Advice and data are the biggest challenges for superannuation funds designing and providing comprehensive income products for retirement (CIPRs), Challenger believes.
As the industry waits for the government to deliver its proposal for CIPRs, Challenger’s retirement income chairman, Jeremy Cooper, said while some funds were using a face-to-face advice model to help design CIPRs it would be a challenge for funds with tens of thousands of pre retirees or who were already in retirement.
“They’re sitting there going ‘we’re going to do a CIPR but we can’t get these people face-to-face advice so how are we, what assumptions are we going to make, what sort of cookie cutter ways are we going to tailor not only in a face-to-face way’ which is not an insurmountable challenge but it’d be a challenge with the funds to come up with when they haven’t got sufficient resources in the pre-digital advice world,” Cooper.
“Technology will have to take up the slack here… Robo-advice is such a horrible world because it’s such a specific job in the way we understand robo-advice.”
Cooper said a well thought out and well-designed software could take members through a number of steps would be a solution for some funds.
“A lot of the big funds have already released online tools or started working on them so it’s just that robo-advice is such a silly expression but yes all of this stuff, advice in particular, will very much be digitised,” he said.
Challenger’s head of retirement income research, Aaron Minney, said it was like robo-advice but was a matrix that said what the fund was targeting and to find out where members fit.
“Which one are you? The real precision of the robo-advice is getting it right by two per cent. And most of the members will fit that and if you don’t you can go out and tweak it in some way,” he said.
Minney said the challenge was all about understanding the member fully to help design the products.
“When you talk to a lot of funds, a lot of them are actually well underway to getting that information and understanding even if they don’t have the whole what’s personal and what’s general advice. I think that’s a bit of an issue of what they do but they need to get through that,” Minney said.
