Making financial advice more affordable should only be explored if the quality of the advice provided is not compromised by a reduction in cost, a consumer advocate has said.
CHOICE chief executive Alan Kirkland highlighted the need for good quality advice and said any move to make financial advice accessible for more consumers should not prioritise a reduction in cost over the quality of the advice provided.
“You’ve got to start with: ‘What does good quality advice look like?’ That has to be the starting point,” Kirkland said last week at a Financial Planning Association (FPA) virtual keynote event on the value of financial advice.
“There is a cost that comes with that and we might be able to reduce that cost over time through technology, but we shouldn’t try to set reducing the cost as the objective because I don’t see how you can do that without compromising on the quality point.
“If that means there are some people for whom advice provided through the private market is just not the right proposition, if the value proposition isn’t there, we have to think about other ways of meeting their needs for information and advice.”
Citing CoreData research, which revealed the average cost for upfront financial advice is between $2500 and $3500, he pointed out it was unlikely this cost could be greatly reduced without impacting the level of work financial planners put into advising their clients.
“People need to be able to make a living in this industry and if you put that together with the fact that good advice does need to involve all of that work, then I think it’s hard to see how we can get [the cost] down significantly lower than that,” he noted.
During the event, Ecstra Foundation chair and former FPA president Paul Clitheroe said the current regulatory framework was preventing financial advisers from helping many consumers in need of basic advice who could not afford the fees.
In July, Actuaries Institute retirement strategy group convenor and public policy committee member Andrew Boal said cheap retirement-related financial advice available to the mass market should be part of Australia’s retirement income system.