Why aren’t super funds moving to fill the advice gap?

19 May 2020

“Super funds have an immediate opportunity to meet the growing unmet advice needs of Australians, but must first ensure they have a strategy and operating model which enables them to deliver services their members need efficiently, at scale, and in the best interests of members.”

That is the bottom line assessment of the latest KPMG Super Insights report released this week.

The report also comes just weeks after research undertaken by HFS Consulting principal, Colin Williams confirmed that while the major banks had largely exited the financial planning arena the superannuation funds, particularly industry superannuation funds, had not moved to fill the gap.

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Williams’ research noted that while the super fund sector had held up well in terms of adviser numbers, it had not actually grown “which many may see as surprising given the losses elsewhere and a greater take up of industry funds by the public post the Royal Commission”.

Superannuation adviser growth had not shown any significant growth since 2018.

The KPMG analysis said that with demand for advice services likely to increase, funds needed to think about how they provided accessible, low cost advice solutions to meet the needs of members, “without creating a negative financial impact for members that don’t utilise these services”.

“Ensuring process efficiency in the advice creation and delivery value chain, and closely managing the economics of cost‑to‑serve and cost‑recovery are critical to creating a sustainable advice offering,” the analysis said.

“…any advice offering – be it intra‑fund only, a comprehensive in‑house advice model, a third party partnership arrangement, or any other model – must be built on a foundation of unrelenting focus on quality advice, through ensuring advisers are highly trained, well supervised and disciplined in their approach,” it said.

“Ongoing changes in regulation and consumer expectations are transforming the financial advice profession, increasing the costs of providing advice, and driving many participants to leave the industry,” it said. “Super funds have an immediate opportunity to meet the growing unmet advice needs of Australians, but must first ensure they have a strategy and operating model which enables them to deliver services their members need efficiently, at scale, and in the best interests of members.”

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The reason why super funds arent hiring new advisers is because under the current legal framework with all the training/education/compliance costs and need to adhere to the best interests duty it is too expnsive to provide tailored advice to clients.

ASIC and the regulators got the outcome they desired (even if they denied this was their desired result). Financial Advice is only accessable by the very wealthy and everyone else is left to Rabo advice or General Advice from an English backpacker at a call centre.

Since when does financial advice only relate to superannuation???

I have never heard of an aligned/conflicted/salaried adviser in industry funds ever give advice on debt consolidation, non super risk, debt repayment, estate planning, non super investments, buy/sell agreements, tax management etc etc ???

Any thought to contrary is naive in the extreme.

The other naive element is that to think comprehensive advice can be provided cost effectively "without creating a negative financial impact for members that don’t utilise these services” if you don't subsidise services. It is simply not possible due to the compliance costs of the current regime.

Lastly as more advisers leave the industry and almost no new advisers joining then wage demands will rise due to a lack of supply. Forget advice to the masses, it's been regulated out of existence.

I have seen good comprehensive advice come out of Unisuper's advisers, beyond the scope of just the Unisuper products.

Not saying this applies to all of the super product-linked advice groups, but there are examples of it.

@Not naive - you should change your name to Not Truthful.....because I have just recently reviewed a 'Comprehensive' SOA from a UniSuper adviser and your assertion could not be further from the truth. Yes - the advice was comprehensive due to the fact it involved a DB component BUT...and this is a big but - the UniSuper adviser did NOT compare ANY other product outside of the UniSuper suite of products. Given the size of the super assets (over $1.5M) - why didn't the UniSuper adviser consider an SMSF? Or any other non-UniSuper product?
Comprehensive advice 101 should include, cashflow management, debt management, personal risk management, SAA and TAA, estate planning (incredibly important in this case as it involved a blended family). The SOA did include some cash-flow modelling and SAA but none of the other elements that a technically sound professional adviser would have considered. And to top it off - the Unisuper adviser charged an SoA fee of $5,500. If I produced this piece of advice and it was audited by ASIC - I would have had my [email protected]*e handed to me for failing to comply with BID and Standard 5 of the CoE! But because this is considered 'intra-fund' advice it must be ok. Talk about 1 set of rules for intra-fund advisers and a different set of rules for everyone else. Level the playing field you tax-payer funded, ivory-tower dwelling numbnuts.

