The chief executives of four of the country’s leading superannuation funds have warned that regulating how funds deliver financial advice to members must recognise that different funds have different approaches, and provided advice is delivered clearly in members’ best interests, regulation must accommodate these differences.
Aware Super chief executive Deanne Stewart told the Advice Policy Summit, hosted by Investment Magazine sister publication Professional Planner in Canberra on Monday, there needs to be a regulatory framework that recognizes “people are coming from different starting points, but that we’re all collectively wanting to help millions more Australians have better outcomes and feel more confident about their future”.
“And so then, on the other end, we do need to make sure that there are the right guard rails in place as we’re thinking about this,” Stewart said.
“You can see Treasury and the government trying to work out what that needle is to thread.”
Stewart said these guardrails should deliver at least some degree of consumer protection but not hamper the spirit of what funds are trying to accomplish, which is to “help millions of Australians really reach a much better outcome for their future”.
Stewart said an example is the so-called new class of adviser introduced in the government’s Delivering Better Financial Outcomes reforms “is a fully fledged financial adviser”.
“They should not be serving beyond the current member base,” Stewart said.
“It’s a service to your members. It’s to answer those basic queries, basic questions that today we can’t. It shouldn’t be a distribution arm, because that will go back to the sins of the past. So that’s one example of consumer protection.”
UniSuper chief executive Peter Chun said consumer protection can also be achieved by ensuring that when members seek comprehensive advice, that’s really what they get. For example, UniSuper’s advisers work from an open-approved product list (APL) that includes products and super funds other than UniSuper.
“Now clearly, [we] and other super funds on this stage, have to ensure we are delivering good outcomes for our members, that it starts there, and of course, our products are rated,” Chun said.
“We go through the same research houses, so I don’t think that changes with the Quality of Advice Review or the DBFO reforms. I think we come back to the original objective: This is all about quality, affordability and accessibility. It’s not about an organisation. I mean, we are giving advice [and] we’re giving advice because in order to fulfill our legal obligations of the Retirement Income Covenant. We think advice is critical.”
Consumers should have choice
Chun said UniSuper has internal advice channels “and we’re about to go live with external advice, because we feel consumers should have that choice”.
“We do not believe that you should just use advice from your super fund,” he said.
“Absolutely, our members have those trusted relationships. So I think the model is choice. It’s open. People can access it.”
Chun said there are members across all super funds who have relatively simple advice needs, and its often these members who are least able to afford – or see the need for – advice.
“We can talk about what those [needs] are that are not being met because the current regulatory settings are very prohibitive to…their needs [being] met simply and cost effectively,” he said.
“So what I would say is if, if some of those changes, which the current minister has already announced, are legislated, then there will be more clients who are happy with simple advice under this new class of adviser.
“And then over time, they will have greater propensity to get comprehensive advice. And I think over time, the whole ecosystem, our clients, our members will actually feel more confident.”
Brighter Super was created in the space of about three and a half years through the merger of LGIAsuper, Energy Super and Suncorp Super – effectively bringing together a for-profit, profit-to-member and public-sector super funds under one roof.
Brighter Super CEO Kate Farrar said it doesn’t matter what flavour a fund is, “because I think all of those three cultures bring something that is different to the ecosystem and that actually complement each other when they’re working together”.
“Within the common ecosystem and the collaborative ecosystem, I do think there are going to be different delivery models, and I think that those delivery models will arise out of different member bases and different competencies within the funds themselves,” Farrar said.
“And in fact, that’s a good thing, because that’s the way competition works, and that’s the way that market works. I do feel really heartened, actually, at the shared grand vision of delivering some sort of guidance or advice to everybody who retires.
Farrar said the acquisition of Suncorp was the starting point for Brighter Super working with and really understanding independent financial advisers. When Brighter Super did its successor fund transfer with Suncorp Super it took on a fund that had relationships with around 1300 financial advisers. Farrar said Brighter Super learned a lot about advisers, and how to work with them, very quickly.
“But to me, the really big bit of the journey has been educating all of our executive and our leaders about what it means to actually have advisers as kind of a third sector of stakeholders within your ecosystem.
