Superannuation funds will need to invest in a significant amount of infrastructure before they are ready to launch a financial advice service to their members, according to industry experts at the Association of Super Funds of Australia conference.
The warning was given by chair of State Super Financial Services Peeyush Gupta and departing Snowball Group executive Tony McDonald.
Based on State Super’s experience, building a team of approximately 20 planners to provide financial advice would cost $3 million to $4 million in one-off start up costs, as well as ongoing costs of $10 million to $12 million, Gupta said.
"Given the risks in this area, don’t do it unless you are set up to do it well," Gupta said.
McDonald warned superannuation funds would face a "massive challenge" finding quality financial advisers who could deal with a range of financial advice issues.
"It’s hard enough getting good people, even as we stand here now," he said.
The cost of building the necessary infrastructure – including risk management and the delivery of financial advice – would be increasingly significant, McDonald warned.
Superannuation funds need to think about how to position themselves to be low-cost producers of very good financial advice when competing with other super funds in an environment where holistic and limited advice are converging, McDonald told delegates.
Despite the costs, superannuation funds had to offer financial advice either free of charge, partially subsidised, or with only a partial payment to draw members in, Gupta said.
The take-up of financial advice will be negligible if members have to pay fully for that advice, he said.
The initial advice could be offered free, with members being charged consequently for any other financial advice, Gupta said.
Superannuation funds looking to offer limited financial advice as well as opportunities for holistic advice need to develop "escalation points" where the adviser will know to escalate a member query from specific advice to more general advice, and then from there to holistic financial planning, Gupta suggested.
