ASIC’s latest
consultation paper, CP 332 Promoting access to affordable advice for
consumers, aims to identify the challenges, barriers and impediments
people face to seeking financial advice, and how to overcome them.

We know financial advice helps individuals achieve their financial goals and improves their overall wellbeing. But what is often underappreciated is the benefit to the nation overall if more people can access quality, affordable advice.

From CPA Australia’s Value of Advice Report 2020, published by CPA Australia in collaboration with CoreData, we can see that 81.2 per cent of Australian consumers and 73.9 per cent of small-to-medium-sized enterprise (SME) owners who receive professional advice believe they are more financially secure as a result. (“Professional advice” is defined in the report as a spectrum of advisory services, including accounting, financial advice, tax agent services and mortgage broking).

The benefits of advice are not only about financial security – there are intangible benefits that are just as important as financial outcomes. Almost one in two (47.7 per cent) of consumers and two in five (40.2 per cent) SME owners have experienced mental health improvements after receiving professional advice. Australians also report benefits to family life, work satisfaction, physical health and even social life.

Increasing accessibility to advice will generate significant macro benefits

However, CPA Australia’s report dives much deeper, into the potential macro benefits of advice for Australia as a whole. The report argues that getting advice not only delivers benefits to individuals, but can also benefit society as a whole and, what is more, can be measured by a dollar value. By increasing accessibility of advice to the Australian population, the report estimates that a whopping $630.3 billion per year benefit can be achieved by having the entire population using advice due to people being better managed and more efficient with their money.

Of course, that is a theoretical maximum. But the main point
is that we don’t need to reach a state where every single Australian becomes
the client of an adviser; we merely have to increase the proportion of people
receiving advice from where it currently is in order to start generating
significant benefits to Australian society and the economy.

CPA Australia estimates about 39.1 per cent of the
Australian working population currently receives advice (see table, below).
Even an increase of less than 1 per centage point in people receiving advice,
to 40.0 per cent of the population, will result in a $9.3b aggregate benefit to
the economy per year.

The point is, making advice more affordable and more accessible will increase the likelihood that more Australians receiving advice will increase, which will generate benefits to society and the economy as well.

There are also potential other positive flow-on effects from
increasing the proportion of people who receive advice. By boosting the
financial outcomes of those with advice, there is a potential reduction in the
amount of government welfare required. Again, taking a theoretical scenario, if
the uptake of professional advice in the community increases to, say, 50.0 per cent,
we can reduce the amount of spending on the age pension by 3.9 per cent, equivalent
to $1.9b per year.

These issues are not often talked about when discussing the benefits of advice. But if we look at the big-picture impact and include it in any discussion about the value of advice, the arguments for greatly improving the affordability and accessibility of advice become too strong to ignore.