If AMP doesn’t step up and lead with a solution for Australians to get the advice they need to protect and grow their wealth, who will?
With a relatively small and ageing population, it is not in the best interests of Australia, or Australians, to put additional pressure on the public purse. The government knows it and we know it. While the government has a role to play, this is primarily something we can solve ourselves, if Australia’s financial sector steps up.
Consumers are absolutely open to financial advice, but they want it on their terms. ASIC’s report into consumer perceptions of financial advice released yesterday shows that barriers such as high cost, loss of trust and a perception that advice is only for the wealthy could prevent more than 40 per cent of our population from seeking advice. But ASIC found the more customers know about advice, the more value they see in it.
Wealth is highly concentrated in Australia, with the average net worth of the top 20 per cent of households being more than 93 times larger than the lowest 20 per cent, according to the latest ABS statistics.
With Australia’s rich getting richer, there remains plenty of organisations prepared to help them.
But who will help everyone else? Some of the biggest players in financial advice are retreating and conservative estimates are that at least one in every three financial advisers will leave the sector over the next two years.
This wave of departures from the sector is expected to put around $900 billion of client wealth into play over the next five years and these Australians will need help and advice so they can continue to build a strong financial future and reduce reliance on the government as they age.
One in two adults – that’s 10 million Australians - have financial needs that aren’t being met. That’s not an AMP assessment, it’s the official research from the Productivity Commission. As ASIC concluded, once people receive advice, they have more positive attitudes toward it.
Australians deserve to enter retirement living the lifestyle they have dreamed of during their working lives. For many, that may involve a decent super balance, their home paid off and enough money to spoil the grandkids.
However, the risk is that many won’t get there because they don’t make the right choices earlier on in their life, often due to a lack of awareness and help, or they leave their retirement planning too late. It’s this group of Australians we need to better support.
"An Australia without advice is an Australia failing to reach its potential."
Our current regulatory model largely supports face-to-face advice. A significant focus has been on compliance and boosting professionalism, and I think we can all agree the industry has learnt some important lessons in recent years. We will be better for it.
But the most immediate and significant challenge for leaders in the wealth management industry today, is to come up with a solution to deliver compliant and affordable advice for the masses. And we must do so while navigating this period of disruption, regulatory scrutiny and market dislocation. Because today’s advice, while valued by those who can afford it, is too expensive for most Australians. ASIC’s latest research supports this.
Our wealth philosophy is around ‘whole of wealth’ needs, helping people at all stages of their lives. But the growing need and demand is to build an advice solution for all Australians that is “life led” helping Australians at the key moments when they need financial advice the most. For example, how to invest an inheritance or redundancy, better manage their super and how to pay off their mortgage faster.
This is a new kind of advice to help those Australians that don’t need or can’t afford holistic face to face advice. It’s advice at a price point that suits, delivered in a way that suits – digitally – and this could be online, phone, video, or robo.
The big change is how those conversations happen. In the same way bank customers no longer need to head into a branch during the working day, financial advice clients can now choose how and when they want to receive advice. It’s thriving overseas, particularly in the US, and Australians are known for their appetite for digital and online transactions in shopping, travel and food.
Coupled with the complexity of our tax and retirement systems and our ageing population, the imminent digital disruption is why we need to act fast.
It is not a simple solution. We need to accelerate discussions with the regulators, the government and other industry players who share the same passion for quality financial advice. The Financial Services Council annual Summit starts today in Sydney, bringing together all elements of the sector for the first time since the Royal Commission’s final report was handed down. The theme is “Shape Your Industry” – a thinly veiled directive to the finance sector to work together to build a stronger and better industry to meet the demands of consumers. In financial advice, AMP is taking up the mantra, engaging with government, regulators and industry to shape the way forward. We need to build a regulatory framework that supports these newer advice channels such as digital and robo. This will take collaboration and commitment.
We have a moral obligation to do so. An Australia without advice is an Australia failing to reach its potential. Demonstrating the value of advice is the starting point for the sector and an issue the industry and government are working on. Even one piece of quality financial advice for a younger person can significantly change their financial future. It’s too important to fail.
Alex Wade is chief executive officer of AMP Australian Wealth Management.