This article was produced in partnership with Australian Retirement Trust.
The country’s second largest super fund, Australian Retirement Trust believes the rules about intrafund advice need to be broadened “just a little bit further” so funds can factor into advice any Centrelink entitlements and additional household income, given the industry’s sharp focus on retirement and obligations under the Retirement Income Covenant.
Anne Fuchs, newly appointed as ART’s executive general manager of advocacy and impact, says the covenant is something that is unique to super funds and trustees need to ensure every member has access to retirement advice.
“Intrafund advice is a marvellous way to cater for that,” she tells Professional Planner.
ART continues to support the Delivering Better Financial Outcomes reforms including the move to create a new class of adviser, which she described as a win/win for “ordinary people” wanting answers to simple questions from their super fund but also for the adviser community, as it creates a new growth channel for new entrants who may want to pursue a career as an advice professional after taking on further study.
“Many Australians have a low level of financial literacy, and this new class of adviser could really help solve that problem,” she says.
But ART intends to fund the new class of adviser through existing administration fee revenue.
Fuchs says that even with this potential expansion, they still do not want to expand to offer more holistic advice inhouse, instead continuing to rely on external partners.
“A lot of people have their own financial advisers, and we worked that out quite a while ago that instead of trying to get in the way of it, our job was to facilitate it,” Fuchs says.
“It helped us solve a problem, which is we can’t provide that service at an affordable price point and it’s not scalable.”
Fuchs says the fund does not have the capacity, capability or desire to provide comprehensive advice, and she is not a proponent of collective charging to cover the cost of comprehensive advice.
“We don’t believe it is the right use of members’ money – every fund charges an administration fee and has a responsibility to ensure the best use of that money for all members,” Fuchs says.
“ART is the second largest fund in the country, and arguably the most diverse in terms of employers and members.”
While the current rules “aren’t perfect”, they don’t require major changes because intrafund advice is not meant to be all encompassing, Fuchs says, acknowledging the importance and value of comprehensive strategic financial advice. This is why we have been advocating to adjust the existing intrafund advice rules to include consideration to Centrelink and household income.
“By no means is it about acquiring FUM and increasing market share,” Fuchs says.
“It is all about delivering a better member experience because right now, under the general advice rules, we’re unable to help a lot of members with relatively basic things, and that’s not a good outcome.”
Family matters
Fuchs says she’ll be the first generation of her family – her and 51 first cousins – to retire with money.
“All my 17 aunties and uncles had to finish school in grade 10 because they didn’t have family money and they needed to go and get a job,” Fuchs says.
“Intrafund advice was created to help the first generation of Australians who’ve never had wealth to actually go to their super fund for really basic, simple questions.”
For ART’s members, 60 per cent of which Fuchs describes as “under-prepared for retirement”, intrafund advice enables the fund to respond to “really basic, simple questions about existing money” and deliver a better member experience. It is not a tool to increase funds under management and boost market share.
ART currently offers intrafund advice through an open architecture model, which includes phone-based advisers and digital advice.
For comprehensive advice, ART has referral relationships with a panel of external advice firms however overwhelmingly we have learnt since first launching the referral panel that members prefer finding their own comprehensive adviser through family and friend networks.
“[Many members] have their super and maybe their own home, and they’re entitled to Centrelink, but that’s it,” Fuchs says.
“There’s a real risk that these people will roll their money out, put some in the bank, spend the rest and end up living on the Age Pension.
“That’s not a good outcome for them and it’s not good for the country so if intrafund advice was expanded slightly, it would be easier for [super funds] to help members make good decisions and establish a stable, steady retirement income stream.”
With over 2.4 million members, ART is focused on delivering simple, scalable advice to its diverse membership, which includes public and private sector employees, and small business owners.
Balancing member needs
Fuchs notes this membership expansive base extends to those who “collect art and others drink XXXX” and barrack for the Brisbane Broncos or North Queensland Cowboys. “We exist to serve them all,” she says.
“We have some really sophisticated, high account balance members with specific advice needs but the majority have basic needs. We need to balance the needs and interests of members.”
According to Fuchs, who cut her teeth at large financial services institutions like BT and CFS, there is plenty of room and opportunity for both retail and industry funds.
She has no interest in entertaining the notion of the return of the so-called “super wars”.
“It’s not a competition…there’s demand for both scaled and comprehensive advice,” Fuchs says, adding the two are not mutually exclusive.
“A lot of our members have their own financial adviser and we don’t want to get in the way of that. Some are very senior government and corporate leaders.”
It’s these members that have high account balances and need comprehensive advice, but still come to the fund for simple questions.
“Funds should respect a person’s right to choose the advice they want because money is a very personal thing,” Fuchs says.
“If they can’t meet a person’s needs, they should facilitate their needs. We recognise that we can’t provide comprehensive advice to 2.4 million members, so we need financial advisers.”
In the same way, medical centres and GPs refer patients to medical specialists, ART is not afraid to refer members to external financial advisers.
Interestingly, more than 5500 advisers recommend ART to their clients, reflecting the fund’s compelling offer and growing reputation as a “global investment powerhouse”.
“Historically, super funds haven’t been recognised as investment houses but that’s changing,” she says.
“Advisers are increasingly interested in our investment philosophy and options. There is a constituency that really, really loves how we invest and our ability to provide solutions at an institutional price point.”
Using a rugby league analogy; a nod to the fund’s working-class membership and the parochial Queenslander’s love for the norther state’s code, Fuchs said the Fund aims to deliver a consistent high performing season every financial year, even if that doesn’t mean winning the grand final.
“We’re always going for gold, which is why were so proud to recently get a ‘gold’ rating from Morningstar, a globally respected investments rating house.
“We can’t wait for the rest of this season and the next.”
Intrafund advice is sales support. It is like going to Pfizer to get a prescription for your flu.