A University of South Australia study has found the high cost of financial planning services is preventing lower socio-economic groups from accessing advice for life insurance and other financial investments that could greatly improve their retirement security.

The study – which was funded by Magellan Asset Management, Centrepoint Alliance, the Financial Planning Association of Australia and the Financial Planning Education Council – reached the conclusion after surveying consumers and advisers.

It suggests targeted policy support for financial planning to deliver significant benefits to lower income groups and improve efficiency in the financial advice industry.

A government-funded rebate for initial advice fees, an awareness campaign on the value of financial advice and streamlining the advice formats for consumers in the lower socio-economic groups are the three main recommendations made.

Geoff Pacecca, the university’s Lecturer in Financial Planning who was involved with the study, says consumers from lower socio-economic groups have low levels of complexity in their financial needs.

“So a short-form approach would help reduce costs while still delivering valuable advice,” he said, adding a “short-form statement of advice format for retirement-age people from lower income groups who are seeking retirement planning advice” would reduce compliance time and thus cost for advisers.

The study collected responses from advised consumers, asking them about the value of eight areas of financial advice: investing; superannuation; budgeting; retirement planning; Centrelink advice; life, income protection and other personal insurances, aged care and wills.

Membership of the lower socio-economic group for the survey is defined by households with superannuation assets less than $250,000, or single-person households with less than $150,000 in superannuation assets.

About 31% of advised consumers who fall in the lower socio-economic group say life, income protection and other personal insurance advice is not valuable, 25% say it’s somewhat valuable and only 6.25% term it as very much valuable.

The survey also polled unadvised consumers on their perception of financial advice.

Overall unadvised consumers don’t value financial advice, with 79% of the 112 respondents coming back with a “negative” answer when asked if they think financial advice would be of value to them.

Of the 79% who did not see the value of financial advice, 36% don’t think they can afford a financial adviser, 33.9% don’t trust the profession and 29% don’t know where to find a “good” adviser.

Click here for the report.