The outgoing chief executive of Australian Retirement Trust has backed the Quality of Advice Review as being essential part of solving the challenge around decumulation.
This week, Australian Retirement Trust announced its inaugural CEO Bernard Reilly was stepping down with a successor expected to take the reins in February 2024.
Reilly became the first CEO of ART as a result of the merger between Sunsuper and QSuper that commenced officially last year.
In that time, the industry has seen a change philosophy around decumulation amid the introduction of the Retirement Income Covenant and the ongoing QAR.
Reilly tells Professional Planner the fact there is a broader conversation around decumulation is “incredibly positive” because the building blocks to deliver to members already exist.
“It probably requires some changes and tweaks to regulations over time,” Reilly says.
“Quality of Advice [Review] is a great example and we’re focused on that. That requires some change about how and who can provide advice and the government has really taken up, which is great.”
The government response to the QAR will give trustees more freedom to give financial advice, although the parameters are yet to be set, nor has any consultation been opened to the industry.
How willing funds are to handle advice obligations varies, some funds like UniSuper have a strong internal advice team, while ART has leaned on relationships with external advisers.
Trustees are already obligated to deliver retirement solutions under the covenant, but the government and regulators have been underwhelmed by their performance so far.
But the sector is divided with many funds unwilling to take on the role, and digital advice providers like MoneyGPS and Advice Intelligence having pivoted their businesses to offer mass market advice to funds.
But Reilly says the industry is “actually pretty well equipped” to be able to meet the challenges of handling the decumulation stage.
“That’s one of the reasons we appointed a chief of retirement to really make it front and centre within our organisation,” Reilly says, referring to BT chief strategy and product officer Kathy Vincent, who was recently announced as chief of retirement, commencing this December.
“The number of people who are able to move to retirement phase but stay in accumulation is about 1.3 million Australians. They’re paying 15 per cent [tax] out of their own money even though they don’t have to. That tells you that there’s a problem on the advice side.”
Reilly says the topic of decumulation is only able to happen now because of the success of the accumulation phase.
“We’re in the incredibly fortunate position that we can actually talk about decumulation because the amounts of savings that members across the board have in their funds are significant enough that it can actually help them in their retirement,” Reilly says.
When it comes to funds being prepared for the impact of decumulation, Reilly says there needs to be more awareness and planning for how they will approach a decline in funds under management.
“Not every fund is going to continue to grow over time because their members are going to hopefully be drawing a pension or retirement income stream out of their fund,” Reilly says.
“What does that then mean the makeup for the industry longer term because I think it continues to change because of that.”
