Coming up to three years since the introduction of the Retirement Income Covenant, it’s become blindingly obvious the response of superannuation funds must incorporate not only product, but also information, guidance and advice. How individual funds manage the intersection of these components remains much less clear-cut.
Expanding the availability of advice through superannuation funds is a critical element in making financial advice more accessible to the Australian public. The Professional Planner Advice Policy Summit, held in Canberra this week, has heard that it will require connections, co-operation and collaboration between multiple players in superannuation and advice.
Some funds hold their own Australian financial service licence and authorise their own advisers. Others start from a product or platform foundation and support advice and advisers from there. And some work with external advice practices to help deliver the kind of sophisticated, comprehensive advice members demand.
One such practice, Eureka Whittaker Macnaught, has established strong advice links with Cbus, via the Financial Advice Association of Australiaadvice relationship with the fund.
“Businesses like ours every day understand there’s 900,000 members in Cbus, and a lot of them need personal advice,” EWM chief executive Greg Cook told the summit.
“They’ve taken on funds like Media Super and the EISS fund, mostly New South Wales-based members that include defined benefits, and so they have an approach with their advice team where they identify where they might be able to use our services or talk to us, and we provide what would otherwise be a fee-based initial consultation. We provide [that] complimentary, and then price up and scope out that advice.
“I just cite that one as one example of where it’s been a benefit to the fund members and been a good client relationship insofar as we’re concerned, and the fund is concerned.”
Great retirement outcomes
UniSuper general manager of financial advice and education Andrew Gregory said the fund defines its responsibility as “providing great retirement outcomes to our members”.
“And there’s a lot to that,” he said.
“We made a strategic decision at the fund [at] both board and the executive level, that advice is core to our proposition. It’s because we know that advice can add value to our members, and often those simple questions that members have at certain stages of their life will result in a complex answer.”
Gregory said UniSuper has 650,000 members nationally, and “when you think about the scale of a fund like that, it poses certain opportunities in a business context as to how do you operate at that scale, but maintain those guardrails of professionalism, quality, all the things that we know and understand in this room”.
“We think deeply about how we provide intrafund advice through a collectively charged model, but also how we complement that with a professional advisory model, which is our comprehensive service,” he said.
Gregory said UniSuper runs its own AFSL under which it authorises advisers, 88 per cent of whom have a Diploma of Financial Planning qualification, and 86 per cent of whom are Certified Financial Planners – a professional designation administered by the FAAA.
But in addition to its own advisers, UniSuper is about to branch out into the external advice channel “because for us, we’ve realised that not every member wants to get advice from their super fund”.
“They often want to work with their own professional advisers, and that’s many in this room,” he said.
To put the scale of UniSuper’s advice capability into perspective, Gregory said the fund will hold almost 60,000 meetings with members seeking advice over the course of a year and deliver around 7000 statements of advice. In addition, it will deliver around 50,000 pieces of general advice.
Tread carefully
Gregory said funds need to tread carefully when it comes to the delineation between information, guidance and advice.
“For a fund like ours, there’s a lot of downsides if we get it wrong,” he said.
“We’re very careful around the guardrails that sit for our general advice population versus our personal advice population. Practically, we sit it within a business unit, so there’s only the representatives in my team that can provide financial product advice. We’ve got very well documented standards [and] we’ve got management supervision programs that are geared directly towards general advice.”
This often has implications for how members experience how they receive advice, Gregory said.
“The member experience in this would be one of slight confusion: ‘Why are these disclosures here?’; ‘Why can’t you just tell me what to do?’,” he said.
“Often they say, ‘Well, that’s OK, but what should I do?’. And so, it’s moving over to personal advice.
“The art of our business model, actually, is making sure the member is meeting with the right person at the right time with the right information. The way in which we organise that value chain of advice is really about understanding the circumstances of the member and making sure they’re meeting with the right adviser.”
AMP group executive of platforms Edwina Maloney said a critical aspect of delivering high-quality advice to more fund members is not only increasing the absolute number of practising advisers, but also in increasing the productivity of existing advisers.
Earlier in the summit, Minister for Financial Services Stephen Jones unveiled plans to make it easier for more people to enter the profession by creating simpler and cheaper pathways for anyone who already holds a bachelor’s degrees, in any discipline.
“We know that’s going to take a while to see the fruits of that come through into the industry,” Maloney said.
“But let’s just assume, in 10 years’ time, that can add five [thousand] to 10,000 advisers into the industry. That’s another third. Let’s also then look at increasing supply through financial planners themselves.
“I’ve had some ambitious conversations with advisers: go from 100 to 110 clients per advisor to 200 plus. You’re doubling the number of clients that advisers can see.”
‘In the sweet spot’
Maloney said a lot of advisers AMP works with “are in that sweet spot” and are focused closely on “providing really good solutions at retirement, pre-retirement, linking those age pension benefits through to the tax outcomes, through to maximizing concessional contributions, through to all those other complex things that we’ve created in this industry”
She said if a way can be found to help advisers efficiently service 200 clients each, then “you’re going from 1.1 million clients seeing advisers to 2.5 [million], three [million]”.
“I think that really does solve a lot of the problems and this is where technology does come into play,” Maloney said.
“This is the sweet spot for platform providers: we are trying to drive that efficiency in advice practices.
“We’ve got to have really smart solutions that, again, enable that efficiency in practices. So I think, yes, there is a problem to solve, but I can see a number of ways to crack this.”
Challenger head of retirement income research Aaron Minney said the RIC has three elements: “the know, the build and the guide”.
“We’ve all focused on the build, what’s the product, what’s the thing they’ve got to have?” he said.
“I think funds have woken up to the concept about actually need to understand their members, who are their members? What do they do? What do they need?
“And then there’s the third element, which is the important bit: Once you figure it out, how do you let them know, at scale, where they need to be, and how they need to manage their retirement? And this is where the whole range of products options are relevant.”
Minney said to (mis)quote finance legend Bill Sharpe, retirement is “the nastiest, hardest problem in finance”.
“The system at the moment wants the average person to be able to solve the problem themselves,” Minney said.
“They can’t do that, the same as they can’t do brain surgery. They can’t do everything that we do. They need someone to help them along. They need the expert. They need the advice. They need something to get them from that point, where it’s just accumulating super, to getting their income in retirement.”
The real question
Minney said the real question that needs to be addressed is “how do you actually get the member…from the pot savings to the income they’re going to need through retirement”.
“And it’s not all about a lifetime stream of income. They still need to have the investments there, but you got to get help there, in different forms.
“We will see a full, comprehensive advice solution that works really well; but for others there’s not enough advisers to go around. I don’t think it’s fair on them to sit there and go whoops, sorry, tough luck, [you] miss out.
“So what are we doing? And what can the system do to give them guidance or some other form of advice so that people can get a reasonable solution?”
Minney says about 700 people approach retirement every single day. That adds up to about a quarter of a million people every year.
“And if we look back over the last 10 years, as we’ve been…bumbling through this, there’s a couple of million people out here that have had to deal with this on their own,” he said.
“Some have been lucky enough to have good advice. A lot of them haven’t. How do we stop that continuing?”
