Do you really need financial advice?
THE Chair of the Australian Securities and Investments Commission (ASIC) recently said: “A healthy and well-functioning economy must include access to affordable [financial] advice.”
This sounds reasonable enough, but it really isn’t when you look at a very common retirement predicament in which most people find themselves when the time to retire comes. It can be summed up as follows.
First, people are unsure if their savings, in combination with the Age Pension, will be sufficient or sufficient for long enough.
Second, people recognise that they have no dependable investment expertise.
Third, given the reputation of financial planners, people are wary of them and, anyway, they are too expensive.
Fourth, because savings must be invested somehow, people fall back on term deposits or simply leave their savings in their superannuation funds.
The compulsory superannuation system has failed these people badly.
Saving up for retirement is only one side of the equation.
The other side is spending in retirement.
Superannuation funds are happy to collect retirement savings. They will encourage you to save even more than is compulsory. They will lobby Government for increases in the compulsory contribution rate you pay while working. They are very concerned you might not have enough once you retire, you see.
But when you retire, the same funds are nowhere to be seen.
The law allows them not to care.
What you do with your retirement savings is your worry and your worry alone. And after you have paid out any outstanding mortgage debt and set aside some money for contingencies, what do you do?
This is when the common predicament described above, starts. It’s also the point at which the Chair of ASIC says: “A healthy and well-functioning economy must include access to affordable [financial] advice.”
In other words, go and see a financial planner.
With respect, this is useless advice from the ASIC Chair. You shouldn’t need to go and see a financial planner about what do to do with your super.
Superannuation funds, called pension funds anywhere else in the developed world, should offer just that: pensions.
Not an allocated pension account, which sounds good, but which is just an on-call bank account.
Pensions are what people need to be able to choose.
They don’t necessarily need “affordable advice”, they need their superannuation pension funds to offer them lifetime, indexed pensions based on their retirement savings.
Sure, it’s easier for funds not to worry about lifetime, indexed pensions, but anywhere else in the civilised world that’s what they are bound in law to do.
Why not in Australia?