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Pre-retirees shocked at the high cost of financial advice

Published on
March 8, 2023
Anne-Marie Esler
Co-CEO & Co-Founder

Retired climate change consultant Arek Sinanian, 72 years old, almost fell off his chair after learning the cost of a financial plan.

Sinanian started planning for his retirement some years back but decided to continue working longer after he was offered a role within an international consultancy. He retired in April last year.

Two years ago Arek Sinanian spoke to his accountant and sought out two financial planners. He was blown away by the fees. Credit: RHETT WYMAN

“I’d finished a book on climate change and thought I would retire when this job opportunity came. It gave me time to continue working and secure my finances,” he says.

A few years earlier, he spoke to his accountant and sought out two financial planners; he was blown away by the fees.

“I looked at the proposals from the two planners, I thought, ‘Jesus Christ!’ I nearly fell off my chair. They wanted more than $10,000 for the plan. I remember thinking ‘what are they going to tell me that I can’t discover myself?’,” he says.

“I know people who need advice, they’re worried, they can’t afford the expense of it.”

Throughout his career, Sinanian maximised his earnings to secure his financial position, including optimising tax returns and investing in property.

“The sad thing is there are many people who’d really benefit from financial advice because they’re less financially secure, or they don’t understand tax laws. But to pay $5000 or $10,000, is unreachable for many,” he said.

A recent report, New Life Old Life, from Fidelity surveyed Australians aged over 45 to explore when they planned to retire, what they thought retirement looks like, and how they are preparing for this phase of their lives.

Head of client solutions and retirement at Fidelity, Richard Dinham said that less than half of Australians surveyed are making an active decision about the end of their career.

“Most of us put lots of energy into building our careers, but not necessarily the inevitable wind-down phase of our working life. It’s therefore concerning that many Australians are going to find the start of their retirement years more stressful and difficult than they expected, or than it needs to be.”

Forty-one per cent of semi-retirees worried the most about their finances, at least once a week, compared with 30 per cent of those in early retirement. The survey found that those who were not in control of their finances when stopping working full-time felt less positive and more negative.

Four in five pre-retirees currently receive advice, have received advice in the past, or would consider receiving financial advice. The problem for many retirees is the cost.

According to the Padua Advice Fee Data Report 2022, initial advice fees charged by advisers on a per advice document basis increased from $2,859 in FY21 to $3,315 in FY22, an increase of 16 per cent.

Ongoing advice fees charged by advisers on a per advice document basis rose from $3,656 in FY21 to $4,865 in FY22 – a significant increase of 33 per cent.

‘Automating the technical components of providing financial advice should be viewed as a priority.’

- Anne-Marie Elser from Padua Solutions

Padua Solutions co-CEO and co-founder, Anne-Marie Esler, said it’s no wonder the high cost of financial advice is frequently cited by Australians as the main reason for not seeking advice – especially when advice fees can rise by more than double the current rate of inflation. She points to technology as the solution.

“Automating the technical components of providing financial advice should be viewed as a priority in the future viability of the advice industry. The automation of providing financial advice will be the norm within the next 12-18 months,” she says.

“This starts with a client’s fact find and goes right through to using algorithms to determine which advice strategies would be best suited for a client and the actual monetary benefit of each strategy for that client.”

“We already have over 1000 financial planners using our software and services,” says Esler.

The original article by Emily Chantiri, The Sydney Morning Herald can be viewed here: