Critics question super funds’ ability to bridge advice gap

Earlier this week, Financial Services Minister Stephen Jones threw his support behind the expansion of superannuation funds’ advisory services and expressed confidence in their ability to effectively cater to the diverse needs of their members.

Speaking to a small audience of super fund CEOs and senior executives at an event hosted by ASFA, Mr Jones said funds “must play” an expanded and more effective role that serves the needs of their members.

“In fact, government has already told them they need to do more,” the minister said.

While Mr Jones appeared to heed the Quality of Advice Review’s (QAR) recommendation six, which proposes amendments to restrictions on collective charging to allow funds to provide more retirement advice and information to their members, his enthusiasm waned when it came to recommendations aimed at ensuring the delivery of “good advice” by these funds.

Moreover, he temporarily brushed aside the QAR’s proposal to extend the invitation for banks and insurers.

Critics are now suggesting that Mr Jones’ understanding of the advice industry appears limited, pointing out that funds alone cannot bridge the gaping advice gap in Australia — one that has become particularly pressing in recent years with a loss of 40 per cent of advisers.

Namely, in a LinkedIn post this week, Adele Martin, the founder of My Money Buddy and The Savings Squad podcast, took aim at the minister and his choice of venue for the delivery of the government’s QAR response.

“The fact that the Quality of Advice reforms were delivered to the Association of Superannuation Funds confirms to me that politicians think financial advice is just superannuation,” Ms Martin wrote.

“And that is exactly why more Australians don’t seek financial advice. Financial advice is much more than superannuation.”

Ms Martin’s post gained a lot of support among advisers, with many agreeing that financial advice extends well beyond super.

In its response to the QAR, the Financial Services Council (FSC) presented a similar argument. It cautioned that the government is “at risk” of “unnecessarily restricting” access to advice if it only heeds the QAR recommendation regarding funds and leaves out the banks and other institutions.

“Superannuation funds will play an important role in providing retirement advice, however, if the government narrowly implements key reforms, they could fail to attract the industry investment that is necessary to deliver quality advice to the millions of Australians that would benefit from it at different stages of life,” said chief executive officer of the FSC, Blake Briggs.

The notion of “stages of life” has become a common argument among advisers, who insist that Millennials, in particular, are currently less focused on retirement and may remain locked out of advice under the government’s proposed model.

Speaking on a recent ifa podcast, Ms Martin argued that younger generations “don’t care about their retirement”.

“Someone in their thirties or even early forties does not care about retirement.

“They want to create a life that they don’t want to retire from. They don’t want to work for 40 years, slug it out 50 hours a week, they want to create a life where they can work three days a week, where they can do months travel,” said Ms Martin.

However, according to Mr Jones, access to advice from a superannuation fund is vital for 5 million Australians approaching retirement.

Advocating for the expanded involvement of super funds in financial advice, Mr Jones highlighted that the current count of less than 16,000 financial advisers cannot meet the demands of that pool of Australians.

“But even if we doubled the number of financial advisers — which is not realistic — it still won’t be enough,” he said.

“The math does not check out”.

However, the question remains, what about the millions of individuals who are not yet nearing retirement?