To date, the superannuation industry’s focus has principally been on a member’s accumulation, but that must change as a growing number of members move into retirement with financial advice being an integral part of that shift, according to Equip Super.
Equip executive manager of financial advice Andrew Vogt tells Investment Magazine a member’s retirement income needs can’t be solved by either product or advice alone. Vogt says the most constructive thing a super fund can do for its members is to “help people, support them with decision making”.
“I’ll just nail my colors on the mast here: As a financial planner, I’m completely biased, when it comes to that question,” Vogt says.
“Product is clearly very important. As an industry we’re blessed. We largely have good product, which is well designed and well managed. You can be in the best product in the country for five years but, particularly with current market volatility, if you make some decisions that potentially aren’t the right decisions for you, as a member or person, that can do far, far more damage to your retirement outcome than any product.”
Vogt says that investment returns are clearly critically important in a member’s accumulation phase, but the best fund performance in the world can be completely undermined “if you go to cash after the market drops, and then buying back in when the market’s recovered, which I have seen happen over and over again”.
“You don’t require a financial plan for that, [often you just need] to have a supportive conversation with a financial adviser when those events are happening,” Vogt says.
“Particularly if you’re getting towards retirement and you see the market jump downwards in a big way, or are spooked by alarming newspaper headline, this can panic members into making changes to their asset allocation which can be unwise in terms of their superannuation balance locking in a loss.”
This view of financial advice means funds need to engage with members not only as they count down to retirement but, increasingly, as early in their lives as possible. Advice offers that only come into focus for a member in the countdown to retirement are potentially missing an opportunity to set the member up better before they even get to that point.
Vogt says Equip has an established comprehensive advice offering – created from the merger of Equip and Catholic Super – and is now turning its attention to building out its intrafund advice offer, as way of engaging with members at earlier points in their financial lifecycle.
Comprehensive advice is offered on a fee for service basis, costing the member between $3000 and $4000 for a statement of advice, depending on the complexity, but Vogt says it’s appropriate that an intrafund offer be funded by all members, even though not every member may use it.
“Not all members use a call centre, not all members use various elements – the website, perhaps,” he says.
He adds some super funds have different offices around the country, and not all members use that office which means there needs to be a sensible approach to those things.
“I do agree that super funds should be prudent on what they spend,” Vogt says. “It’s members’ money, they should be very prudent, and I don’t think it’s unreasonable that regulators have a look and make sure that that is being spent prudently. But I do believe that having advice available, intrafund advice available to members, supported by the membership of a fund, is an expectation of a lot of members in a fund.”
Vogt says members expect that they will be able to get a straight answer from their fund.
They want to be able to pick up the phone and speak to somebody generally,” Vogt says. “It’s important that funds have that the ability to do that. The members would expect it.”
Building out an intrafund advice offering is designed to open a conversation with fund members about issues that are important to them, at the time they’re important, not waiting until they’re a few years out from retirement. It has introduced an asset allocation service, which Vogt says is “a core offering of all intrafund offerings, but it’s particularly pertinent at the moment, with market volatility.
“We know that there’s demand there, because every time the markets gyrate, our members are ringing the call centre and asking questions – and every single fund would have that experience,” he says.
“So we know that’s a building block to start building things around.”
Vogt says the conversation between member and fund might start out on relatively simple issues but is likely to cover increasingly complex issues as a member gets older and as they get closer to retirement.
He says the conversation should be directed by the member and the fund will direct the member to wherever their issue or question can best be addressed, whether it’s through intrafund advice or through its comprehensive advice offering.
“It’s starting a conversation without a predetermined outcome, and trying to understand what the client’s needs are,” he says.
“It’s the beginning of a relationship and a conversation that does often solve that immediate question – what asset location should I be in, what investment choice should I be in – but it increases the member’s awareness of advice,” Vogt says.
“Quite often, they’re not aware of the advice offering we’ve got. It begins a conversation that leads to something down the track. It maybe a year or two… but what want to do is start thinking about their superannuation and their retirement goals and those sorts of things. So it’s very much centred around a conversation.”
Vogt says Equip fundamentally believes in “advice as a differentiator” and as a clear value-add for members.
“We see that the impact that it has a member outcomes and on our members,” he says.
“They want support. Not all of our members want full comprehensive advice, but I would argue that at some point a lot of them will. But they want support, and they want to be able to call up and get questions answered.”