Andrew Inwood at Investment Magazine Chair Forum. Photo: Tim Baker

A room full of the most influential super fund chairs has been warned the guidance of an external financial adviser is going to be the biggest driving force of member switching in retirement – and it’s up to funds to offer better services to retain members.

At the Investment Magazine Chair Forum, CoreData Research founder and global CEO Andrew Inwood said almost a quarter (24 per cent) of members are changing funds when retiring with financial advice being the key driver.

“Here’s the real reason people are changing superannuation fund, the most common reason is advice from a financial planner,” Inwood told the chairs.

The data found 63 per cent cited advice from a financial planner as the reason they would move, while 33 per cent cited access to better pension/annuity options, which Inwood said has risen through the ranks over the past few years.

“I’ve been doing this a long time and that used to be nowhere, now it’s somewhere,” Inwood said regarding the movement of annuities.

“I don’t know if it’s the financial planner talking about annuity products or because the people are thinking about it properly.”

While super funds have done a strong job in the accumulation phase, Inwood said once people realise they have a high balance they begin to consider their options.

“When they’ve got lower balances or they’re younger – about 20 per cent think about it – the rest don’t pay attention to it,” Inwood said.

“But as that value rises, the decision start to change and they’re starting to think well maybe I could do better.”

When it comes to who is the beneficiary of those choices, Inwood said it’s Colonial First State and MLC, mostly in part to the fact advisers have a better relationship with the people providing services.

Inwood highlighted that knowing the BDMs and the ins and outs of the platforms had a significant impact of the direction of those flows and that’s the challenge the industry funds face.

“It’s a challenge that you’re absolutely equal to – to allow those people to understand you as well, to understand your systems, processes and outcomes,” Inwood said.

The battle for retirement

The CoreData research found consulting with a financial adviser about retirement was the biggest driver of retirement confidence.

This was more important than having free online services for retirement, total household income and even whether the member owns a house.

“This is not about being rich, this is about being clear with what’s going on,” Inwood said.

However, when it comes to estimated standard of retirement total super, total household income and owning a house, they all outrank consulting a financial adviser.

But Inwood notes controlling those factors is largely outside the funds’ control. “But they can change whether you’ve talked to a financial adviser,” he said.

Ultimately, whichever fund wants win the battle for retirement, it will come to who is best set at reducing friction points for members which is where advice will come into play.

“Australia has a complex retirement system, the way in which the money is treated for taxation purpose, the way in which money is saved…is complex, more complex than many other nations around the world,” Inwood said.

“That means it’s hard to navigate. That means when people bump up against it, they suffer from stress and about 80 per cent when they walk into stressful situations simply don’t deal with it and they want help through that process.”

A matter of trust

Presenting data on trust levels for their super funds, Inwood said there had been significant moves in the last year.

When it comes to the most trusted super funds as rated by their members, Aware Super scored 96 per cent of trust by members, up 6 per cent year-on-year.

UniSuper followed with 89 per cent, AustralianSuper also with 89 per cent, and AMP (up 8 per cent) and MLC with 87 per cent each.

“Aware Super has had an extremely good year in building up its trust component amongst its members and it’s had some very significant changes,” Inwood said.

“The other one that’s really moved up is AMP Super…the numbers are starting to move around in that organisation and that’s interesting in its own right.”

Cbus had an 82 per cent rating despite survey results from December coming after a year of negative news headlines due to poor services and ties to the militant CFMEU union, but it was still higher than Colonial First State (80 per cent) and Mercer Super/BT Super (75 per cent).

Inwood noted much of the connection between the union and the fund didn’t get mainstream news coverage.

When it comes to how news coverage impact the perception of funds, Australians are more likely to be aware of positive news stories (36 per cent aware; 64 per cent unaware) than negative news stories (23 per cent aware; 77 per cent unaware).

“Most people aren’t aware of negative news stories and the message isn’t really getting through,” Inwood said.

“Those people who are aware of the negative news stories are having a very interesting correlation…every time people talk about good things for a super fund trust rises really quickly.”

The effect of news stories on trust

Source: CoreData Research. Click to enlarge.

Inwood identified the biggest work for super funds is improving service standards, something the researcher had flagged during its research into member standards conducted with Conexus Financial, the publisher of Investment Magazine.

“Hundreds and hundreds of people responding to the survey, lots and lots of interviews of talking to people about their service experience and one third of complaints are unresolved,” Inwood said. “It’s not as good as we probably want it to be.”

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