Why the cost of financial advice must come down now | Really Simple Money
When our financial literacy site Really Simple Money ran an advocacy campaign with our sponsors AMP two years ago, it was designed to help bring down the price of financial advice.
We called the campaign TOGETHER – tapping into the feeling that, as our country was hit by a pandemic on top of the bushfires, that we could help ordinary families by standing together.
Then treasury minister Jane Hume participated in our podcasts and we received universal support.
Everyone agreed that the fact that less than one in ten Australians think financial advice can help them was a serious problem, and that financial literacy in Australia was in an appalling state.
The government agreed to investigate. We like to think we played some part in getting the 267-page report by Michelle Levy up and running.
We were pleased that a Liberal Government, on the face of it more aligned with the financial services industry that most, would instigate a report of this nature.
Ms Levy is both knowledgeable and as independent as anyone can be in the world of financial services. And as anyone who has read her report knows, she has made an excellent job of presenting options that could make financial advice more accessible.
So it is disappointing that Stephen Jones, the Financial Services Minister in a Labor government that should support the democratisation of advice, is now prevaricating on implementing the report’s recommendations.
He is using the classic political response of promising to “consult widely”, despite previously accepting that the cost of financial advice and the industry was a “hot mess”.
The Levy Report has garnered support in some interesting places. The Financial Review is backing change. The Australian seems supportive. Stuart Robert, opposition financial services and assistant treasury spokesman, is saying the Jones’ position is “consultation on consultation”.
Financial planners are voting with their feet. In 2019, there were 28,000 – today there are just under 16,000. Our former partners in our campaign, Adviser Ratings, reckons we’ll be down to 13,000 in the coming year.
That would mean one financial planner for every 1,562 Australians.
Levy’s argument is that, with so many financial institutions able to provide “good financial advice” – banks, super funds, insurance companies – the resources are available to provide ordinary families with help.
Not the full panoply of financial advice you need if you have a billion dollars. But help with how to sort out a home loan, a will, budgeting and loans.
Digital advice platforms already exist to help. But they is little incentive and scant education to market this to people.
One plan we really like is making financial advice tax deductable. The Financial Planning Association has proposed this – and really, it makes a lot of sense.
The government might claim it is expensive. But not as expensive as families falling into debt thanks to inflation and the current cost of borrowing.
A well advised population should make more money and cost the state less. Their futures should be more secure. They might even replace the tax relief by earning more from investments.
Not a bad investment – and certainly one the government should consider.
At Really Simple Money, the team are excited. We hope the pray that the government will see this as a watershed opportunity for change.
But we are also planning a new campaign.
Advice is for everyone. Like universal education and healthcare, we should all get help
We think, given the lukewarm response to Michelle Levy’s report, it might be time to remind everyone of that.