The provision of financial advice has become increasingly pivotal to superannuation funds and those funds need to do more to drive its take-up, according to new research conducted by actuarial consultancy, Rice Warner for State Street Global Advisors.
According to the research, published by Rice Warner this week, investor financial literacy and education rank as two primary levers available to superannuation funds that seek to deepen engagement levels with members and improve a member’s retirement decision making and outcomes.
Further, it said that there was a significant correlation between those who were more financially savvy and who received financial advice in terms of their understanding of retirement products, confidence in meeting retirement goals and a lower reliance on the Age Pension.
“In comparing the results between those who are advised against those that are not, advised members are substantially more confident in meeting their desired retirement goals and income,” the Rice Warner analysis said.
“For those who are already retired, a substantially greater proportion of advised people say that they have maintained their lifestyle into retirement, while one third report it has improved. Those who are advised are also much more likely to contribute extra to their superannuation and to have specific objectives. Therefore, they are able to see, together with an adviser, if they are on track or not.”
The research analysis said there was a clear lack of knowledge and understanding of even basic superannuation concepts, showing there is plenty of upside for quality advice to make a difference, citing the fact that only one third of people understand superannuation basics such as whether or not they are able to contribute extra to their superannuation.
“Australians need to better understand the benefits of advice, what it is, how much it costs, do they pay for fees out of their pocket or does it come out of their superannuation account, and how it can be delivered,” the analysis said.
“Superannuation funds have a significant role to play here. The majority offer advice services to their members, some through in-house teams, others outsource, and some use hybrid models. However, due to a lack of promotion, targeted communications and messaging, there is substantial lack of awareness and take up by fund members.”
It said it was therefore not surprising that most superannuation funds were currently reviewing their advice models and how they positioned themselves for the future, considering issues such as resourcing (including advice partners), how members want to receive advice and through which channels.
“With a projected increase in the take-up of advice by fund members over the next decade, the 16,000 to 18,000 practicing financial planners will not be able to service demand via face-to-face conversations,” the analysis said.
“Digital advice, as well as phone-based advice will help solve the scale conundrum. It is here where superannuation funds are focusing on triaging and guiding members to the most appropriate advice channel.”
