UNSW Business School's Pamela Hanrahan and The Conexus Institute's David Bell

A new paper released by The Conexus Institute and co-authored by one of Hayne’s royal commission advisers proposes the introduction of a low-cost, standardised modelling tool that provides access to retirement planning but sits outside the current regulatory parameters.

The proposal, put forward by the institute’s David Bell and UNSW Business School professor Pamela Hanrahan, suggests a tool – initially rolled out via APRA-regulated funds and registered financial advisers – that takes client data, maps the available products and produces a “retirement transition support plan”.

Underpinning the tool’s effectiveness would be a regulatory exemption based on the premise that the tool itself is “safe by design, not by regulation”.

The current regulatory settings make the provision of low-cost retirement advice commercially unviable in many cases, the paper argues, leaving a vast swathe of pre-retirees without access to advice.

“Solutions that are usually proposed as a means of improving the accessibility of personal financial product advice – expanded intra-fund advice, fintech enabled digital advice, or ‘scaled’ advice – have not successfully addressed this problem so far,” the paper states. “Each is inhibited by a combination of legal, regulatory, behavioural and operational factors.”

As the advice market shrinks and the cost to serve rises, advisers are increasingly reluctant to take on clients with retirement balances south of $500,000. That leaves a large chunk of the 250,000 people that retire every year without an affordable advice option.

“High net worth households are well served by the existing private wealth management and financial planning sectors,” the paper continues. “Those retiring with no or very low superannuation balances who qualify for a full aged pension have different needs, including different support needs. We are looking for a scalable solution to current lack of support for pre-retirees in the middle.”

This is where the carve-out comes in. If the tool is designed so that the regulatory protections are “baked in”, and it comes without the agency risks of regulated advice, the need for expensive regulatory settings is abated.

“We decided the solution is not to get rid of regulation that you need but get rid of the need for regulation,” Hanrahan tells Professional Planner. “The aim at the outset is to make it low-cost, and taking away the compliance piece does that.”

A regulatory exemption isn’t the only thing policymakers could do to facilitate the idea, Hanrahan continues.

“One of the things we looked at was whether the government could give everyone a voucher when they turned 62, which could be paid for by a levy on the superannuation funds,” she says. “It’d be nicer than some of the other things you get at that age.”

(To read the paper, visit The Conexus Institute’s website or go straight to the PDF.)

A guiding hand

According to Bell, proposing super funds and advisers distribute the tool – with the scope to add other professionals like accountants – was a natural decision given the alignment of industries and relevant expertise.

Making it self-directed wasn’t feasible, he says.

“You always want some degree of direction involved because financial literacy – and literacy in general – can be a concern,” he says.

Another reason, Hanrahan adds, is that the proclivity of people to use tools is greater when they have someone helping them.

“The research indicates there is a really high drop out rate when people try to do things like this on their own,” she says.

Simple alternative

The paper’s authors acknowledge that the proposed tool would be “less detailed” than a  comprehensive financial plan and less able to accommodate individual preferences.

While the embedded fact find would be “incredibly robust” by necessity, it’s not meant to compete with or replace the kind of holistic strategic advice a registered financial adviser would deliver, Bell says.

Rather, the tool would provide an alternative for people who can’t pay for it. And, he adds, it would help the people who simply don’t want to pay for financial advice.

“That’s why we didn’t want to target the tool at a specific cohort of people that have saved up to a certain level,” Bell says. “Instead of looking at everything through a dollar value, we want it to cater to anyone who is looking for guidance.”


*(To read the The Conexus Institute’s paper, visit the website or go straight to the PDF.)

5 comments on “Unregulated retirement tool proposed for ‘middle’ retirees”
  1. Avatar
    Mitch Bradshaw

    Right… Advice is expensive because of regulation, and tech solutions are unfeasible because of the cost of regulation.

    So… just remove regulation for one party? Seems fair.

  2. Avatar
    Craig Lindner

    How about use modern software with AI to lower the cost to serve by advisers? Advisers currently available “tools of trade clumsy at best and fit for purpose in the 2020’s. Why isn’t the advice industry demanding better and getting better?

  3. Avatar

    If a person is retiring with less than $500k in investable assets, I am not sure that a planner needs to be involved. I agree that the FIS service is important to this cohort and, if necessary, have the role enhanced to be able to provide direction on how to start super pensions or draw lumps to pay down debt – the areas outside of the Centrelink focus but 2 key aspects for retirement structuring. Basic modelling via superfunds isn’t the answer. The person needs a directory of where to go to get the things done. Once at the superfund, the info and fact sheets should be comprehensive and self explanatory etc.

  4. Avatar

    Thanks Mark for your feedback and suggestion.

    The potential role of FIS officers is interesting. One important aspect of our idea is that there needs to be a pathway to implementing the recommended plan (account-based pension, other retirement income products etc.). FIS may not be able to provide that support. However, it is an idea that we will consider further.

    The full paper can be accessed here: https://theconexusinstitute.org.au/wp-content/uploads/2021/10/Retirement-transition-support-20211028.pdf .


  5. Avatar
    Mark Bastiaans CFP®

    Good work David and Pamela on this critically important tool.

    Did you consider distributing via Centrelink’s Financial Information Service (FIS) Officers?

    In my financial planning business, I direct all individuals (prospects and clients) who will be completely or partially reliant on the Age Pension to meet with a FIS Officer (face to face or via phone) to understand the decisions they face, their potential entitlement and process for applying.

    The clients experience with the FIS Officers are very complementary and it removes any possibility of conflict of interest.

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