Govt should subsidise advice: Financial Advice NZ
Government should be encouraging New Zealanders to engage with financial advice to better equip them for lifelong wellbeing, Financial Advice New Zealand.
Friday, January 31st 2020, 5:00AM 4 Comments
Acting Retirement Commissioner Peter Cordtz this week released the latest three-yearly review of Retirement Income Policies by the Commission for Financial Capability.
Financial Advice New Zealand chief executive Katrina Shanks welcomed many of the recommendations made, particularly introducing a “small steps” contribution option to increase contributions over time, excluding fixed fees for low-balance accounts, making prescribed investor rates tax refundable, employer contributions for members over 65 and targeting the government contribution to incentivise voluntary contributions by non-employees.
But she said more should be done to encourage financial advice.
Shanks said the review had recognised there were many “levers to pull” for success – such as housing and employment. “You can’t just look at super in isolation.”
But she said financial advice was another lever that had so far not been identified.
Financial advisers would come into their own helping people pull together the various aspects of their lives, she said, understanding what risk cover or mortgage structure they needed as well as investment planning.
If people were exposed to financial advice in their first jobs, or when they first signed up to KiwiSaver, that would help them to understand the difference that advice could make through their lives, she said. Then when they went through a life change, they would think to check in with a financial adviser – in the same way that people were in the habit of seeking advice from a healthcare professional when their health changed.
“I would like to see the Government subsidising financial advice in the workplace by financial advisers.”
She said it could be that it was linked to KiwiSaver, or available via a tax credit or subsidy for a set number of visits.
“It’s easiest through the workplace.”
She said there was clear appetite for it and many employers were already engaging financial advisers to help their staff with KiwiSaver. “There are already good employers doing it. How do we extend that further?”
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Comments from our readers
Exactly where do we draw the line on the expectation that everything is free and available 5 seconds ago?
Our society with its expectations of now drive many of these questions.
For me, a number of parallel issues collide here:
1. Government (of any political colour) regularly uses taxation (either increasing a specific tax or removing one) to incentivise societal change and behaviour. Why is this issue any different if there is a genuine appetite for change across society as a whole? Isn't that what we have "government" for: to make decisions for the benefit of society as a whole and then to use the resources of its tax payer base to enforce those collective decisions for the common good?
2. There is no doubt that government wishes to see more private sector insurance and less reliance upon state sponsored programs. The financial literacy noise, increasing difficulty of obtaining ACC (anecdotally), the legislative push for "better consumer outcomes" from financial services and so forth are shifting NZ in that direction. Which is not necessarily something I disagree with incidentally.
3. Regulatory reform of our sector is undoubtedly raising costs for the sector, which in turn will limit consumer access due to higher advice delivery costs, or reduced advice choice (either fewer participants in the market or fewer participants willing to work with segments of the market). While reform itself may be a good thing for the industry, it is difficult to see how it increases partcipation in the use of financial services by consumers at this point. It may in time, but almost certainly won't in the next electoral cycle.
4. Official messaging (from politicians and policy makers and policy enforcers) is consistently disparaging of the industry, and that in turn makes it more difficult for the industry to absorb additional costs when there is decreased confidence by consumers in using the services of the industry.
5. There appears to be a centralised approach to manipulating market models to suit some sort of PR agenda. I am referring of course to the ongoing noise about commission rates and cost of distribution where some fairly provocative statements are made repeatedly which actually appear illogical to me.
Given that the impact of such things are going to be felt most severely by a relatively small number of businesses trying to serve consumers, but they are supposedly for the benefit of our society as a whole in the long term, then I think it is a legitimate question to raise as it is an issue of "fairness" coupled with enhancing (or is it "restoring"?) confidence and participation in the use of the sector.
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