The disturbing Australia/UK advice parallels

Mike Taylor

Managing Editor and Publisher

6 December 2024

A new white paper has pointed to significant parallels between the financial advice sectors in both Australia and the United Kingdom with regulatory changes over the past two decades having priced advice beyond the means of many retirees.

Importantly, it has also pointed to many of the remedies being the same including allowing more advice delivery via insurers and superannuation funds.

The white paper, published by Australian-based financial services technology firm, GBST, has pointed to the reality that 43.30% of people expect to remain reliant on a Government pension or allowance at retirement, compared to 26.80% having access to superannuation, an annuity or private pension.

The white paper has cited Australian Bureau of Statistics data from May, this year, showing that 37.10% of people expected to be fully self-funded in retirement, with 31.60% reliant on a government pension only, while a further 17.60% expected to be partly self-funded at retirement.

The white paper has pointed to the “advice gap” in both Australia and the UK with respect to retirement income with a third of those in the UK entering drawdown without taking any advice or guidance.

It said the recent Advice Gap report which revealed that just 9% of UK consumers have paid for financial advice in the past two years, down from 11% in the previous survey period and said the UK advice gap had been growing for over a decade.

“In a similar way to the UK’s RDR, the 2019 Royal Commission in Australia saw an exodus of large institutions providing financial advice, resulting in a significant reduction in the number of financial advisers, dropping from around 28,000 to 15,64652,” the white paper said.

“In addition, current regulations have increased the standard of advice. Even for relatively simple pieces of advice, advisers are required to conduct multiple meetings and extensive research, before they can make a recommendation.”

“The supply of advisers and high regulatory burden have increased the cost of financial advice, with many Australians now unwilling, or unable to access it. As a result, fewer people are getting the advice they need to prepare for retirement effectively. Consequently, as we’ve seen, a significant number of retirees in Australia fall back on the means-tested State Pension.”

The GBST white paper suggests that providers have an important role in educating consumers, delivering information and driving engagement but laments “the slow pace of regulatory change hampering their efforts to provide help”.

It said that going beyond simple guidance tools, some organisations in Australia and the UK are attempting to lower costs and improve access to advice via digital solutions aimed at those with lower investible assets.

“With over five million Australians nearing retirement and only 16,000 professional financial advisers, there is a significant gap in affordable advice accessibility. However, digital advice is poised to bridge this gap, offering a promising future for financial services in terms of enhanced accessibility and affordability. “

“Superannuation funds, life and general insurers, and banks have a unique opportunity to incorporate digital technology tools into their advisory services. These institutions play a crucial role in providing Australians with personalised and affordable financial advice on a large scale.”

“Superannuation funds, in particular, serve as Australia’s primary distribution channel for achieving this, making them integral to the process. By offering members access to user-friendly retirement planning tools and financial assessments within their platform, superannuation funds can provide investment and retirement strategies that would otherwise be out of reach for many.”

“Digital advice technology also has the flexibility to give members a hybrid option at any stage to include access to additional human support.”