Financial advisers are in for a tough time over the next five to ten years, as pension products offered directly through industry superannuation funds take a larger slice of the retail allocated pension market, Mercer Human Resource Consulting’s chief executive Simon O’Regan has warned.
Speaking at an Association of Superannuation Funds of Australia (ASFA) lunch yesterday, O’Regan said clients would begin to choose industry super products on reaching retirement due to the value they offered over retail products.
O’Regan said that buying into a retail allocated pension product with a lump sum was not as cost effective as rolling money over into a cheaper product offered through an industry fund.
“It doesn’t make sense to go into a retail product and pay 295 basis points compared to the 95 basis points offered by industry super products,” O’Regan says.
O’Regan claims this trend will continue as superannuation funds continue to add “bells and whistles” to their super funds.
This would make life more difficult for financial planners, who choose not to recommend industry super funds products as only retail products offer ongoing commissions.
The trend would be exaggerated should choice of fund be introduced in 2004, causing super funds to compete for customers.
O’Regan says that financial advisers will have to move toward a fee-for-service model of financial planning, where they could provide cost-effective advice to clients with low net assets and not have to rely on ongoing commissions.
