Australia

COVID-19 could revamp superannuation advice model

I’ve lost count of the number of times “unprecedented” or “uncertain” has been used to describe the current economic situation.

Intra-fund advice, the model where all super fund members chip in for generic, once-off guidance, just isn’t going to cut it any more.

Australians need high-quality advice at an affordable cost.

Australians need high-quality advice at an affordable cost. Credit:

Call centres at many of the country’s largest super funds have seen volumes increase as much as 200 per cent since March as frenzied members seek information about why account balances have plunged or whether the federal government’s early access scheme is right for them.

The corporate regulator cut through some red tape for intra-fund advice last month to allow funds to help members understand the risks of the emergency scheme that allows those in financial hardship to withdraw two tranches of $10,000 from their retirement savings.

Global accountants KPMG applauded the move and its partners have called for ongoing regulation relaxation.

“The early access scheme is a great example of why having accessible and affordable advice for the mass market is so critically important,” says KPMG superannuation executive Linda Elkins.

“The government offering relaxation of rules is perhaps evidence the regulatory settings aren’t where they need to be in order to provide that level of advice.”

If members want more than intra-fund advice, they can request a one-on-one session, but this doesn’t come cheap.

Super fund HESTA charges an average of $2043 for comprehensive financial advice and a full statement of advice at AustralianSuper will set you back at least $2500.

“At the moment, those fees are very high and not attractive to the mass market, who could really benefit from it,” says Elkins. “No matter what people say about advice, you rarely hear people say it isn’t valuable.”

The answer is cost-appropriate, individual-specific, digital-centric advice.

One fund providing just that is Russell Investments. It was awarded fund researcher Chant West’s top gong for innovation last week for its GoalTracker service that asks members a series of questions about how they see themselves in retirement. It then uses payments tracking and digital prompts to help you stay on track to meet your financial goals.

Chant West also cheered AMP’s mobile app that helps members take a bird's eye view of their overall financial position — super, savings, shares, mortgage and insurance — and provides online tools to help manage budgeting, spending and tracking.

Industry-specific funds could use market research to offer services that meet members’ specific needs, suggests KPMG in its yearly report on superannuation. Robo-advice for financial products could link fund members to new services.

About 5000 financial advisers left the industry in the past year, with only 38 newly registered.

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KPMG believes now more than ever is the best opportunity for most Australians to receive affordable advice via their super fund.

The scathing banking royal commission made the term “financial advice” interchangeable with “conflict of interest”.

Consumer advocate SuperConsumers says this is the reason why free, independent advice should be made available via a government-backed hotline mimicking the British service, where citizens can access guidance on how to manage their retirement savings 24 hours per day.

Crises provide important flashpoints to analyse advice models.

Industry Super Australia’s campaign to raise awareness of the risks of the early access scheme failed to prevent tens of thousands of Australians emptying their retirement accounts.

Figures released by the Australian Prudential Regulation Authority (APRA) this week show more than 1.3 million people have so far applied to access their super early, with more than $9 billion in payments already made.

As we approach an inevitable recession, quality advice for all Australians is needed at an affordable cost now more than ever.

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