The prospect of giving advice is "terrifying" for superannuation funds and greater clarity is needed to ensure super funds can fill the gap outside of comprehensive advice, according to a panel.
Speaking on a panel at the Household Capital Three Pillars Forum, asked by moderator Ali Moore if super funds were scared of giving anything that looked too much like advice, Ben Hillier, AMP general manager retirement solutions, said “of course” they were.
“There's been some high-profile cases where super funds have been wrapped over the knuckles for perhaps, for giving perhaps personal advice or what's been called personal advice when their intention was to make it more general,” Hillier said.
“Simply because they perhaps knew more about the client and perhaps the client may have had an expectation, or there's a possibility that the client had the expectation that personal information was taken into account.
“It really does terrify funds, and so we do see a lot of funds sitting on their hands doing quite limited, or certainly providing less, advice than they legally can provide.
“We do need greater clarity in the regulatory space to ensure that super funds can fill the gap between comprehensive advice, which absolutely should sit outside of super funds in most instances.”
Hillier said there was a “big gap” for people who just could not afford that type of advice or did not have complex needs.
“Just on a single topic, scaled advice as we call it, perhaps there's a different name for it, but I think, the regulatory support to narrow that scope and to provide the guidance that people are clamouring for,” Hillier said.
Jeremy Duffield, SuperEd and Retirement Essentials executive chair, said the “elephant in the room” in the Retirement Income Covenant paper was the failure to address advice which had been deferred to the Australian Securities Investment Commission (ASIC) review next year.
“That really is the big question: how are super funds going to provide advice?” Duffield said.
“The current regulations make it very difficult to know what the boundaries are and to provide an affordable form of advice in a safe harbour environment for super funds.”