The government’s retirement income review has made a number of suggestions in its final report to expand retiree access to advice, including reducing regulatory barriers to super fund advice and government subsidisation of the industry.
In its final report, the independent review panel noted the significant financial benefits that could be achieved if more retirees were incentivised to take up advice, including improved investment confidence and less emotive decision-making in market cycles.
“Forthcoming research by a large fund points to the importance of advice in reassuring members and helping them stay the course when markets fall. The fund comprised two broad groups of retirees: one where retirees were largely self-directed, while the other group typically received financial advice,” the report said.
“Key member characteristics and aggregate asset allocations were otherwise broadly similar across the two groups. Following the sharp market downturn in March 2020, just 0.9 per cent of funds under management for the largely advised group was switched, while 11 per cent of funds under management for the self-directed group was switched.”
The report noted that financial literacy initiatives and digital tools alone would not be sufficient to provide guidance to consumers entering retirement, as they were more interested in receiving personalised assistance around their finances and were less willing to pay advice fees for online guidance.
However at the same time, the panel said many retirees were also unwilling to pay the current market costs of advice, citing recent ASIC data that revealed 35 per cent of unadvised consumers said they would not engage an adviser because it was too expensive.
The panel stated that super funds were “well placed” to provide retirement guidance as members had to contact their fund to commence a pension, but that current legal restrictions prevented funds from easily delivering other types of advice beyond intra-fund advice.
“Giving funds the confidence to provide limited and targeted guidance to members without needing to comply with the legal obligations associated with financial advice would likely improve people’s retirement outcomes,” the report said.
While noting the conflict of interest between trustees’ obligations to “their membership as a whole” and the individual member, the panel stated that “the benefits associated with drawing down more retirement savings and higher standards of living in retirement, coupled with effective regulation, would likely outweigh any potential impact from conflicts of interest”.
Further, the report noted suggestions from a number of submissions to the review that the government have more direct involvement in advice, including directly employing advisers, subsidising advice fees or funding a free, basic retirement advice service similar to the UK’s Money and Pensions Service.
Commenting on the review, FPA chief executive Dante De Gori said the association looked forward to “working with the government on options” in the coming months to ensure better access to retirement advice.
“Improvements in financial literacy and access to affordable financial advice remain essential to help Australians prepare for their retirement,” Mr De Gori said.
“The FPA supports the review’s recommendation that the government address the barriers to seeking and accessing financial advice, including the cost of advice.”
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