) most often citing high (41 per cent) or unclear (30 per cent) costs as barriers to entry.

“In contrast, the value of advice is well perceived with more than 80 per cent of unadvised Australians seeing benefits in receiving financial advice,” said Dr Irene Guiamatsia, head of research at Investment Trends.

“Australians who engage with an adviser state they feel significantly more confident in their overall financial wellbeing (61 per cent agree) – demonstrating the meaningful impact advice can deliver to people who are able to access.”

Despite unadvised Australians understanding the benefits that come along with financial advice, the average that they would be willing to pay to receive help with each one of their unmet advice needs was just $570.

On an average basis, Investment Trends said, the purchase of an investment property is the single topic people are willing to pay the most to receive assistance at $800.

Interestingly, the report found that potential adviser clients would pay a lot more for help to start a retirement income stream, at $800, compared with $580 for all unadvised with needs.

“These findings further highlight the necessity to address the cost barrier, three in four unadvised with needs state tax-deductible advice fees would be a likely incentive to seek advice – increasing to 85 per cent among potential adviser clients,” added Dr Guiamatsia.

The ATO recently released a draft taxation determination on the deductibility of advice fees that went some way to clarifying the way that advice fees can be deducted from tax, however, it is still limited to advice relating to managing a client’s tax affairs.

Digital advice

Among the 9.1 million Australians who have unmet advice needs but don’t intend to seek advice in the near future, 38 per cent said they would turn to digital advice tools when seeking advice.

This means that roughly 3.3 million Australians could see some of their advice gaps fulfilled, “if the right digital solution came along”.

In terms of specific features in a digital advice offering, the most common types of tools already used by unadvised adults are budget planners (54 per cent), retirement needs projectors (46 per cent), and super contributions calculators (46 per cent) – where all three also received the highest in demand.

“Appetite for digital advice naturally increases as the amount they are willing to pay reduces. We estimate 750,000 potential adviser clients (58 per cent) would use digital tools at a calibrated cost of $320,” said Dr Guiamatsia.