Spreading the fortunes of financial advice

Demands for greater transparency in financial planning is depriving lower income groups of access to financial advice, a leading financial services executive has argued.

Pitcher Partners investment services Victorian partner Sue Dahn said the inability of those in greatest need to access financial advice was a key social issue requiring addressing, but may have been complicated by recent well-intended reforms.

“Under the commission model, financial advice could be amortised or spread over an investment timeframe.

“In this era, where fee-for-service is more prevalent, costs and charges come to the forefront, requiring that low income people have access to immediate cash.”

According to Snowball Group managing director Tony McDonald, lower income groups weren’t the only ones missing out.

“The traditional financial planning model simply isn’t set up to deal with large numbers of people moving through their various life stages, where they need different levels of financial advice,” he said.

Dealer groups tended to focus on those with larger lump sums nearing retirement, he said, ignoring the many Australian workers in the “accumulation phase” needing advice on matters such as basic financial education, event-based advice, as well as longer-term retirement planning.

But dealer groups with cost structures based on remuneration from full retirement planning were unable to offer such services at lower costs, he said.

However, member-based organisations such as credit unions, with obligations to the wellbeing of members, were starting to fill the gap using ‘corporatised’ models, where back-office processing costs were centralised, he said.

“They care about their members, are involved with their members’ finances, and if they care then they have to give some form of advice,” he said.

Sue Dahn believes unions, employers, and even the Government could play a greater role in improving access to advice.

“It could be deemed a matter of public interest for all people to receive financial advice,” she said, highlighting government assistance in areas of health and basic skilling.

“If the Government thinks having financial advice is important, they could step in and provide tax deductions for people in need,” she said.