Much has been read and written about regarding the impact educational requirements and rising compliance are having on advisers and their subsequent departures but less has been covered about how this has affected consumers.
The annual research report did not hold back, stating that 100,000 clients have either been orphaned by their adviser or ceased receiving advice, causing the number of advised Australians to fall below two million people.
This was the result of the cost of advice rising to $3,256, a 40% rise in the past three years. Other reasons were a willingness to use technology or online advice and a heavier reliance on accountants.
Adviser Ratings noted, however, the increasing cost was in line with a higher standard of advice provided to consumers and the higher educational standards.
But if consumers cannot afford this higher-quality advice then what was it all for? Were forecasts done at the time on how much costs would likely rise by as a result of the change and the costs that consumers would pay? Will advice now become exclusively concentrated in the high-net-worth sector, where so many firms are now focusing their efforts?
With inflation, rent and living costs rising, it is unsurprising that 60% of unadvised Australians say they cannot afford advice while only 6% say they could afford to pay more than $2,500, still $756 less than the average cost.
If younger or less-wealthy people are opting to seek advice, then they should be encouraged and praised for taking that step to improve their situation, not sent packing to seek advice online because they are viewed as being ‘low value’.
It is a cruel irony that the people who cannot afford advice due to increased costs are probably the ones who need it most and for this reason, the Government and the industry needs to find a solution that does not exacerbate the problem.
