In its final report, the independent review panel noted the significant financial benefits that could be achieved if more retirees were incentivised to take up advice, including improved investment confidence and less emotive decision-making in market cycles.
“Forthcoming research by a large fund points to the importance of advice in reassuring members and helping them stay the course when markets fall. The fund comprised two broad groups of retirees: one where retirees were largely self-directed, while the other group typically received financial advice,” the report said.
“Key member characteristics and aggregate asset allocations were otherwise broadly similar across the two groups. Following the sharp market downturn in March 2020, just 0.9 per cent of funds under management for the largely advised group was switched, while 11 per cent of funds under management for the self-directed group was switched.”
The report noted that financial literacy initiatives and digital tools alone would not be sufficient to provide guidance to consumers entering retirement, as they were more interested in receiving personalised assistance around their finances and were less willing to pay advice fees for online guidance.
However at the same time, the panel said many retirees were also unwilling to pay the current market costs of advice, citing recent ASIC data that revealed 35 per cent of unadvised consumers said they would not engage an adviser because it was too expensive.
The panel stated that super funds were “well placed” to provide retirement guidance as members had to contact their fund to commence a pension, but that current legal restrictions prevented funds from easily delivering other types of advice beyond intra-fund advice.
“Giving funds the confidence to provide limited and targeted guidance to members without needing to comply with the legal obligations associated with financial advice would likely improve people’s retirement outcomes,” the report said.
While noting the conflict of interest between trustees’ obligations to “their membership as a whole” and the individual member, the panel stated that “the benefits associated with drawing down more retirement savings and higher standards of living in retirement, coupled with effective regulation, would likely outweigh any potential impact from conflicts of interest”.
Further, the report noted suggestions from a number of submissions to the review that the government have more direct involvement in advice, including directly employing advisers, subsidising advice fees or funding a free, basic retirement advice service similar to the UK’s Money and Pensions Service.
Commenting on the review, FPA chief executive Dante De Gori said the association looked forward to “working with the government on options” in the coming months to ensure better access to retirement advice.
“Improvements in financial literacy and access to affordable financial advice remain essential to help Australians prepare for their retirement,” Mr De Gori said.
“The FPA supports the review’s recommendation that the government address the barriers to seeking and accessing financial advice, including the cost of advice.”
I get the vibe that we hate product providers role in all of this, why not the government just provide every citizen a guaranteed pension at a higher rate (we have this thing called Age Pension), zero market risk involved. Oh and COVID-19 has shown everyone that the government can spend first before it collects the taxes from us, and the government owns the RBA anyway….
Well, now the powers that be know that we are useful. Stop giving us contradictory compliance requirements that cannot be fulfilled and don’t help the customer at all. All that time spent on compliance can’t be spent on advice.
“Giving super funds the confidence to provide limited and targeted guidance to members without needing to comply with legal obligations associated with financial advice….” What!! And at the same time many of these super funds do not permit their account holders to get advice from their own financial adviser, paying for that advice out of their super account. So – we let super funds do what they like when giving advice to their account holders – AND, account holders are in the position that this is the only advice they have sensible access to. As is the case in any mature profession, every provider must be subject to the same conditions and the customer must be able to access that service from any provider. Anything else is nonsensical.
“Giving super funds the confidence to provide limited and targeted guidance to members without needing to comply with legal obligations associated with financial advice would likely improve people’s retirement outcomes” the report said.
Is that not what super funds and their “agents” e.g. AMP used to do in the past? Instead of super funds paying adviser salaries and bonuses, they used to pay commissions. Are we going back to this? Which super fund will look after the best interest of the client and suggest that they approach another super fund which would be more appropriate for the member?
What was the point in asking financial advisers to make all these changes to their business and do all this study? Now financial advisers who have done all this study have to abide by increasing onerous rules while it is being suggested that super funds do not need to abide by these rules as it “would improve people’s retirement outcomes”! It is no wonder that financial advisers (even young advisers who have all the relevant qualifications) are throwing in the towel.
“Giving funds the confidence to provide limited and targeted guidance to members without needing to comply with the legal obligations associated with financial advice would likely improve people’s retirement outcomes,” the report said.
Well, I can do that, but ASIC tells me I must follow the law.
I guess becoming a profession (think Dr) now means that we must allow the Product Manufactures (think drug company) to give advice (think sell product) to retail client with no requirement to comply with the law.
Just love it, no legal protection for retail clients if your just welling product – but if you are a professional qualified Financial planner, you must. Amazing logic from these people.
Great analogy and much closer to the truth than generally realised.