Financial advisers will be required to give greater consideration to aged care planning to meet new requirements within the mandatory industry-wide code of ethics, according to an aged-care specialist.
Writing in a recently released white paper, Aged Care Steps has stated the code of ethics introduced by the Financial Adviser Standards and Ethics Authority (FASEA) will require advisers to act in the best interest of clients and also to “actively consider the broader long-term interests and likely circumstances of the client”.
“To adhere to the code, advisers need to consider and discuss the client’s frailty years and aged-care needs or risk failing the FASEA requirements,” the paper noted.
“Acting in the best interest of clients requires advisers to ensure that advice, product recommendations and services are appropriate to meet the client’s specific objectives and needs, including their likely longer-term interests and circumstances.
“This means advisers are required to consider the phases of a client’s retirement, including the frailty years, and the impact of changes to their health and circumstances to their financial plan, including their income requirements and aged-care needs,” it said, pointing out these requirements were covered by standard six of the code of ethics.
Aged Care Steps also claimed many licensees and advisers had not tackled the issue of aged care, but would need to do so urgently to ensure they could adhere to the FASEA code, and that retirement advice provided in the past did not fully consider the transitions that take place in retirement.
“Financial planners focus on the beginning and end of retirement, but potentially fall short in adequately addressing the journey through retirement and all its life-stage transitions,” the paper said.
“Historically, advice has tended to concentrate on helping clients grow and manage their superannuation so that they are ‘retirement ready’ to fund the post-work period, the length of which has been defined by life expectancy tables.”
Aged Care Steps said it had identified three phases of retirement that were not marked by age, but rather by levels of independence and frailty, and advisers could not delay gaining the knowledge required to discuss these issues with clients or integrate this type of advice into their businesses.
“Financial advisers need to adapt their approach to retirement planning to ensure their service meets the real-world needs of their clients. Otherwise advisers face becoming less relevant and less competitive as a business, which will impact commercial viability. They also risk failing to meet the FASEA code of ethics, as well as failing to satisfy the needs of the client,” it said.