In late November we shared the Australian Government’s announcement of new reforms for the retirement phase of super. Since then, on 7 December, another major change to retirement income has been announced. This time it’s an attempt to increase access to quality, affordable advice at the time of need for 4+ million retirees and 2.5 million pre-retirees.
Before we go into the specific changes involved, here are the two main reasons people come to Retirement Essentials to get exactly this type of timely, manageable advice:
- They have done their homework, have a good idea of their likely sources of income and are seeking external reassurance that they haven’t overlooked anything, missed any important rules and that the timing is right.
OR
- They realise that they need to address their retirement planning or retirement income management but don’t know how to get started. They suspect that they ‘don’t know what they don’t know’ and are seeking a basic understanding and some first steps to get things underway.
These two types of needs are very different – and that is just one of the reasons why Retirement Essentials advisers don’t treat all customers with the same ‘one size fits all’ solutions. Retirement Essentials welcomes the Federal Government’s attempts to simplify the advice process, but, in fact, this is a service we already offer. It’s also interesting to note industry spokespeople welcoming the notion of $900 advice consultations. That’s because we know that our popular 55-minute single-issue consultations are usually sufficient to give our customers both peace of mind and the information that they need to make their own best decisions.
What problem is the government trying to solve?
Minister Stephen Jones noted three top level problems; supply, cost and the reliability of the advice on offer.
- Supply: With about 5 million Australians who could conceivably benefit from the right advice at the right time, the Assistant Treasurer and Minister for Financial Services noted that just 16,000 qualified financial advisers simply couldn’t service the full need. (What was not completely canvassed was the role of digital tools to combine with adviser meetings to ‘do the sums’ quickly so that strategies and options might be more fully canvassed).
- Cost: It is proposed that a new more cost-effective class of advisers, with a certificate, rather than a degree. They will be employed by licensed financial institutions and the licensee will be responsible for the quality of advice provided.
- Reliability: Minister Jones is hopeful that a new, more widespread advice offering will mean a reduction in scam losses due to unregulated content on platforms such as Tik Tok, Reddit and directly from financial scammers.
The Minister also noted that the government would encourage increased plain English Statement of Advice provision so that retirees could better understand their options. The announcement on 7 December noted that legislation will be developed to implement this model in 2024. This seems ambitious; it’s possibly an error as 2025 is a matter of weeks away.
What about episodic advice?
The announcement seems to support the strong preference of most retirees for episodic advice. What does this mean? It’s sometimes easier to start by explaining what it is not. Episodic advice is the opposite of comprehensive advice which is a full financial plan based upon your goals, assets, income, normally projected across the entire second half of your life. Typically priced at between $4,000-$5,000, it comes as little surprise that most retirees with median super savings of around $200,000 find this fee structure too high and the offering overly complex.
Episodic advice, as defined by ASIC, is ‘limited’ advice, also known as scaled, single-issue, modular, or piece-by-piece advice.
At Retirement Essentials we view episodic advice as ‘bite-sized’. This is because our 55-minute consultations are:
- Affordable ( $375 per 55-minute online meeting)
- Manageable – because they are designed to help solve an issue you have designated to be the most pressing, e.g. Should you use super to reduce your mortgage? How long will your savings last? When should you apply for an Age Pension? We don’t swamp you with too much information – just the rules and obligations that are relevant to your main concern.
- Specific to your current needs, concerns and circumstances, which means that they are completely relevant to your current age and stage.
Retirement Essentials welcomes the government’s more practical approach.
Our advice team of Nicole, Meghan, Sharon, Andrew and Amanda have more than 80 years combined experience in listening to ordinary Australian retirees and helping to guide and support them to make the right decisions at the right time.
In a way the government is a little late to the party, but better late than never. Our mission remains to help all Australians enjoy their best possible retirement by putting them in control of their financial futures.
Perhaps you have more specific questions with which you want help? These are covered in the following tailored consultations:
- Retirement Forecasting – This shows you how much you can safely spend, how long your money may last or any changes you can make to achieve your goals.
- Understanding more about super – There are many things you can do with your super to improve your income in retirement. It helps to talk to an adviser who knows all the important rules, tips and tricks.
- Maximising your entitlements – Maximising your entitlements comes with many complex rules. The result is that many retirees can be significantly underpaid in retirement. Retirement Essentials advisers can show you how to make the most of your financial resources and how they combine with Centrelink.
- How to understand and manage your home mortgage – One in five of our customers still have a mortgage on their home. There are strategies available to manage debt. You can talk to one of our advisers about these retirement journey options.
