More investors expected to seek advice during Coronavirus pandemic. 

Senator Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology, recently gave an interesting interview to the website Really Simple Money. 

The early release of super, she said, had turned Australians, many of whom had previously no clue of their super balance, into a nation transfixed by the amount set aside for retirement.

At Adviser Ratings, our members have witnessed one of the biggest surges in demand for advisory services in a long time, with many working around the clock and pro bono to provide emotional support and help clients prepare for what many see as a coming economic storm. 

If COVID-19 has a silver lining, it may well be that more Australians have now realised the value of professional financial advice.

That said, the spread of financial literacy among Australians is still a sorry picture. Last year, only 12 per cent of consumers saw a financial adviser in the previous 12 months. 

And from a study of 20,000 consumers who left reviews of their financial adviser on our platform, 44 per cent assessed themselves as having average or worse financial literacy. 

If, by seeking professional help, these are the motivated and financially informed within the community, what of the rest? 

COVID-19 reinforces need for advice

Our report on the advice landscape last year said: “It’s very hard to be rosy when thinking about the 2020 business climate for the Australian retail wealth-management market. Collapsing consumer and business confidence with rising unemployment and low wage growth speak to a broader weakness across the economy.” 

Since then, the pandemic has smashed global growth and investment markets, in turn creating crazy daily gyrations in share prices that have lured do-it-yourself novices into the market with the expectation of making big money. 

Robinhood has 61,000 Australians registered on a platform for day traders while not yet accepting registrations from this country. Local contender Stake, which offers zero-commission trading in US stocks, has seen a 167 per cent increase in sign-ups to 100,000 users.

Millennial investors, it seems, think trading is easy.

But Covid-19 may yet provide the financial services industry with a second coming. Handled well, with compassion, courage and grace, financial professionals who go the extra mile and help ordinary Australians cope with a coming financial storm could be hailed as heroes, like the first responders to the bush fires and the health workers of the coronavirus epidemic.

In the last few months, we have seen a huge spike in leads through our consumer platform – a tripling of inquiries to financial advisers that represents the tip of an iceberg. 

If only one in 10 Australians take advice at the moment, a rise to three in 10 would be phenomenal.

Typical questions

There are no surprises about what people are asking. There is a lot of demand for cashflow-based advice from people who have suffered material drops in income through job loss, reduced hours or reduced investment income for retirees. 

For many, there is also the sickening realisation that income-protection insurance provided as part of their superannuation fund does not apply if you lose your job. 

The early release of super also sparked the question of whether the offer of a quick cash injection really made sense if it greatly affected retirement lifestyle down the track.

Risks to health and life from the pandemic also drove increased life-insurance claims and new business inquiries. Advisers proved critically important in helping clients get what they deserved during a period of great uncertainty about whether policies would pay out under pandemic conditions.

So, the opportunity here for the advice industry to regain favour with the community is akin to the redemption the banks have experienced by allowing loan holidays and reaching out early to aid small business after the torrid reports and investigations, including the Royal Commission, over the last two years.

Advice barriers

Significant structural changes are being implemented to restore trust so that consumers can feel comfortable that advisers and the wealth sector are looking after their best interests. 

And while this has led to an increase in the cost of advice – an unwelcome side effect of all that regulation – it is now time to demonstrate the value of this service. 

Until now, the industry has done a poor job communicating how financial advice changes lives, and confronting the reasons why consumers don’t take advice. 

Top 10 reasons why consumers don’t get advice

Source: ASIC survey of 2,545 consumers

And because of regulation, the supply of advisers is shrinking.

Advisers are leaving the industry at a rate of 15 per cent each year as new educational standards, together with difficult business conditions, force many to retire and advice business owners to sell. 

So these are the best and worst of times to be an adviser: increasing consumer demand and an industry driving towards becoming a respected profession to mirror the accounting, legal and medical fraternities, yet hampered by a diminishing workforce, putting more pressure on those remaining. 

New advice campaign

Adviser Ratings and Really Simple Money owners Big Splash Media are launching a campaign for accessible financial advice for all, and suggesting to the government that it’s a real investment to help finance a growth in advice as a way of stemming the rise in welfare recipients during the pandemic.

The campaign involves TV, the national press, a national digital campaign and a website. It’s called Together Australia – and we think that together we can make a difference in the next six months.

Many of our members have offered free financial advice and we have assembled an enormous library of free content, calculators, tools and courses. And we are pleased to welcome as supporters some of Australia’s biggest institutions, such as AMP. 

We hear a lot of anecdotal evidence about why Australians don’t take financial advice: “I’m embarrassed by my financial circumstances – how could I have let things get this bad?” or “I don't want to look stupid in front of the adviser because I don’t really understand money.” These just demonstrate the need for a proper literacy campaign about money matters and about how advice can help.

Unlike traditional professional services that are about helping people with problems today, financial advice is about helping people achieve a better tomorrow, which is always harder to value. But that doesn’t mean it isn’t valuable. It is – particularly now.