Simples I never said I had reviewed every piece of Unisuper advice. I said that I'd seen some that was comprehensive and had a scope outside of just Unisuper products. I don't work for them, I have no skin in this game.

Do you know if the person was still working at a university and in one of the defined benefit schemes? Because they may not have choice of fund. There's no need to compare an alternative when the machinations of the workplace relations system have conspired to give you no alternative.

In relation to your comment about intra-fund advice, yes it is one set of rules for intra-fund advice and another for comprehensive. It's sitting there in the SIS Act and regulatory guides from ASIC. But if what you reviewed had a $5,500 advice fee then that wouldn't be intra-fund advice.

Why is this a surprise? Industry funds have never had any interest in financial advice, except as a retention tool.

How many super funds would be on their APL - I am assuming 1, not really unconflicted advice...

Job done. Workplace financial advice is squashed. Keep the workers hungry and they will keep working. Education is power and we don't want the masses having power! Thanks, Royal Commission, thanks ASIC.

Wildcat, you may wish to do some more research around the breadth of advice and the sophistication of said advice provided by some of the Industry Super Funds. I am not endorsing Industry Funds in my comments here, but I think it is time that we as a profession cast aside comments with no factual integrity, don't you agree?

Super funds should NOT be providing financial advice at all. They are a product provider. They have a fundamental conflict of interest.

Has KPMG been in a deep coma for the last few years? How can they possibly be advocating such a conflicted approach?

Good point.

It is a very good point - but we still have Intra Fund Advice and associated fees.

As much as I hate to admit it, full separation of advice and product is the only way forward now. We have come this far we may as well go the next step - and then all advice documentation including SOAs and ROAs MUST be scrapped altogether. If there are no conflicts of interest, we should be allowed to operate like any other professional, unburdened by a sea of legalistic red-tape. Only then will advisers consider coming back to the profession. As it stands, very few people or organisations would be stupid enough to invest money into this industry. ASIC, FASEA, Rippoll, Hayne and the politicians have completely stuffed it.

Another good point.

Paul Howes led KMPG's super/wealth division, former Aus Super director and head of the AWU, say no more where they are coming from

Industry super funds only ever established an adviser network to ring fence their members. 100% of advice to members from their advice network, whether internal or external ends with a recommendation to stay in the Industry Fund. The advice is a joke! Over the last year 5000 advisers have left the industry. That's exactly what industry funds want - to eleminate any competition, keep their members ignorant and continue peddling their product. The Royal Commission has supported their cause considerably. Don't you get it, they don't want advisers. Based on current trends there will only be a handfull of advisers left in 5 years. What an excellent outcome for the people of Australia.

How many of those advisors were given compulsory retirement? Not all advisors leaving the industry were good guys. This august publication has almost weekly notices of yet another advisor being told the line had been crossed and don't come back.

About 30,000 are employed in financial advisory positions and so the 5,000 attrition rate per one year seems overly high (thankfully).

Financial advisors have a much bigger role in the financial health of clients than just doing advice on superannuation. Therefore both retail and industry funds should not be giving financial advice because it would not be holistic. It is not good for a common belief to exist that all financial advisors are good for is talking about superannuation contributions and pensions. I hear that some industry funds have outsourced financial advisors and so maybe they give advice on more than just the industry super fund. Retail funds did this.

Is KPMG going to advocate for an Accountants exemption? Seems a bit like it with some of these comments. They are also advocating vertical integration and the conflict of interest that comes with it, if they are suggesting Industry Funds should provide more advice. Although I may be biased, I still think advocating for independant advisers would be a much better result.

Because there is risk in advice. Alternatively you can keep selling a product (general advice) get a MER + account keeping fees with no liability.

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