Superannuation funds ought to be the box seat when it comes to delivering affordable financial advice to the masses. Yet most funds still only provide financial advice to a small fraction of their members, possibly because not all funds equally value the benefits of advice, or perhaps because they’re simply not adequately resourced to deliver it at scale.
Some of our recent research suggests there may be other dimensions to the advice challenge facing super funds, namely, meeting the advice-scope expectations of members themselves, and the apparent indifference of those members to whether or not the individual they get advice from is employed by their super fund.
CoreData’s Q1 2020 Trust Research shows that almost six in 10 (57.2 per cent) people expect a fund’s financial adviser to be allowed to give them advice on more than just superannuation, whether they actually needed that broader advice or not.
And more than half (53.3 per cent) of them would be more likely to seek advice from another adviser if their super fund’s adviser were permitted only to give advice on superannuation, not on broader financial planning issues.
Almost six in 10 (58.1 per cent) people expect a fund’s adviser to be allowed to recommend an alternative superannuation fund to them, if the adviser considers the alternative fund to be better suited to the member.
For various reasons, the specific issues – advice extending beyond super, and recommending alternative super funds – isn’t a feature of all super funds’ advice offerings.
Funds themselves have created a variety of advice solutions, including developing in-house teams, setting up referral arrangements with carefully selected panels of advisers, and proactively working to engage with the general financial planning industry.
Whether an adviser is employed by a superannuation fund or not seems to make little difference to the member: about a quarter (24.6 per cent) say they would trust an adviser somewhat or significantly more if the adviser were employed by the fund, and a similar proportion (25.6 per cent) say they’d trust the adviser somewhat or significantly less.
For around four in 10 members (40.6 per cent) the employment status of the adviser makes no difference; and around one in 10 (9.2 per cent) members say they don’t know if they’d trust the adviser more or less.
This raises an issue for industry funds who may have traditionally been reluctant to expose members to the broader financial advice industry for fear of potentially losing members to competitor funds (often retail funds) recommended by those advisers. CoreData’s findings suggest that fund members are not likely to trust a fund’s in-house advisers more than external advisers.
Trust in advice in general remains a barrier to its greater take-up by the Australian community generally – our research shows trust in advice stands at 38.0 per cent*, down from in 42.4 per cent Q4 2019 but broadly consistent with how it’s tracked ever since the royal commission.
And a referral by a fund to an adviser likewise makes little difference to the member’s level of trust in the adviser: most (47.4 per cent) say they’d nether trust the adviser more or less if they were referred to the adviser by their fund; around one in five (21.5 per cent) say they’d trust the adviser more as a result of a referral; and a similar proportion (20.1 per cent) say they’d trust the adviser less. One in 10 (10.9 per cent) say they don’t know how their trust in the adviser would be affected.
This paints a bit of a picture about the sort of advice – and the sort of adviser – superannuation fund members might expect to encounter when or if they seek advice from their fund. It appears from these initial results that fund members don’t care too much who gives them the advice – whether it’s an employed adviser or it’s an adviser they’re referred to – nearly as much as they care about the scope of advice they can get from whichever adviser they see.
And it illustrates the challenges for super funds to develop a workable advice proposition. Current intrafund advice rules restrict the scope of advice that funds can provide to members, apparently contrary to the scope of advice members say they want.
Spending time, money and effort creating a full-service in-house advice capability might not have any meaningful impact on member advice take-up, because the level of trust in the in-house adviser is likely to be no greater than the level of trust in an external adviser to whom the member may be referred.
There remains little question, however, that financial advice is a potentially enormously valuable service for super fund members. Research by CoreData has shown on numerous occasions that receiving good financial advice leads to measurable financial and non-financial benefits for the recipient.
For many Australians superannuation is the most significant financial asset they will ever own, not counting their family home. Their superannuation fund remains well placed to be the provider of advice to help them make the most not only of their superannuation but also non-superannuation financial assets.
A number of submissions to the government’s Retirement Income Review have backed the idea of allowing advice to be paid for from MySuper accounts. But even before the question of how to pay for advice in superannuation is settled, it would seem to be a fine idea to make sure the advice offer available to members is relevant and attractive to them in the first place.
*Simon Hoyle is head of market insights for CoreData Group. Hoyle was previously editor of Professional Planner magazine