The incoming legislation will be a boost for the advice industry, according to a Challenger Life head.
On a new episode of the ifa Show, the company’s general manager of retail distribution, Luke Cheetham, said the retirement income covenant – which will require superannuation trustees to plan and outline a retirement strategy for members – will present a huge opportunity for financial advisers.
“We work in a highly complex retirement system and you couple that with a lack of understanding of the risk that many will face over a 20 to 30 year retirement, it really means that transitioning from work to retirement without the right guidance [and] without the right advice can be a really daunting prospect for many,” Mr Cheetham said.
“So I do feel that there’s great potential for product manufacturers and the advice market to work together and help make sense of retirement to give people the confidence that they need, when it comes to managing their savings.”
In particular, Mr Cheetham noted Baby Boomers will retire with larger nest eggs “than any generation before them” and on average will live more than two decades after retirement.
“So there’s going to be a huge demand for fit for purpose product innovation, delivered through quality advice, that’s specifically designed to, manage tax status and also give consideration to liquidity risk, to longevity risk, inflation, and market risk,” he said.
“We know from research that those who are engaged with an adviser, they have an active plan, they have a current plan, they generally feel more informed, they’re better prepared, they have greater confidence about their retirement and therefore they worry less and when we know they worry less, they enjoy more. And let’s face it, that’s what retirement should be all about.”
The covenant, set to come into effect on 1 July 2022, has been widely praised by industry groups including the former Financial Services Council chief executive Sally Loane who called it a “milestone” for financial services and the Council on the Ageing (COTA) Australia.
Listen to the full podcast with Mr Cheetham here.
Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.
Neil is also the host of the ifa show podcast.
The president of the commission has suggested the advice industry needs a “regulatory rethink” in regards to its current legislation.
The regulator has also banned the director of the firm linked to the Mayfair 101 Group from controlling a financial services entity.
The big four bank has confirmed the move today.
Get the latest news! Subscribe to the ifa bulletin
Get notifications in real time and stay up to date with content that matters to you.