The research from Rice Warner Actuaries claimed that as well as doubling the number of people receiving advice, the reforms would add 10 per cent to Australian savings in the next 15 years. The report found the number of people receiving financial advice would jump by almost 125 per cent by 2024.
The number of low to middle income earners receiving financial advice would increase dramatically and national savings were set to rise, with total investment business anticipated to be $117 billion higher by 2024, according to the findings.
The additional savings would be driven by the lower cost of obtaining advice and the increased savings following a higher take-up of advice, the report found.
The report, commissioned by the Industry Super Network (ISN), also showed incomes for financial planners would continue to rise following reforms, which planned to remove all forms of commissions and other incentive payments to advisers.
It found the average financial planner revenue would increase from $169,000 in 2009 to $363,000 by 2024 (in future dollars); with increased efficiency achieved by financial planning groups through increased economies of scale, automation and innovation.
The cost of financial advice would fall and consumers would seek advice more suited to their needs at a specific point of time, it found.
“The government has rightly been concerned that comprehensive reform of the financial planning industry could reduce the number of people receiving advice,” ISN chief executive David Whiteley said.
“This analysis predicts the opposite will occur and nearly 1 million more pieces of advice will be provided each year.”
In regard to the debate on fees, the research found commissions and percentage-based fees were not a transparent pricing mechanism and could have a dramatic effect on consumers’ final retirement savings. It also found commissions and percentage-based fees meant many consumers paid for a service they might not have received for many years because of inertia or structural defects in products.
No doubt increases in financial planning revenue will bolster many in the wake of 2009’s market turmoil.
Many within the industry have been quick to embrace the change to their fee structure, so such findings on commissions are hardly a surprise.
What, however, is a surprise is the forecast increase in the number of Australians seeking advice. Surely this finding is enough to not only guarantee the survival of the advice industry, but provide a solid incentive to work towards greater communication and education between planner and client.
