Industry super is already dominating financial advice

Any fears that Michelle Levy’s recommendations will allow super funds to take over advice are misguided — industry super has been providing advice for decades. And the offering has become increasingly sophisticated in recent years.

Take a quick look at any of the annual reports of industry super funds and you will see that advice is now a core part of their business.

Australian Super members can access help and advice about super, investment choice, insurance and retirement planning over the phone, often at no additional cost, or they can choose to meet face-to-face, by phone or by video conference with a financial adviser for more comprehensive personal financial advice.

In the 12 months to 30 June 2022, half of all comprehensive advice by Australian Super was delivered virtually by phone or by video conference. More than 8,000 statements of advice (SoAs) were produced, an increase of 11 per cent on the previous year.

REST issued more than 19,000 statements of advice in FY22, up 77 per cent increase on the previous year. UniSuper had its best ever year in financial advice in FY22, with a 43 per cent increase in the volume of intra-advice provided compared to the previous financial year.

Cbus, which delivers advice via a referral agreement with the Financial Planning Association of Australia (FPA), was able to organise 631 interactions between its members and financial planners.

Hostplus provided personal advice to 3,700 members over the year. Along with Australian Super, it is one of a growing number of industry funds that uses licensee IFS Group to deliver its advice.

IFS Group is owned by 19 industry funds and provides advice licensing from general to comprehensive, digital advice tools and calculators, member education, advice issuance and audit, back-office technology, adviser education, paraplanning and consulting with industry funds on their financial advice needs.

“Australian Super advisers are licensed by us,” IFS Group chief executive officer Csaba Baranyai said. “When a member sits down with that adviser, as far as they are concerned, they are seeing an Australian Super adviser. But on all of the documents and resulting SoAs, it will state that the advice was provided by IFS Group,” he explained.

The dealer group licenses 120 advisers across 16 industry super funds and generates 7,500 SoAs per year. Mr Baranyai says there has been significant interest from retail advisers and IFAs looking to join.

“We are seeing strong growth both in the number of advisers and the volume of advice given,” he said. “We were the fastest growing advice licensee in 2022, which is very exciting. We are seeing new advisers joining us from both the IFA and retail space.”

Given the power of super funds to reach every working Australian in the nation, it is easy to see why they are being considered a major candidate for the delivery of affordable and accessible advice.

In previous years, vertical integration was seen as a problem. Today, as Michelle Levy stated in her final report, “vertical integration is part of the answer”.

The Quality of Advice Review (QAR) recommended that super funds should be able to provide personal advice to their members about their interests in the fund, including when they are transitioning to retirement.

“In doing so, trustees will be required to take into account the member’s personal circumstances, including their family situation and social security entitlements if that is relevant to the advice,” the report recommended.

“Superannuation fund trustees should have the power to decide how to charge members for personal advice they provide to members and the restrictions on collective charging of fees should be removed.”

Mr Baranyai says super funds will play a much bigger role in making advice affordable and accessible over the coming years, whether the QAR recommendations are legislated or not.

“Super funds are best placed to deliver that affordable and simple advice to mass market Australia. They are already doing it. The issue at the moment is scale,” he said.

“But we are confident that with the right service models that leverage rapidly evolving technology, we are really close to cracking the code of putting retirement-focused financial advice within reach of everyday Australians at scale,” he said.

Hybrid advice is the aim of the game for super funds, which means more financial advisers will be required to support members.

“For us, it is really important that we have an alignment of values,” Mr Baranyai said. “We are always open to working with IFAs as long as we can do it in a way that maintains that value alignment we have with our profit-to-member ethos.”