AustralianSuper Chair Don Russell doesn’t want to see his fund’s members just leave when they retire after 30 or 40 years, diligently building up a large asset.
“We have some responsibilities for making sure that they don’t walk out the door with a big pot and head to the first person who has, you know, a pot of beans to sell them, and then you just wave goodbye to them and say, good luck,” he told delegates at a conference in the Blue Mountains hosted by Investment Magazine‘s parent, Conexus Financial (pictured below being interviewed via video link by Conexus CEO Colin Tate).
“We have a fiduciary responsibility to our members… Members do take quite sizable balances out at 60 and put it in the bank. And it’s coming to grips with why they might do that and what we as an organization can do to nudge them.”
He went on to say that whatever their motives were about taking the money out and putting it in the bank, just paying off debt, or sitting in a fixed income, there are other things that they could do, which would “give them all the flexibility that they’re presumably wanting, but also deliver them better financial outcomes”.
But, as with many issues surrounding super funds at the moment, providing advice is not as straightforward an argument as might first be expected.
Advice doesn’t come free and at the end of the day ultimately funds must use member resources to pay for it.
“The challenge, then, is how do we fund it?” Russell said.
“How do we finance that advice? Because we are responsible for all members. And the real issue is to what extent can you fund advice out of the collective wealth of all the members… in other words, what can you cross subsidize legitimately.”
He added that the heart of the question was how do funds provide the sophisticated advice around what an individual member needed in relation to their subsequent investment behaviour, given their circumstances and the size of their assets.
“We have the view that maybe 80 per cent of our members are really in the business of needing general guidance, or general advice… often around life events,” he said.
“So we’ve come to the conclusion that as a funder, we need to focus on the 80 per cent. And that’s where we have been putting a lot of attention in, to how we can be helpful for our members, and do it in a way which is efficient. Face to face conversations are expensive. But these people do need help.”
Russell added that for the 10 percent of his members that he felt could be helped by comprehensive advice or advice in the traditional sense, the best way of servicing them was essentially outsourcing to licensees to financial planning businesses. He said the fund had been actively working to build relationships to make it a financial-planner-friendly organization.
Evan Poole, Manager, advice operations at Sunsuper told the Summit that his fund started back in the early 2000s in advice, mainly provided internally, but later saw a different perspective. Poole spoke on a panel alongside Industry Fund Service’s Adrian Gervasoni (pictured below).
“We realized in about 2015, that the future was actually not just looking inwards and providing advice ourselves, but instead to trust the intent of advisors out there in the marketplace and have them provide advice to our members rather than us doing it ourselves,” he said.
“The challenge that we face is how do we get advice to one point something million members… it’s a real challenge to try and find advice solutions that that they can get, which we know are going to mean they have a better outcome in retirement whilst also still having advisors being able to run businesses that that run a profit.”
He added that when a situation arose with a member whose needs exceeded that which the fund could provide ‘interfund’ they referred that out to a panel of advisors.
“We’ve been doing our advice panel for over five years now. And we’ve tried many different things across that time, because we’ve got to make sure that there’s something in it for the advisor, there’s something in it for the member, everyone gets a good happy outcome,” he said.
“And if we’re the trustee, and we’re providing that referral, we want to make sure that the service is like the one that we would want to provide. And so we hand pick out the advisors that are on that panel, we know and understand who they are, we now understand the licensees, and we track the outcomes from those referrals as well.”