Advisers and funds vital for retirement success, new report shows

The 2023 Global Retirement Reality Report, produced by State Street Global Advisors and drawing insights from 4,257 respondents, including 608 Australians, revealed that when questioned about their preferred approach to sustainably withdrawing savings in retirement, 40 per cent expressed comfort in “figuring it out myself”, whereas 37 per cent indicated a preference for partnering with a financial adviser.

“It is hard to imagine a robust ecosystem for retirement incomes that doesn’t include affordable and accessible advice. This is clearly reflected in our survey responses,” State Street said.

In December last year, Minister for Financial Services Stephen Jones proposed the creation of a new class of financial advisers, called “qualified advisers”, who will generally be employees of licensed financial institutions, including superannuation funds, with the licensee assuming full responsibility for the advice provided.

The announcement was widely welcomed by superannuation funds, with AustralianSuper’s chief officer retirement, Shawn Blackmore, noting at the time that the advice reforms announced by the government will prioritise the interests of super fund members.

“This is a big win for millions of Australians who will now receive the help and guidance they need to feel more confident about their financial future and that will allow them to have the confidence to move from savers to spenders in retirement,” he said.

“Superannuation funds are the right vehicle for these reforms as there is already very strong legislation governing fiduciary duty to ensure funds such as AustralianSuper act in the best financial interests of their members.”

However, in its latest report, while acknowledging the importance of advice, State Street said: “Finding a balance between affordable, accessible, and simple financial advice and necessary consumer protections is going to be a difficult task”.

“To be fair, the problem of retirement income is not one that superannuation funds can solve on their own.”

Specifically, the State Street report highlights a lack of clear understanding among Australians regarding “retirement income”, as the majority of respondents (46 per cent) perceive it as a straightforward, comprehensive concept, equating retirement income to a regular pay cheque.

“This definition resonated more strongly than either an annuity or a drawdown plan, both of which are ‘products’ that a superannuation fund might offer,” State Street said.

Concerningly, as many as 14 per cent said they don’t know how to define retirement income.

The financial services company clarified that the intricacies stemming from the interplay between the Age Pension, Superannuation, and Healthcare contribute to the complexity of the Australian system.

“And it is for this reason that the retirement ecosystem needs both advice and innovative products from superannuation funds,” it said.

Another interesting finding from State Street is that women are more likely to favour financial advisers for retirement planning, with 41 per cent choosing advisers compared to 33 per cent for men. In contrast, men are more inclined to “figure it out myself”, with 47 per cent opting for self-reliance compared to 33 per cent of women.

Moreover, State Street’s research indicates that investment markets have minimal impact on Australians’ retirement confidence. Inflation and the cost-of-living crisis are the primary factors negatively affecting confidence in retiring as planned, followed by concerns related to mortgage debt/rent and housing costs, as well as medical expenses.