Minister for Financial Services Stephen Jones has told the Retirement Conference in Canberra that superannuation funds must provide forms of advice to members in order to meet their obligations under the Retirement Income Covenant.
“The lack of advice and information around retirement incomes is clearly the biggest gap in the advice market,” Jones told the conference, jointly hosted by Conexus Financial and the Conexus Institute at Old Parliament House on Tuesday.
“I expect funds to play an important role here. In fact, the increasing obligations that have been placed on funds make this a necessary step.”
The comments indicate it is an expectation of government that funds provide advice to members, going beyond the Quality of Advice Review suggestion that funds be encouraged or that the regulatory settings be amended to “make it easier” for funds to give advice should they choose to.
“There are details to be finalised around the scope of advice that can be provided, the qualifications for the adviser, and the charging framework for that advice,” Jones said. “But this is a natural progression for funds to both know and serve their member in a better way. Funds will be able to have more meaningful conversations with their members and provide helpful and safe advice.”
The clear expectation comes despite cautiousness about an expanded role in advice for funds from disparate stakeholders. Super Consumers Australia has expressed concern about conflicts of interest that may taint the independence of advice provided by funds, while the Financial Advice Association has questioned whether the providers of super fund advice will be suitably educated to professional and ethical standards.
The exchange follows a joint and damning report from ASIC and APRA, which found “insufficient progress” by funds in meeting their obligations under the covenant introduced under the previous legislation, including deficiencies in advice. The review found the vast majority of trustees now provide some form of comprehensive or intra-fund advice, but many are failing to communicate with members’ external advisers.
Jones also revealed that draft legislation to enshrine a purpose for the super system would be introduced within months, with a consultation to follow.
“We have proposed that the objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside Government support, in an equitable and sustainable way,” he said, referencing the government’s preferred definition.
The comments come ahead of the next installment of the Conexus Financial Political Series in Melbourne on Monday 28 August, at which Shadow Treasurer Angus Taylor and Shadow Finance Minister Jane Hume will lay out the Opposition’s response to the government’s financial services agenda.
