It’s vital that the superannuation industry find ways to overcome apathy and boost the public’s understanding of and engagement with their super.
Many Australians are apathetic towards their superannuation and the role it can play in their retirement. They see the process as complex, dull, confusing or even of little relevance to them.
It’s important then that, as an industry, we do what we can to conquer people’s apathy and increase their understanding and engagement with their superannuation.
One way we can do this is through workplace education and utilising the experts who work in this space. However, the social and economic value provided by workplace financial advisers has often been overlooked.
Will proposed industry developments, such as the banning of commissions on Superannuation Guarantee Contributions (SGCs), help or hinder an adviser’s ability to deliver value add services for employees and employers?
And importantly, has the industry given due consideration to supporting workplace advisers in transitioning their business from commissions to fees?
In the context of widespread consumer apathy, we need robust industry discussion on these issues and, ultimately, agreement about the role and remuneration of workplace advisers, and the true value they bring.
Segmentation trade off
As many advisers have discovered, it is difficult and time intensive to provide educative advice to a mass audience.
The risk inherent in banning commissions on SGCs is that it will undeniably drive advisers to segment the workforce and target particular employee types.
This ultimately means fewer Australians will be receiving education and advice in relation to their superannuation and it will arguably be the ones who need it most that will miss out. What can we do to avoid this scenario?
Commissions are clearly not the future for workplace financial advisers.
The answer may be that we should agree on a set of industry guidelines.
These could outline agreed actions, services and remuneration arrangements between employers and advisers in relation to the delivery of education and advice to their employees.
Or it may be that workplace advisers address one of the main criticisms levelled against them and move towards fee-for-advice arrangements where the client has the ability to agree to a fee and switch it off at any time.
Importantly, we need industry support to help advisers transition to a more sustainable business model.
Models of value
There is much conjecture across the industry around what a successful workplace adviser model looks like and the benefits it delivers.
As with individual advisers, there are multiple models on offer to achieve the desired engagement result, each with varying merits.
A typical approach from a workplace financial adviser would be to first reach an agreement with the employer on their level of service and what they will charge for it. This is sometimes a dollar amount, it can also take the shape of a commission or, in other instances, it is an agreed employer service fee — for example 10 basis points.
The proposed removal of commissions from SGCs will naturally have an impact on some models and advisers will need to take the opportunity to rethink their business strategy to provide value and sustainability to their clients.
It is important to note that each adviser model offers a different level of service, which can and should be tailored to suit the workplace.
They range from the provision of regular newsletters and education sessions, through to site visits and dedicated employee websites.
These are all valuable tools to help employees understand their superannuation. It is the variable levels of service that often contribute to differing views of the value of workplace advisers.
From a cost and economies of scale perspective, workplace advisers have the opportunity to make financial education and personal advice more accessible, particularly where they partner with small to medium-size employers in remote and/or diverse locations.
In contrast, a typical super fund can justify generic education sessions in heavily populated areas combined with Internet-based tools and resources, but this approach requires an active decision by a member to engage in their superannuation.
Geographic limitations aside, a number of advisers have been successful by effectively working with employers who otherwise may not qualify for the ‘personalised’ service of a fund. Advisers operating in this smaller company size bracket have the opportunity to play a central role as the financial educator for the employees.
Successful arrangements exist where personal financial advice and ongoing education are positioned as key employment benefits for employees.
Having an employer not only advocate an adviser’s service but work closely with them to reach key audiences helps diversify the adviser’s business risk.
The employer can also assist with packaging advice for different employee segments, reducing the broad-brush approach.
Personal working relationships with employees facilitate the provision of tailored education at levels above what may be provided by the fund, employer or any other party.
Workplace financial advisers add value by helping to improve the awareness, understanding and participation of employees in their super journey.
We should recognise these benefits and provide the industry infrastructure, policy direction and support these advisers need to sustainably service our working population.
The path to conquering superannuation apathy in employees starts with an industry conversation on the long-term future of our workplace education and advice models. Are you part of the discussion?
Natalie Jarvis is head of Product, MLC Business
