The Financial Services Council recently released a report into the fast-changing future needs of financial advice customers. We asked what was changing, and why.

The financial needs of Australians are becoming increasingly complex, says Blake Briggs, CEO of the Financial Services Council (FSC). That’s because of increasingly dramatic changes to wealth, tax and social security eligibility.

“As people age, they accumulate varying sources of wealth that add to their level of financial complexity,” Briggs says.

“This includes owning a home, investment properties, investments both within and outside superannuation, and varying sources of income such as salaries and business ownership.”

Also, attitudes around aged care, and its availability and cost, mean caring responsibilities for ageing family members increasingly fall on the following generation, who likely also have children, he says.

“This is compounded by Australia’s ageing population, and the fact that we are going to start seeing people retire who have accumulated superannuation savings for their entire working lives, meaning they will be less reliant on the Age Pension,” he says.

“The advice needs of a 70-year-old today will look very different to a person who is 50 years old and looking to retire in 25 years. They will have significantly more personal savings through superannuation, and their life expectancy will also be different.”

Complex finances require nuanced advice

Financial advisers, insurance brokers, accountants and more — including those designing products and services to serve this market — must keep their finger on the pulse of changing financial needs.

More than that, Briggs says, a changed regulatory approach is required to enable more nuanced advice for customers who need it. FSC research, conducted by NMG Consulting, highlighted specific areas of regulatory design deserving of more focus.

One is around performance testing for different types of superannuation products. Such testing should be sensitive to the role financial advisers play in developing a total portfolio for a client, as opposed to considering the product a freestanding item, the research says.

“The FSC supports performance testing for default products, where a consumer is not engaged and trustees have complete control over the product’s investment strategy,” Briggs says.

“However, this principle does not apply to more complex choice products [which enable investors to make decisions around the product, as opposed to being a default member of a fund], where performance testing would struggle to consider the diverse needs of advised consumers.”

There is also work to be done around the Retirement Income Covenant (RIC), and the increased focus on the superannuation sector providing a good level of income to its members.

“This can be difficult because superannuation funds do not necessarily know everything about their customers, like whether they have a spouse or a property, in the same way, a personal financial adviser does,” Briggs says. 

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