An academic study conducted by researchers at Brisbane’s Griffith University has argued the case for professional financial planning, expressing concern at the advice take-up rate in Australia.
According to Griffith Business School senior lecturer Rakesh Gupta, the number of Australian investors choosing to take up professional advice from a financial planner is a concerning development.
“There is widespread reluctance among investors to seek financial advice,” Dr Gupta said in a statement revealing his latest research findings.
“There needs to be a change in mindset. People need to think about the bigger financial picture and see past the accountant they visit once a year,” he added.
Dr Gupta’s call for greater appreciation of the work of holistic and strategic financial advisers comes off the back of his research finding that there is a concerning focus on managed fund past performance from Australian investors.
Having analysed more than 20,000 individual funds, Dr Gupta – in association with a team of researchers from the University of St Thomas in Minnesota in the United States – found that asset allocation in the managed fund industry is determined largely by fund performance.
“There is clear evidence that investors base their decisions primarily on past performance of the funds,” Dr Gupta said. “They may end up pursuing short-term strategies purely based on past returns of the funds, which can be detrimental to their long-term investment goals.
“Misallocation of funds by uninformed investors may result in significant under-performance of portfolios, leaving the public sector and ultimately the taxpayer left to service and support retirement. This is money down the drain in every respect.”
The fact that – at $63,794 per person – Australia has the highest per capita investment in managed funds in the world demonstrates that investors have not taken advantage of the superannuation choices legislation introduced in 2005.
More broadly, Dr Gupta said Australia is “no better and possibly worse” than other OECD countries on financial literacy.
Written by Aleks Vickovich of ifa magazine