Australia’s biggest superannuation funds are quietly plotting their path into playing a bigger role in dishing out financial advice sector as the government pushes for funds to play an expanded and more effective role in offering customised advice.
The move follows Quality of Advice Review recommendations that super funds step up and become the primary source of financial advice for fund members, which the government has embraced as part of its response to the controversial review.
Now, as five million Australians approach retirement seek out advice at an affordable price, just how funds roll out financial advice offerings has emerged as an opportunity to stand out from the pack.
Many funds have been investing in digital tools that help provide free or cheap advice to members wanting to make financial preparations for retirement. Many of these tools offer fund members a self-guided path to better understand what they need in retirement.
For some super funds, the transition into offering more financial advice will be relatively straightforward. But other funds are more hesitant about the move, according to David Bell, executive director of The Conexus Institute*.
Advice provided by super funds on a collectively charged basis remains financial product advice, which must satisfy legal and regulatory requirements, which creates both cost and risk for funds, Bell explains.
“Retirement is one of the most complex topics, and may be difficult to embed into an affordable advice process. This is important if advice is going to be funded through a collective charging model, because if costs to provide advice are too high, then the degree of cross-subsidisation across members becomes too substantial,” Bell says.
He also points out that some funds may be structured to service external advisers, which could be difficult for them for a couple of reasons. “Firstly, trustees may find it confronting to charge those members already paying fees for advice an additional collective charge for advice that they won’t utilise.
Opportunity for growth
Of course, some funds are already well entrenched into the advice space. UniSuper has a national team of over 150 advice professionals in more than 30 locations. This includes a finance advice centre and superannuation consultants.
But this year, the fund has rolled out automated triggered journeys for members that targets members by age. The communication provides education and digestible information to support members make informed choices for their retirement, explains Andrew Gregory, UniSuper’s head of financial advice and education.
“A significant program of work has delivered educational content including videos and calculators to enable members to estimate and understand how much they may have in retirement and where they can get additional information and support,” Gregory says.
Ongoing campaign activity is also targeted at members approaching retirement age to educate and encourage members to seek and find information and help as part of their journey to retirement,” he says.
Aware Super has also been thinking about the role of education for the last few years and building some interesting digital tools that give members free financial advice.
More than 120,000 of the nearly million Award members accessed advice and education services (including online offerings) in the last financial year, presenting plenty of opportunity for growth.
“We think that the right way to engage more Australians in that advice journey is to help them build the confidence and give them the tools and allow them to test some different ideas and help them to build up more personalised advice through the process,” says Peter Hogg, Aware Super’s business lead at the fund’s advice arm, Super Helpful.
Aware also offers free-for-service comprehensive financial advice as well, which the fund will continue offer in the future while also building out its free advice offerings. Hogg confirms that around 60 per cent of its members will be in the retirement phase in the next 15 years. “Members are really looking for personalised advice as they near retirement.”
“We’re a story of multiple mergers, and as our funds have come together, there’s been advice within our super funds for decades. But we know that we need to build in affordable and accessible help offers that don’t exist widely for many consumers,” Hogg says.
Friends or competitors
Exactly when super funds will step into the world of financial advice is unclear. Bell believes that some seasoned industry professionals reflect that there’s little benefit in developing an offering in the financial services sector until the legislative and regulatory settings are clear.
“This is far from the case at the moment for retirement advice, particularly if you factor in the risks around proposals passing through parliament. That said, I admire the funds who are trying to further develop their retirement offerings. The process of innovating and developing helps industry as a whole move forward,” Bell says.
The best super funds will have a well-developed framework for triaging their members into different advice and guidance channels based on their financial situation, needs and ability to pay.
The core advice solution offered by many funds will be technology-led to meet the scale and cost challenge for the complexity of retirement planning, most likely accompanied by a concierge-style service, he says.
However, advisers may also feel that some funds are now effectively competing against them,” Bell adds.
It will be crucial for financial advisers and super funds to work together, rather than view each other as competitors.
“For instance, some super funds may be hesitant to make the most of the triage to a financial planner pathway for those members with complex needs. And financial advisers may miss the opportunity to make the most of some of the quality retirement offerings being developed by super funds,” Bell says.
*The Conexus Institute is philanthropically funded by Conexus Financial, publisher of Investment Magazine.
Editor’s note: Some research and interviews for this article were conducted before the announcement of the government’s full response to the QAR on 7 December.