“You know, we’ve had to look at all our forms. We’ve had to look at our contact centre and the way that they interact with advisers. We’ve had to train our administrator. There’s so many different things that you just don’t think about when you haven’t had this third arm – after members and employers, obviously – of stakeholders to consider. It’s a huge educational uplift, but like all education, we’re all better off for it.”
Significant issues to solve
Insignia Financial CEO Scott Hartley said there are “significant issues to solve as a collective industry, and we need to do that together, and they’re not easy issues”.
Insignia has hived off financial advice licensee businesses into a new entity, Rhombus Advisory (and sold another, Godfrey Pembroke, back it its advisers).
Creating Rhombus was “a very good plan”, Hartley said, albeit set in train by his predecessor, Renato Mota who was also in attendance.
“I had some questions about execution of that plan, but I think it’s been executed really well, and we now have the advisers that are licensed by, collectively, the Rhombus group, owning a licensee business, which I think is the right model going forward,” Hartley said.
“We retain a minority share in that business, we are a supportive minority shareholder in in that company, and we work very closely with the Rhombus business and board to do what we can to help their success.”
That leaves two salaried adviser businesses – Shadforth and Bridges – within the Insignia group.
“[We are] very happy owning advice businesses,” Hartley said.
“As we know, there’s never been a better time to be in the advice industry, as an owner of a selling advice business, and in the purpose of being in those businesses is to make money out of advice, and it’s a good time to do it.”
Aware’s Stewart said the superannuation industry needs to co-operate closely and encourage policymakers to land on a solution best for members. She said she had been hearted by conversations at the Advice Policy Summit because “there is actually more consensus in that middle than I think we often, in our different corners, realise”.
“The more united we can be, the more we can seek that centre ground and way through, it helps millions of Australians, and ultimately, that is why most of us are in this industry – to actually really help Australians have dignity in their retirement,” she said.
Aware acquired the StatePlus advice business in 2016 for $1.1 billion and was later forced to write down its value to little more than $100 million. Stewart said that experience fell into the “what doesn’t kill you makes you stronger”, but advice remains as central to Aware’s long-term plans today as it did then.
Advice matters ‘a huge amount’
Stewart said the average age of an Aware member is 48, and “help, education, guidance and advice matters a huge amount for our members as they’re heading into retirement”.
“And so theoretically, in that purchase of StatePlus, it really was to the heart of how do we actually help more members as they’re entering in retirement through that process?” Stewart said.
“For sure, we’ve learned a lot. The industry has changed pretty dramatically, and ultimately for us, where we’re at now is radically different than where we were when we purchased it back in 2016, in that we have such a broad range of guidance and advice, right from digital advice, where actually, since we launched it over a year and a half ago, we served more than 150,000 Australians; right through to phone based guidance; to advice; to then working with thousands of independent financial advisers.
“So for us, we really deeply believe that help is at the core of this industry, and that’s what we’ve broadened out and learn many lessons along the way.”
UniSuper’s Peter Chun agreed that advice is integral to the fund’s support of its members.
“We’ve had the in-house advice capability for over 15 years, and it suits our model,” Chun said.
“Our members need it, so that’s worked really, really well for us. Over that time we also do have members that have very trusted relationships with external financial advisers, and we have not, at this point in time, made it easy for [those advisers] to work with UniSuper. So we are in the process of going to market, to work with the IFAs [independent financial advisers] in the marketplace.”
Chun said UniSuper currently has about 15,000 members who have a relationship with an external adviser, and about 40,000 members who use UniSuper’s internal advice channel.
“So all up, UniSuper has over eight and a half percent of our members who get great advice,”he said.
Chun said a pivotal moment for the superannuation industry occurred last year when the government enshrined in legislation the objective of super.
“Some of the words are quite important: deliver income for a dignified retirement. So that’s what super funds are here to do,” he said.
“Super funds cannot exist without advisers, both in-house and external. In UniSuper’s case, because it’s both super and advice, it’s how we’re going to achieve these goals.”
