More to retirement outcomes than super funds giving advice: ASIC

In a speech to the Conexus Retirement Conference on Tuesday, senior executive leader, superannuation and life insurance at the Australian Securities and Investments Commission (ASIC), Jane Eccleston said that it is a misunderstanding that without being able to provide personal financial advice to members there is little progress that can be made on retirement outcomes for members.

“Often discussions around the retirement income covenant very quickly become a discussion about the challenges of personal financial advice regulation,” Ms Eccleston said.

“Fundamentally, superannuation funds are product providers and, like other financial service product providers, cannot realistically have a business model whose success is entirely contingent on making individual product recommendations to customers.”

She said ensuring the products available are high quality and meet members’ needs is a more pragmatic approach, adding that super funds need to support member decision making “so that the chances of members ending up in a product suitable for them are maximised and ending up in a product not suitable for them is minimised”.

“This is not a set-and-forget situation – essentially, every day a member stays in a product they are implicitly making a decision to stay in the product,” Ms Eccleston said.

Collecting more data from members, she said, is another way to improve retirement outcomes, but noted many are concerned this leads to trustees making decisions that land in the realm of personal advice.

“I think it is important to clarify that when we refer to the fund’s choice architecture, we are talking about more than just the retirement product or solutions offered by a fund,” Ms Eccleston said.

“I am also talking about the services that the fund provides and the interactions it has with its members through things such as advertising, member communications or other processes which involve members.

“So, when we say that analysing member data can help trustees further enhance their choice architecture, in no way are we suggesting that trustees must use the data they have collected about their members to deliver them personal solutions that are designed specifically for that member.

“Nor do we think that the collection of member data somehow automatically translates into a requirement or obligation to provide personal financial advice or means that any future interactions the member has with the fund will involve the provision of personal financial advice.

“Retirement income strategies need to be consumer-focused and evidence-based. And it is this member data that helps provide that evidence base.”

Ms Eccleston added that ASIC will keep a “close eye” on the way trustees implement their retirement income strategy, with a particular focus on consumer protection.

“More generally, ASIC will continue to have a focus on the delivery of member services. We want trustees to effectively assist their members in a manner that complies with the very laws intended to protect members,” she said.

In July, ASIC and APRA published a joint review that found that super funds have displayed a “lack of progress and insufficient urgency” in embracing the retirement income covenant (RIC).

“A further 3 million members will become eligible to draw from their super in the next 10 years. They are entitled to rely upon their super fund for assistance as they plan for a sound financial future,” commented APRA deputy chair Margaret Cole.

“Some trustees have made a good start, but overall, there has been a lack of progress and insufficient urgency. As more members approach retirement, trustees must step up and deliver both well-considered strategies and action to support members in retirement.”