The government has made it clear super funds are set to play a much bigger role in financial advice in the future, but a recent report indicates many lack the insights necessary to develop member retirement strategies.
The thematic review of how Registerable Superannuation Entity (RSE) Licensees have adopted the Retirement Income Covenant, conducted by the Australian Securities and Investments Commission and Australian Prudential Regulatory Authority, found a series of data gaps that limited how funds could develop and monitor retirement help.
Instead of using data specific to members, many of the RSE licensees were found to be relying on more generic data, such as that from the Australian Bureau of Statistics.
Furthermore, the review found RSE licensees were missing data on a range of matters linked to appropriate strategy, such as fund members’ retirement goals, retirement age, financial literacy, partner status and partner super balance.
“All RSE licensees were missing data that is critical for developing an effective retirement income strategy,” the report stated. “Further, few RSE licensees had critically assessed the extent to which their analytical and modelling capability enabled them to draw meaningful insights from their data.”
‘Funds have to do better’
In response to the report, Assistant Treasurer Stephen Jones told a Conexus Group Insurance Dialogue that funds urgently need to lift their game.
“I am going to say this bluntly: Service standards in the superannuation system need to improve,” Jones said. “Funds have to do better...And now.”
Last month, Minister Jones released his Quality of Advice Review roadmap, which broadens the ways in which super funds can advise members through retirement. Stream two of three involves changing the restrictions on collective charging and giving super trustees legal clarity around the payment of adviser-service fees.
At the time, several large funds, including AustralianSuper and Australian Retirement Trust, endorsed the moves and offered to work with Treasury on how to implement the changes.
Even though the government’s plan demarcates the role of funds and advisers, there has since been speculation about what the moves will mean for advisers, including whether the advice market could be a hunting ground for super funds.
Adviser Ratings data shows just under 4 per cent of advisers are licensed by super funds or not-for-profits, with Aware Financial Services licensing the most in Australia.
Figure 1 – Number of advisers licensed by super funds/not-for-profits
Source: Adviser Ratings
Meanwhile, results from our 2023 Landscape Report consumer research indicate there is an identified need from Australians for more help with super and retirement. Building super and preparing for retirement are the two top areas of financial demand, but most consumers say they turn to news media and family or friends to get financial information.
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Comments5
"Quality of advice is an issue for all providers as I went to an independent adviser and still got a cookie cutter SoA and no reasonable responses to questions on why I should consolidate basic superannuation death and TPD cover to a non super individual policy. This article confuses the provision of financial advice with the new SIS ACT requirement to come up with a fund wide retirement income strategy for all their members, including the possibility of different strategies for different cohorts of members as part of the Retirement Income Covenant. The problem is with the introduction of the Covenant. It will be impossible for any fund with more than a couple of hundred members, let alone a coupe of hundred thousand, or more than 1 million members to achieve any sort of tailored retirement income strategy, whether that includes personal advice or a range of education, self service calculators, robo advice tools. Financial advice can only be provided to a small proportion of fund members whether they see a internal or external adviser given the advice industry numbers. Nice thought from the government but divorced from reality. "
B 18:02 on 26 Jul 23
"The industry funds control massive amounts of retirement capital yet only employ 4% of advisers. Interesting statistic. My concern is that industry funds are giving out 'quasi advise' over the telephone via their contact centres and not using properly licensed advisers. I have lost clients to Industry Funds who have provided them 'free advice' for complex matters like applying for allocated pensions and even merging super and existing pensions with no consideration given to client circumstances (ie loss of grandfathering of pre-2015 pensions and also not taking advantage of cash-out re-contribution strategies to reduce taxable components for estate planning purposes). I am talking about call centre staff here, not licensed advisers. They are telling them which forms to use and how to fill them out! They need to step up and act more responsibly and make proper advice more accessible rather than having advisers only in capital cities and phone/webcam advice. The regulators are asleep at the wheel now that they have chased all the Banks out of advice."
Andrew 16:05 on 26 Jul 23
"I think that some of the big industry funds should focus on getting their admin up to speed first before they create more problems. Waiting 12 months plus for death benefit payments for no good reason is unacceptable."
Mark 15:13 on 26 Jul 23
"The significant loss of experienced advisers cam about due to concerns about educational standards. At that time there was no consideration about experience. Now in a crisis it is proposed to bring in people with no experience or qualifications to fill the gap? To most Australians superannuation is the most important investment they will ever have, major product providers have a very poor track record of monitoring (or even caring) what their representatives do. We are, in effect, putting advice in the hands of the product provider, if that's not a conflict I don't know what is!"
Les 14:54 on 26 Jul 23
"Lets's not get into the habit of calling that "financial advice", if their future so called advisers are going to have less qualification/compliance requirments and limited scope, I won't call that "Financil Advice". "
Saeed 14:38 on 26 Jul 23