The current regulatory framework is preventing financial advisers from helping many consumers in need of basic advice who cannot afford the fees, financial planning expert Paul Clitheroe has said.
Ecstra Foundation chair and former Financial Planning Association (FPA) president Clitheroe said the complex regulation surrounding the provision of financial advice drove up costs and prevented a large portion of the population from accessing much-needed advice.
“Regulation is not supporting us in our drive as an industry to actually improve financial capability,” he noted today at an FPA virtual keynote event on the value of financial advice.
To be effective, the financial advice profession needed to reach a point in time when it could help consumers answer basic questions without them being obligated to pay more for the advice than they might be able to afford, he added.
“[You should be] able to answer [questions] without requiring the consumer to spend thousands of dollars that gets you to the point where you can answer. Otherwise, how an earth are we going to make any difference to financial capability?” he said.
He said the current framework meant advisers were restricted to only being able to help high net worth individuals and other relatively well-off consumers who could afford to pay for advice.
“That satisfies [roughly] the top 10 or 20 per cent of the population of Australia. What do we do for the other millions of people who want to talk about everything from their credit cards, to investing a hundred dollars, to talking about [whether they should] put a thousand dollars in super or [towards paying off their] mortgage? That remains the challenge.”
Ideally, financial advice professionals should be able to act like any other professional, be it a doctor, lawyer or accountant, and be able to answer questions when asked, he added.
In July, research conducted by Fidelity International revealed Australians using a financial adviser were worrying less about the financial impact of the COVID-19 pandemic than Australians who did not seek financial advice.
Earlier this year, the firm found financial advice was instrumental in leading to a stronger sense of mental, as well as financial, well-being.
