Default products dismiss varying needs
The role of financial advice will be critical for pre-retirees and retirees to customise retirement solutions for clients as a one-size-fits-all default retirement product will not adequately cater to members' varying needs, according to an academic.
University of Melbourne research director and professor of finance, Professor Kevin Davis, told a panel discussion at the 2017 SMSF Conference in Melbourne last week that the proposal for a comprehensive income product for retirement (CIPR) failed to account for a range of personal financial circumstances that may require tailored strategies.
"Everybody is different. It does seem to me that again, one of the problems with the CIPR discussion is that you really want something that incorporates drawing down the equity in the house, that people want to do that, allowing for aged care accommodation," Davis said. With countless variables in that phase that had never been considered, providing one simple product for a range of members with different needs was unrealistic, he added.
Fresh Advisory managing director, and chair of the Ripoll Report in 2009, Bernie Ripoll told the panel the drawdown phase of the complex retirement system lent itself to quality advice as a large proportion of the ageing population transitioned into this phase. "
About the complexity of the system, It's not going to get simpler, it's just not going to happen. I think there is an amount of certainty," Ripoll said.
"There are a whole range of things that we know absolutely that people can work on but if certainty means there'll be no change in the future, well obviously that's not the right way to think about it." Financial advice would play a critical role in self-managed superannuation funds as well as for other super fund members where there were significant amounts of funds at stake to understand how it functioned, how the tax system interacted with that and how clients should manage it.
"Quality advice, professional standards, having the right people who are really qualified to be able to do that, I think that's where we need more certainty. That should be the focus," he said.
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