Industry superannuation funds are ideally placed to fill a gap in the advice market for individuals who fall outside the retail planning industry’s typical demographic, according to a report released yesterday.
Conducted between December 2014 and May 2015 and spanning 19 not-for-profit funds serving 10 million members, with $314 billion in assets, the study was a joint initiative of Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST).
It suggests financial advice delivery to industry super fund members will increase by more than 40 per cent over the next five years. Scaled advice – referred to as ‘piece-by-piece advice’ within the report – is expected to account for much of this anticipated growth.
“I think that the greatest area of change is likely to be in single issue advice and this area of intra-fund advice…the main simple things that can be done based around members’ existing super fund membership, to improve their outcomes,” says Robbie Campo, deputy chief executive, ISA. She spoke with Professional Planner on the sidelines of the Financial Advice In Super Symposium in Melbourne on Thursday.
Restoring trust in advice
Many funds reported their members were wary of financial advice and that intra-fund advice helps to restore member confidence in advice. A number of them indicated that members who obtain intra-fund advice on one topic often progress to receiving further advice.
“I would say that the funds are still really building their capacity in this area [of providing advice]. So it’s going to continue to grow.
“If [members] come to you with one need, helping them to understand their super…it is a gateway to open up further conversation around their financial future and the role of their super within that,” Campo says.
The research found the vast majority of advice (70 per cent) received by members was general advice. Around 25 per cent and 5 per cent of personal advice was piece-by-piece and holistic advice respectively.
It identified advice on investment selection inside super funds as the most common type of piece-by-piece advice. All funds surveyed provided advice on this, and on making contributions, including salary sacrifice. Sixteen funds also provided piece-by-piece advice on intra-fund insurance, and 15 provided transition to retirement strategies.
“If you look at the numbers of people in the broader population who get traditional financial advice services, they say it’s between one in five and one in eight,” Campo says.
“Given that industry fund members are typically people that are probably toward the lower end of the socioeconomic scale rather than the higher end, those numbers probably make sense,” Campo says.
Commitment to quality
She also stresses the high quality approach to advice being taken by industry funds, which have in the past been accused of using under-qualified advisers, particularly in providing general advice.
“But funds have been very careful to build very qualified and experienced pools of planners. So they’re shifting to whatever this new framework for professional standards is going to be,” Campo says.
The study found many of the funds’ advisers held higher qualifications and on average, 55 per cent of the advisers in each fund held the Certified Financial Planner (CFP) certification.
As part of an effective triage process, more complex advice needs are referred to advisers with higher qualifications, particularly degree-level. More than seven years experience was identified as the average level among the advisers of surveyed funds.
This article was updated with a link to the full report Meeting Members’ Advice Needs.
