While criticism of aged care advice in Australia is far from new, this has intensified due to lingering systemic complexity, regulatory gaps, and high costs.
According to a new report by accredited training provider to the financial advice sector, Aged Care Steps, older Australians and their families are increasingly exposed to conflicted, inconsistent and inaccurate advice.
Within its recently released White Paper, Protecting Older Australians and Ensuring Quality Advice, Aged Care Steps calls for reforms to existing shortcomings around how aged care advice is currently being provided.
Despite the complex financial components involved, such as home care packages and residential care fees, only around 18% of Australians currently seek advice on aged care.
Catering for this cohort are around 2,700 financial advisers in Australia who have completed Aged Care Steps’ Accredited Aged Care Professional program.
The trouble is that existing gaps in financial advice regulation are, by default, exposing older Australians to a growing number of unlicensed financial advisers, who, according to Aged Care Steps, are potentially exposing older Australians to untold financial harm.
What’s clearly evident within the training providers’ research is an insufficient distinction between personal advice and information related to aged care funding.
Equally alarming, the training provider also points the finger at a proliferation in advice errors from Services Australia, an Australian Government agency responsible for delivering core social, health, and welfare payments and services.
According to Aged Care Steps director Assyat David, the current grey area of unregulated advice poses significant risks to consumers and highlights the urgent need for clearer guidelines and stricter regulations.
"Without proper consumer protections, older Australians are at risk of making inappropriate decisions that could have serious financial and estate planning consequences."
Based on the training provider’s research, key areas where current regulations fall short include:
- 85% of licensed advisers believe there are unclear boundaries between general and personal advice in the aged care context.
- 70% noted a lack of specific regulations governing aged care financial advice.
- 65% mentioned inconsistencies in how regulations are applied across different professional groups (e.g., financial planners vs. aged care placement services).
Echoing a similar sentiment, Aged Care Steps director Louise Biti said it was high time aged care advice was the exclusive domain of financial advisers with the necessary expertise who are authorised under an Australian Financial Services Licence (AFSL).
This approach, adds Biti, would strengthen consumer protections that unlicensed providers do not currently offer, while also providing minimum education and competency standards.
As well as ensuring advisers carry professional indemnity insurance - to ensure compensation in cases of professional misconduct - Biti is also calling for compulsory participation in an external complaints resolution body.
Within its recommendations to government, regulators and broader advice industry figures, Aged Care Steps is calling for:
- Enhanced regulation and enforcement through strengthening ASIC's role in overseeing aged care financial advice.
- Aged care financial advice be classified as Personal Financial Product Advice under the Corporations Act.
- Introducing financial planning specialisation categories on the ASIC Financial Advisers Register (FAR), to more effectively identify licensed advisers.
- The government launch a public campaign to educate consumers about the value of licensed financial advice and how to find a financial adviser.
- Ways to improve the affordability and accessibility of aged care advice, recommending subsidies or new service models as possible avenues to achieve this.
Aged Care Steps survey responses provided several compelling examples illustrating the benefits of proper aged care financial advice and the potential pitfalls of inadequate or no advice; Here are just two:
Case Study 1: Maximising pension entitlements and minimising fees
A financial adviser shared this success story:
I had a client, a widower in his late 80s, who needed to move into residential aged care. His main asset was his home, valued at $800,000.
Initially, he thought he had to sell the house to pay a full Refundable Accommodation Deposit (RAD).
After a comprehensive analysis, we determined that selling the house would significantly reduce his pension entitlements and increase his means-tested care fee.
Instead, we recommended the following strategy:
- Keep the house and rent it out.
- Pay a partial RAD of $200,000 from his savings.
- Pay the remaining accommodation cost as a Daily Accommodation Payment (DAP).
This approach allowed him to:
- Maintain his full pension entitlement.
- Generate rental income to cover the DAP and contribute to other care costs.
- Minimise his means-tested care fee.
- Preserve a significant asset for his estate.
“The outcome was a savings of approximately $15,000 per year in overall aged care costs and pension benefits while also preserving his main asset,” the adviser noted.
“This case study demonstrates how proper financial advice can lead to significant financial benefits and better client outcomes.”
Case Study 2: Navigating complex family situations
A financial adviser shared this success story:
I worked with a couple where the husband needed to enter aged care, but the wife wanted to remain in their family home. They had modest savings outside of their home and needed help to fund the husband's care without jeopardising the wife's financial security.
We developed a strategy that involved:
- Utilising the 'protected person' provisions to exempt the home from the aged care means test.
- Structuring their assets to maximise pension entitlements for both partners.
- Using a combination of RAD and DAP to balance immediate and ongoing costs.
This approach allowed the wife to remain comfortably in the family home while ensuring high-quality care for her husband.
It also preserved their assets for potential future needs and their estate.
“This case illustrates how tailored advice can address complex family situations and balance the needs of multiple individuals,” the adviser concluded.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
