Financial planning was already an integral part of the superannuation equation but, as Damon Taylor writes, the Government’s Future of Financial Advice and Stronger Super initiatives have created an even closer relationship.
Though intra-fund advice may have become the catchcry for financial advice offered through superannuation, the reality is that fund members’ access to advice goes well beyond that one piece.
From online tools and calculators to full service financial plans, super funds have opened up a range of different advice paths, but what is most interesting, according to Paul Schroder, AustralianSuper's general manager – growth and new opportunities, is not the number of advice choices funds have made available but rather the rationale behind them.
“Within advice, I think it’s really important to convey our driving purpose and it is this: as a fund, our purpose is to help members achieve their best possible retirement outcome,” said Schroder.
For better or worse, interest and engagement in superannuation only really kicks in at 45 to 50.
“So how do you do that? In our view, your best outcome is a function of the net performance of the fund and members taking actions,” he continued. “And that’s how we see the whole advice space.
“That’s the lens through which we see financial advice.”
According to Schroder, the logical question for funds is then how they can best assist members with advice, a question to which the answer is often a multi-pronged approach.
“People tend to graze about these things; they’ll graze and then there’s a trigger and that trigger will lead them to find out a little bit more,” he said.
“So the trigger might be a change in their own circumstances, or a trigger might be a newsworthy event or Kochie on Sunrise said something, or they saw an advertisement that caught their attention or they saw someone from their super fund talking at their workplace, but whatever that trigger might be, that then prompts someone to want to do something more.
“So the question then becomes what more that person is going to want to do,” Schroder added.
“They might want to go online, they might want to ring up, they might want to ask a general question, they might want personal advice, but we recognise that people want to do those things through an array of channels.
“At AustralianSuper, those channels are the web, the contact centre, the workplace, the publications and then the face-to-face personal advice as well. For us, covering those bases covers the spectrum of our members’ needs when it comes to advice.”
Yet while the multi-pronged approach referred to by Schroder may be popular within the super industry, fund executives are also very aware of which particular channel has gained, and continues to gain, the most traction.
“We’ve had our advice model in place for close to eight years now and had in excess of 75,000 of our members take up that advice,” he said. “And in today’s terminology, that would probably be called limited or scaled advice or possibly even intra-fund advice but, when we set it up, the intra-fund advice exemptions simply didn’t exist.
“So we set it up under the traditional financial planning rules; it was still set up to provide just limited advice but we had to set it up in that far more stringent regulatory environment,” Hill continued. “But whilst we do offer full financial advice, I wouldn’t say that’s the core or the most popular part of our advice model.
At the other end of the spectrum, we also have quite sophisticated investors who have significant balances with needs that are particular and often quite complex.
“When we put it in place, our focus was limited advice but, more importantly, limited advice offered over the phone.”
Commenting as to the reasons behind such a specific focus on limited advice, Hill said that it was REST’s belief that Australians deserved access to quality financial advice that was fit for purpose.
“And there’s no way that we could do that in person economically, particularly given the spread of our fund around Australia,” he said.
“But nor was it sufficient to operate just online. Advice is a lot about relationships and trust and being able to access someone, even if only over the phone.
“People want to have that conversation, to develop a relationship over what can be quite lengthy phone calls, and enabling that relationship was key.”
So when it comes to providing advice to super fund members, it seems two broad themes emerge. On the one hand, the common approach taken by funds is to cover the spectrum of advice, the most basic online calculator at one end and a full-service financial plan at the other.
Yet at the same time, there is an acknowledgment that intra-fund advice is receiving the most take-up, that it best fits most members’ advice needs.
Indeed the irony of those twin truths isn’t lost on Anthony Rodwell-Ball, CEO of NGS Super, whose view is that the issue comes back to engagement.
“For better or worse, interest and engagement in superannuation only really kicks in at 45 to 50,” he said. “Earlier than that and there may be some out there who are interested but they’ll be a minority.
“But what’s interesting is that as we’ve rolled out a comparatively active electronic engagement program, where we’ve invested quite a lot in YouTube-type delivery education material, we’ve noted a marked increase in interest when it comes to broader investment market updates as opposed to product-specific strategies,” Rodwell-Ball added.
“So when they want information on a contribution strategy or tax effectiveness or whatever, they know where to go to find that information but, typically, they’re not that interested in that sort of information when taken on face value.
“They’re far more interested in knowing what’s happening in the markets and also getting our perspective on what’s happening in the markets.”
Rodwell-Ball admitted that the same trend would not necessarily exist for all super funds but, for him, the point was the existence of what he termed “the hard core” of members who were actively engaged with their superannuation.
“So the issue is that we’ve got this hard core of members whose needs we’re filling and yet it’s not doubling or trebling over a period of time,” he said.
“And, as a result of that, we see the necessity to continue with a multi-faceted strategy of engagement, education and advice, even though, arguably, getting people in cars and out to workplaces to deliver seminars to a group of 15 or 20 or 30 is costly and inefficient compared to the power of communication via the internet.
What we should instead be measuring is whether members are getting better financial outcomes as a result.
“We know it does work and so, just on that basis, we’re prepared to invest.”
Offering an alternative perspective, Paul Watson, executive manager – Member Choice and Advice for HOSTPLUS, said that a fund’s choice to focus on specific advice channels or its decision to cover the spectrum of advice would have been strongly influenced by member demographics.
“Bearing in mind that we’re a fund of over one million members and that those members are quite literally scattered the length and breadth of Australia, I think our advice decisions are certainly an outcome of us understanding our membership and the context in which they seek advice,” he said.
“For some funds, offering online tools or links to other tools such as those provided by ASIC (the Australian Securities and Investments Commission), that might in their view be sufficient to cover off the basic advice piece.
