Late last month, Financial Services Minister Stephen Jones released the latest round of financial advice reforms, including creating an allowance for superannuation funds to provide targeted prompts to members to drive greater engagement with superannuation at key life stages.
With these changes has come the ability for super funds to provide members with retirement income advice in relation to their interest in the fund including selling retirement products.
The idea of this has been met with varied levels of enthusiasm, however, independent financial adviser Nathan Fradley said this has triggered in him a feeling akin to “dread”.
In particular, he said significant issues could arise when it comes to super funds providing advice on lifetime income products.
“If the products that come through, these lifetime income products that come through, are not homogeneous enough, we could be in a real spot of bother,” Fradley said on The ifa Show.
“I just think these products can’t be undone. That person ends up in that lifetime income stream, that lifetime annuity, and 11 years later, it turns out it was a junk product. We can’t fix that.
“We can always move someone’s super outside of a spousal pension or a reversion pension, but we can’t do that with a retirement income product without a substantial loss to a client. So, without at least some checks and measures to that kind of product, it would be really problematic.”
Furthermore, while financial advisers might have concerns about these changes from a professional perspective, Fradley was quick to remind them that not everyone would seek a financial adviser, regardless of whether or not super funds are given the ability to provide product advice.
“I think if we’ve got to think of it outside of not-an-adviser’s problem but financial advice broadly speaking, people’s superannuation, what have you, not everyone’s going to come and see us. What checks and measures are there to make sure that there’s not more mess for us to clean up later, which is going to cost the client a lot more,” he said.
“All it takes is someone wanting a slight point of difference and something to go wrong. But these are also behemoth organisations that have got, you know, if we think we’ve got compliance obligations, there’s going to be so many checks and balances and stop points around this sort of stuff.
“I think this just gives them a bit of guidance on maybe what some of those triggers should be.”
Speaking at Momentum Media’s Election 2025 event on Thursday, chief executive of the Association of Superannuation Funds of Australia (ASFA), Mary Delahunty, said while the association supported the government’s plans to improve access to retirement income products, it needed to be complemented by financial advice.
“We think that, to be effective, those products need to be supported by guidance, information and advice that is scoped appropriately, delivered by qualified professionals and supported by a framework that reflects how people actually engage with super,” Delahunty said.
Another aspect of the proposed legislation was the allowance for super funds to take a member’s broader circumstances, such as pension eligibility, home ownership, and relationship status, into consideration when giving product recommendations.
While this particular aspect has some arguing that it came a little too close to comprehensive advice, in an attempt to be more positive, Fradley argued that when it comes to super funds providing product advice, it would be worse if they didn’t consider these circumstances.
“[Looking] at this in the spirit of what maybe it should be or what it’s trying to be … if they didn’t have the ability to consider the Centrelink implications or the broader circumstances, it would be hugely problematic and we’d probably be up in arms about that,” Fradley said on The ifa Show.
“I think this opens it up to at least, when they are, if I’m taking this in a positive light, when they are giving product advice on their products – vertically integrated or not – to assist their members, this allows them to ensure that certain boxes have been checked, that there’s not going to be broader issues at play.”
“I think that if they didn’t have that consideration, it would be more problematic than them having it.”
For example, Fradley said that when super funds are providing this general advice to members who are part of a couple, there should be automated triggers and flag notifications to let them know when what they’re doing might impact the partner’s Centrelink pension payments.
Finally, he said if financial advisers were concerned about being replaced through this initiative, that may have more to do with them than it did the super fund.
“This might be controversial. If you’re worried about a call centre person with no qualifications or experience taking your job because they can give retirement advice, considering an account-based pension and whether or not someone’s eligible for the age pension over the phone, you might want to improve your client experience.”
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The issue isn’t whether super funds should be allowed to give advice—there’s nothing for the profession to “come around to.”
The issue is free advice, funded by invisible collective charging. That’s not a difficult concept to grasp.
Super funds already provide advice. Just like independents, they can hire licensed advisers and charge appropriately to run a viable advice business. They’re already in the game.
What they want is a different set of rules.
They want to employ people under a lower educational threshold—that’s what the New Class of Adviser is. It was originally pitched as something exclusive to super funds, until they faced enough backlash to open it up.
But what they really want is collective charging. They want to offer free retirement planning advice to all members to help them sell annuity products. If you think that’s overstating it, read the Explanatory Material for DBFO 1.5—it spells it out, plainly.
So when Jones says this new law isn’t about giving super funds the ability to provide “holistic” advice, he’s using weasel words. He’s lying. Retirement planning that considers your full financial position to recommend a fund-owned pension or annuity—paid for by all members—is exactly what this is about.
No independent adviser who earns their living from retirement planning can compete with free.
I have come across a few of the industry funds promoting their lifetime products as the best solution for retirement income.
It almost implies all of their super would be converted to these products without really understanding a clients full retirement planning needs.
In these cases, clients could be hamstrung for choices in their retirement.
It makes a product the solution and at the same time, locks funds away from those pesky independent planners.
Super funds recommending inhouse products, which utilise their own inhouse investment teams via their own unqualified advisers. What could go wrong?