Advice from super funds ‘unlikely to lead to good outcomes’

In a submission to the Senate economics committee on improving consumer experiences, choice, and outcomes in Australia’s retirement system, the Grattan Institute argued that “stronger intervention” is necessary to ensure the products that Australians access in retirement offer value for money.

It, however, judged that the government’s proposal to allow superannuation funds to provide financial advice to their members is “unlikely to lead to good outcomes”.

“It will leave funds more able to advice people in their own products, and leave those products more lightly regulated than those available in the accumulation phase,” Grattan said.

The institute’s argument is supported by Australian Financial Complaints Authority (AFCA) data, which shows that over the past three financial years, the authority received 3,299 (non-trustee) superannuation-related complaints in its general jurisdiction, primarily involving financial advice about superannuation.

The most common issues raised in these complaints related to inappropriate advice, failure to act in a client’s best interests, incorrect fees, and costs and advice service issues.

Moreover, AFCA revealed that most of the superannuation-related complaints it receives relate to the superannuation accumulation phase.

“We received a much smaller number of complaints specifically about pension products and financial advice given in relation to superannuation,” the authority said in its submission to government.

Despite the concerns, the superannuation funds believe they play a crucial role in disseminating more advice to more Australian retirees.

Namely, in its own submission to the Senate economics committee, the Association of Superannuation Funds of Australia (ASFA) said it wants to see intra-fund advice expanded to cover transition to retirement.

“The role of the trustee is to provide their members with guidance and support in making informed choices about their retirement. One element of this is trustees being able to give personalised, targeted advice to members with respect to their options and choices in retirement,” ASFA said.

“Given this, the government’s response to the Quality of Advice Review will be instrumental in facilitating trustees’ ability to assist their member in transitioning to retirement. Intra-fund advice is less costly to deliver and can prove effective in enhancing members’ outcomes.”

The Financial Services Council (FSC) recently revealed that 76 per cent of Australians support superannuation funds being able to provide consumers with basic advice and guidance about which retirement products to choose based on their personal circumstances and goals.

The research also found that this support was consistent among all age groups and genders, though the highest level of support was among those approaching or in retirement. Among 55- to 64-year-olds, 79 per cent support retirement advice being provided by their superannuation fund, while 82 per cent of those aged 65 and above agreed.