Advice plays a ‘massive’ role in retirement planning

Patrick Clarke, general manager of retirement solutions at Generation Life, believes the key to a good retirement plan is financial advice.

Speaking on an upcoming episode of the Momentum Media’s Relative Return podcast, Mr Clarke said that central to a good retirement plan is advice.

“Saving for retirement is not hard, right? You just spend less, save more, invest hard. But drawing down when you don’t know how long you’re going to live for, there’s a lot in that.

“And so, advisers are absolutely critical to not only solving the empirical issue of what’s the right allocation between an account-based pension and a lifetime income stream, but also they’re important from an emotional side of things, they’re important from a behavioural side of things,” Mr Clarke said.

He explained that Australia, as a nation, has been very focused on saving for retirement, but education tilted towards spending has mostly been neglected.

“I heard a great phrase the other day that Australians are regarded as the richest in the graveyard.

“People are passing away with large parts of their superannuation intact, which means that they haven’t actually spent their retirement savings,” Mr Clarke said.

He believes that providing advisory services is “a natural role” for super funds.

“If you’re a super fund member and you’ve been relying upon the super fund to help you accumulate for retirement, then I think it’s only natural that super fund members would look towards their super fund to help them use those savings in an effective way,” Mr Clarke said.

“I think it’s actually a collective awakening, if you like, that. We’ve got a gap here in our system. We’ve been brilliant at saving for retirement and the light bulb’s gone on for some people, the light bulb went on a bit earlier than for others. But now, to me, it makes eminent sense that super funds would have a role to play in helping their members use those retirement savings effectively in retirement.”

While Mr Clarke recognises the key role advisers play in helping Aussies retire comfortably, he believes advice needs to be made far more available.

“They’re [financial planners] perfectly placed to help, but the super fund, I think, is perfectly placed to provide solutions to complement account-based pensions.”

Ultimately, promoting more financial confidence among retirees can actually unlock untapped capital to support Australia’s economy.

“It sounds a bit corny, but this is actually good for the consumer and good for the country,” Mr Clarke said.

Last month, ifa learnt that Treasury is expected to release a consultation paper shortly to strengthen the accessibility of retirement products.

Namely, while the recent intergenerational report revealed that total assets in the superannuation system are expected to continue to grow strongly over the next four decades, the government expressed concerns over a noticeable reluctance among Australians to tap into their retirement savings.

As such, this new paper, announced by Treasury, is expected to canvass problems with financial advice, among other things.

Commenting on the news at the time, Eugene Ardino, chief executive officer at Lifespan Financial Planning, told ifa that advisers do play “an integral part” in helping Australians plan their retirement.

“While obtaining advice is obviously more effective for consumers if they access it long before retirement, having an adviser to navigate trying to decide which retirement products best suit an individual’s unique circumstances, will also play a large part in the effectiveness of any new framework that is built.

“Therefore, it is important, in my view, that personal advice is made available to consumers who seek to purchase any new retirement products so they can assess the appropriateness of them.”

But, unlike Mr Clarke, Mr Ardino stressed that “it is imperative that this advice be accessed from an adviser” and one that is “not related to the product provider”.

“I feel that this creates an even larger need for personal advice from a fully qualified adviser to become more accessible for all Australians.”

To hear more from Mr Clarke tune in to our Relative Return podcast here.