Restoring trust in financial advice for retirees
Australia needs a robust, independent financial planning and advice industry to ensure retirees receive the best possible advice for managing their retirement savings.
The call comes as Australia’s seniors’ advocacy organisation, COTA Australia, joined with other consumer interest groups, such as Choice, to warn a Senate Inquiry about the detrimental impact of the proposed amendments to Future of Financial Advice (FOFA) legislation on tens of thousands of older Australians.
Sound financial advice, that puts the interest of the consumer first, is more important than ever given changes to the pension age, announced in the recent federal Budget.
Ian Yates, COTA Australia chief executive, told the FOFA Hearing of the Senate Economics Committee in Canberra last week that retirees need professionals, independent financial advice, as they have no opportunity to recoup lost investments or assets when financial advisors are swayed by commissions rather than advising on the best outcome for clients.
“The proposed changes remove important safeguards which were put in place following the disasters of Storm Financial and West Point to stop inappropriate products being sold to vulnerable community members,” Mr Yates said.
“Just as important as those headline grabbing financial failures are the day to day problems and losses when people don’t get the best advice possible about their hard earned retirement savings,” he adds.
According to Mr Yates, weakening those safeguards removes important protections and the recourse for consumers against advisors or salespeople who choose to exploit the loopholes these changes would create.
“There is much uncertainty facing this and the next generation of retirees as they make arrangements for their financial security to live as active and as healthy as possible in their retirement years,” he says.
COTA Australia believes trust in financial advice may be restored by a ban on all commissions or third party payments to all financial advisors and financial product sales, ensuring that scaled advice is fully subject to strict best interest protections.
