Advice industry hampered by lack of innovation

There is a lack of retirement product innovation and this is hampering the financial advice industry, according to Zenith Investment Partners and Chant West. 

Zenith chief executive, David Wright, said while the industry had known there was a population bulge that had been moving through the system, it was “surprising and disappointing” that the industry had not made better progress on retirement products or portfolio construction. 

“In recent years we have seen innovation from advisers making more of a distinction between accumulation and decumulation portfolios, and managed accounts have also played an important part in this process,” he said. 

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“However, these approaches are still largely ad-hoc with little in the way of industry standards or benchmarks.” 

Commenting on the Government’s Your Future, Your Super reforms, Chant West general manager, Ian Fryer, said he had reservations on the proposed superannuation performance test regarding the use of one metric over a single period to determine whether a fund passed or failed. 

“The asymmetry of consequences of the proposed performance test – between not meeting the benchmark and doing much better than it – will inevitably lead to poorer investment outcomes for members in some funds, as the focus shifts in those funds from long-term performance to passing the test,” he said. 

“Rather than having a single test, we believe there should be separate tests for investment performance and administration fees and that both tests must be met by each fund.  

“This is at odds with Treasury’s push for one test. However, if there must be only one test we agree that it should include administration fees. But given significant changes in administration fees in recent years and historical problems with inconsistent disclosure, the administration fees included in the test should be either current or recent fees, not historical fees that no longer have any relevance to member outcomes.” 

On stapling members to one super fund, Fryer noted that the Australian Taxation Office (ATO) would need to provide a system where new employee details could be electronically uploaded in bulk, and stapled fund details were provided to employers in bulk. 

“If this is not available then the introduction of account stapling should be delayed,” he said. 

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