Steven Travis explains the thinking behind Sunsuper’s On Track financial planning service.
It is a damning statistic that only one in five Australians choose to get advice from a financial planner. As an industry we should, in some way, feel chastened for not delivering quality advice to more people. We know that people are better off with financial advice, and the earlier they get advice, the better their retirement benefits. I believe this issue is at the heart of the Government’s recent announcement of Regulatory Guide (RG) 200.
RG 200 has caused waves of concern in some segments of the financial planning community. However, there are two separate issues within RG 200. First is the Class Order Relief (CO 09/210), which applies only to super fund trustees who wish to claim an exemption from section 945A of the Corporations Act, and which comes with very strict and onerous conditions. The second, and more important issue within RG 200, is the guidance it provides for delivering financial advice to super fund members (intra-fund advice), no matter who the advice provider. As far as the latter issue is concerned, I see this as not much more than the Australian Securities and Investments Commission (ASIC) providing legislative validity to what many financial planners have done for years; that is, give advice that relates to the specific inquiry a person has made.
From Sunsuper’s perspective, we didn’t need or use RG 200 to facilitate the delivery of our new financial advice program On Track, which we launched in July. In fact, we’ve been giving members basic advice about their superannuation over the phone for years. As an industry fund, Sunsuper has a relatively long history in financial planning. We employed our first group of financial planners in 2001, providing full planning, and then launched our Member Advice Centre – or MAC as it has fondly become known – in 2006. The MAC, with its team of qualified financial planners, is a service specifically designed to give our members basic advice about their super account on single issues. It’s been a highly popular service with members; but we acknowledged the limitations of this model some time ago, and it’s these limitations that led us to develop our new On Track program. On Track is about more than just responding to one-off queries on single financial issues.
The program has evolved well beyond that. It will help people manage their super and retirement dollars, as well as the age pension, with a tailored financial plan from a planner complete with simple strategies that members can put into action to help them reach their target retirement lifestyle. This initial plan will then be followed by regular financial “check-ups” every three years, in the lead-up to and right throughout retirement, to check progress and accommodate any changes along the way. Importantly too, the program is uniquely focused on “lifestyles” rather than balances or incomes. This means that rather than asking investors how much money they’ll need in retirement, we’ll ask them to think about the kind of lifestyle they want and then to choose a lifestyle “profile” from a range that we have developed. The lifestyle profile comes complete with a “story” and a series of validation points that help investors understand where they want to be.
We are then able to quantify it, or attribute a cost to that lifestyle, and build a plan accordingly. Some will argue that it’s mere semantics to talk about a difference between asking investors how much they’ll need in retirement, and talking about the kind of “lifestyle” they’ll want. But it’s not semantics to our members. Traditional financial plans are typically underpinned by how much money people think they’ll need or want. But members told us they found it hard to articulate how much money they’d need and were able to identify much better with the process when you talked to them about the kind of lifestyle they wanted. And this is key. The On Track program was born out of a recognition that the current model of financial planning appealed only to a relatively small percentage of people. Our rate of member penetration with financial planning was no different from the statistics quoted earlier – one in five. We wanted to understand why a vast majority of Australians didn’t ever seek financial advice.
Researching our members showed that many people find the concept of financial advice intimidating, confusing, time-consuming and costly, and this deterred many Australians from getting advice. There was also an undercurrent of mistrust with the planning process. Paradoxically, members also told us they were worried that their lack of knowledge of the strategies available to them meant they had missed opportunities to grow their super, and so wanted help to find out more. On Track invites our members into an advice relationship. We make it accessible to them from their early 40s, when they start thinking about their financial preparedness, and have time to do something about it if they are not prepared. On Track will largely be delivered over the phone, but can be supported by face-to-face advice if requested by members. Our research showed the majority of members just want help with their super and retirement, with the option to upgrade to more if needed.
The On Track program will accommodate that. In any case, we do consider non-super investments as part of the On Track process, although we don’t provide specific recommendations about these as part of the program. However, if a member wants specific recommendations about these kinds of investments then we will accommodate that via the traditional, comprehensive financial planning model. There is a place for the current style of financial planning and we will continue to offer a comprehensive service, but the On Track concept is targeted at those who would never have sought advice that was tailored to meet their specific needs. To meet demand, our financial planning team has grown in size and capability. It was important for us to build a team with credibility and experience in planning, not just call centre operatives with scripting. We have a team of 18 financial planners and advisers with varying degrees of experience.
Of our team, five are CFP qualified, with another five currently finishing the CFP program. We didn’t need RG 200 to deliver On Track and we certainly didn’t develop it overnight. I see RG 200 leading to better retirement outcomes for people as super funds and other planning businesses innovate and create better services to help people make sensible financial decisions. When people call a super fund they don’t ask for limited personal advice or general advice, they just want help, and ASIC’s changes might pave the way for the industry to better help people without being daunted by the legislative framework. However, the solutions that will flow as a result of RG 200 will be just one part of the total advice spectrum. Of course, the real game for super funds now will be establishing an end-to-end business model that directs the member to the right level of advice when they need it. This will include multiple channels, including online, phone and face-to-face. And this is where Sunsuper and On Track will evolve next. This won’t be at the expense of full financial planning; in fact, it may create a thriving market for it.