“Others will take the approach that if a member wants holistic advice, they can seek that from a financial planner directly,” Watson continued.
“But I think the more progressive and member-centric funds are doing more than seeing advice as an after-thought or a bolt-on service in this day and age.”
And with regard to HOSTPLUS specifically, Watson said that it was the diversity of the fund’s membership that necessitated an equal diversity in the financial advice channels that it offers.
“So at HOSTPLUS, we have members with fairly modest account balances,” he said.
“But, at the other end of the spectrum, we also have quite sophisticated investors who have significant balances with needs that are particular and often quite complex.
“So we believe the spectrum of advice that we offer needs to cover not just those two poles but also the key waypoints between them.”
Taking a similar view, Schroder pointed out that if you came at advice from the member’s perspective, it was a pretty straightforward equation.
“They want to be able to get what they want, when they want and at a price they want to pay,” he said.
“That’s obvious from their point of view and yet each of us has to approach these things with commercial rigour and ask ourselves how we deliver the most in the most efficient way.
“So what we have to do as a large fund is balance how the member wants to connect with us and understand what’s the most cost effective way to do things,” Schroder continued.
“And then the question becomes how you cover the breadth of demand, because as people’s balances grow and the complexity of their circumstances increases then they might want to talk about more things.
“They don’t just want to talk about super, they want to talk about everything related to their financial wellbeing.”
For Schroder, the bottom line is that member expectations, not just in advice, but in all aspects of superannuation, have risen.
“Expectations have risen, balances are growing, the technology has exploded and so the onus is on us as funds to work out how to get the right piece of help and advice to people in the most cost effective manner,” he said.
“After all, we’re not just product providers, we’re looking to build whole-of-life relationships with people and they expect us to be able to help them in that.”
Of course, super funds’ growing role in that whole-of-life advice relationship is itself a point for discussion when considering financial advice.
Any number of financial planners have expressed the view that intra-fund advice impinges on the services that they have traditionally offered, but while intra-fund advice remains in its infancy, it is Hill’s expectation that the reverse will be true.
“I think that over time, intra-fund advice and full service financial planning are actually very complementary and I’ve been out there saying that before,” he said. “And whilst in the early days there may have been some potential conflict there, I think what it is doing is actually fostering cultural change within the advice industry.
“It’s certainly opening up access to members who have never had access to advice,” Hill continued.
“And in my view, being able to have earlier, bite-size advice is likely to increase engagement and increase the take-up of either further bite-sized bits of advice or, indeed, full advice going forward.”
For Rodwell-Ball, the interplay of intra-fund advice and full service financial planning goes back to the question of what people need.
“And I suspect that 80 to 90 per cent of people in the superannuation space only need that simple advice,” he said. “It might be personal but it’s relatively simple and intra-fund advice provides that.
“Now, in the good old days the planner would provide that because none of us could actually offer anything other than very general advice, so it has, I suspect, had a negative impact on the financial planning industry at large,” Rodwell-Ball continued.
“But for us, it’s a question of what best assists our members.”
Like Hill, Schroder hoped the financial services industry was moving into an era where intra-fund advice and personal advice didn’t have to be opposed.
“Instead, it will be intra-fund advice linked with personal advice, with each a part of that spectrum of advice,” he said.
“We have to think about all of this as being on a path to better retirement outcomes where a member can do certain things over the phone, but then they’ll need to take it the next step.
“And in line with that, we’ve embarked on a trial with six external financial planning groups and the early indications, the very early indications, are that that’s generating more, not less, activity to link those two things together,” Schroder continued.
“So yes, we don’t have a long history to track in terms of the relationships between intra-fund advice and personal advice, but all of the indications are that as people become more engaged, we end up with people going to the right place at the right time.
“So rather than making a host of appointments for financial planners when people really weren’t interested or weren’t ready, you tend to have people going to see a financial planner when they want to and when they need to and, above all, when they’re ready to.”
Indeed, Hill suggested that both the super industry and financial planning industry’s focus was poorly placed if it was about intra-fund advice versus personal advice, or what percentage of members chose to move from intra-fund advice into a full service financial plan.
“Those aren’t the right metrics,” he said. “What we should instead be measuring is whether members are getting better financial outcomes as a result.
“Whether intra-fund advice results in a full financial plan later is still to be determined,” Hill continued.
“My belief would be yes, but is that what really matters?
“The question should be whether they are on the path to a better financial outcome and I think, unequivocally, that that seems to be the evidence at this stage.”
So with the Future of Financial Advice (FOFA) reforms as a background, it seems clear that the superannuation industry’s advice focus is exactly that: improving its members’ financial outcomes.
And for Watson, the best means of doing that is working smarter, not harder.
“I think the next major piece of work around the advice space has to be the development of online tools,” he said.
“So rather than advice being available to people during working hours, it will be available to people during waking hours and whenever it best suits them to avail themselves of that.
“It’s about creating tools that are able to provide the advice that someone might otherwise seek in an over-the-phone conversation with a financial planner, but can instead be done on their time, in the comfort of their own home or sitting on a train with their iPad,” illustrated Watson.
“We have to work smarter not harder in terms of providing advice but it also needs to be easily accessible, easily understandable and, even more importantly, easily implementable.
“So if funds focus on those pieces in the next little while, that will go a long way to building bridges with the community in terms of both the value of advice and how it affects their lives.”
In acknowledging that super funds were still in the early days of connecting the pieces within the advice puzzle, Schroder said that the industry’s focus remained the member.
“We want to provide the member with the channels and the options that they want in a way that’s sustainable and cost effective,” he said.
“And that’s vitally important because the member has to have sovereignty in these issues.
“So the central challenge for us has been and continues to be making the member the centre of everything.”