Financial advice: What are the risks and benefits?

Financial advisers are supposed to act in the best interests of their clients. That’s not a vain hope or fluffy belief, it’s enshrined in law.

Confidence in financial advisers fell to all-time lows in the wake of the Hayne Royal Commission, which unearthed serious financial misconduct. Most notably, fees for no service and advice that left clients worse off. Then COVID hit, followed by rising interest rates and a cost-of-living crisis and it’s been a gamechanger for advisers and their clients.

Demand for advice is growing

The 2022 Investment Trends Financial Advice Report found 91% of Australian adults have concerns about their finances, with rising inflation front of mind (58%, up from 42% in 2021). Yet there appears to be a reluctance to seek advice, with an estimated 12.4 million people reporting unmet advice needs.

The report found the advice gap was widest among younger adults. While 81% of those aged 18–34 indicated they had unmet advice needs, only 18% had sought advice in the previous 12 months.

Significantly, while many super fund members said they were open to seeking advice from their fund, they were often unaware of services available.

On a more positive note, new clients outnumbered those leaving their adviser for the first time in three years. Even so, growing numbers are considering stopping or switching advisers, citing unhelpfulness (31%), unclear fees (27%) and slow responsiveness (28%).