The COVID-19 global pandemic has prompted a rethink of the value of advice, as an increasing number of individuals and households find themselves under financial pressure. But the individuals believe their advice needs are relatively simple, raising questions about the suitability of comprehensive, holistic advice offers to meet the demand.
CoreData’s Q4 2020 Trust in Financial Services survey has found that around four in 10 (37 per cent) Australians say they are likely to seek financial advice in the next 12 months. There is a significant minority (42 per cent) who remain very unlikely to seek advice in the next year.
However, around one in five consumers say they are more likely to seek financial advice in future as a direct result of the COVID-19 pandemic. Previous research by CoreData has show the impact of the pandemic on the financial position of Australian households, with increasing numbers reporting being unable to pay bills as they fall due, and a significant number of individuals having lost income or had an immediate family member lose income as a result of the pandemic.
And we also know that the benefits of financial advice are not exclusively financial. People who receive advice enjoy better mental health, have healthier relationships with friends and family and generally report lower levels of stress.
While the increase in likelihood to seek advice is good news for financial advisers, there appears to be a challenge facing the industry in meeting the needs of these potential clients. Only a handful of people who say the pandemic has made them more likely to seek advice believe their needs are very complex. Around a quarter (23 per cent) believe their needs are somewhat complex, and the remainder believe their needs are either somewhat or very simple.
On the day the Australian Securities and Investments Commission (ASIC) began its consultation process on promoting access to affordable advice for consumers, the survey findings are a timely reminder that not all Australians have complex financial needs they require full-blown, comprehensive or holistic advice solutions.
Targeted, limited scaled or punctuated advice – call it what you will – is likely to meet the needs of an emerging group of potential clients who now recognise more clearly the need and the potential benefits of advice.
ASIC recognises that consumers continue to find it difficult to access good-quality affordable personal advice, partly as a result of large financial institutions quitting or scaling back their advice businesses, and as growing numbers of advisers either leave or signal that they intend to leave the industry for other reasons. These include the requirement to comply with new education, professional and ethical standards, and the cessation of grandfathered conflicted remuneration at the end of this year.
ASIC says it knows from previous research that “consumers want better access to limited and affordable advice, but that many industry participants find it challenging to provide this type of advice”. The consultation paper is designed to help the regulator understand better what the impediments to accessibility are.
Most financial advisers could probably explain those reasons in a few well-chosen words, but the fact remains that at a time when demand for advice seems clearly to be on the rise as individuals and households come to understand more clearly the benefits of advice, ASIC’s consultation is welcome and it is to be hoped it may lead to a reduction in the complexity and cost of delivering advice, making it more affordable and accessible to more Australians.
