Super funds should be able to fill the gap advisers can’t: Deloitte

In a blog post, Deloitte partner Andrew Boal argued the need to make it easier for super funds to provide financial advice, something that is expected to be introduced with the Deliver Better Financial Outcomes (DBFO) reforms.

A fatal flaw in this plan, though, is the unknown delivery date for tranche two of the legislation, despite Financial Services Minister Stephen Jones stating it would be delivered over the second half of year.

However, with the timeline being repeatedly pushed back, any thoughts on this being delivered prior to next year’s federal elections are beginning to look like a pipe dream.

Boal explained that, under current regulations, it is rather costly for super funds to provide any form of advice while also remaining competitive within the market.

“One problem is that for super funds to provide financial advice at scale, they will need to introduce a hybrid model where advice is delivered digitally as well as in person. However, building these digitised financial advice businesses will take years and require substantial investment in digital technology and GenAI capabilities,” Boal said.

“This will be difficult for super funds to do at speed while also balancing industry consolidation, increasing competition, and ongoing political and regulatory pressures to keep fees low.”

He further argued that to truly close the advice gap, there needs to be a reduction in the overall regulatory barriers to make it easier for super funds to interact with members and provide basic product advice.

“For example, we believe there is an important distinction between financial advice and financial product advice, and this difference should be acknowledged within the regulatory framework, taking into account the likelihood and severity of any potential consumer harm,” Boal said.

“One area to highlight and consider further is the current hawking prohibition designed to protect consumers from unsolicited offers of financial products. How will superannuation funds be able to properly engage with its members about appropriate retirement strategies without considering the merits of its own retirement product?”

The problem of Australians accessing financial advice is also exacerbated by the limited number of advisers and the cost being higher than consumers are willing to pay.

According to Adviser Ratings’ Australian Advice Landscape report, while more than two-thirds (68 per cent) see the benefit of financial advice, consumers are only willing to pay an average of just $911. This is even lower among those not currently seeing an adviser, with this cohort willing to pay just $553.

Despite this, the report found that only 6 per cent of advisers have new client fees under $1,500.

Furthermore, the latest statistics from Wealth Data saw adviser numbers fall back below 15,500 to 15,485 despite the profession trying to regain some of their lost cohort over recent years.

In response to the advice profession’s struggles to serve more Australians at a more affordable price point, Boal said that regulation should “facilitate the provision of limited advice to address consumers’ occasional and specific needs” by super funds.