Show me the data: Improving adviser access to client info boosts retirement outcomes

The Vanguard study found that while individuals will have access to the full scope of their personal information, they often lack the financial literacy to optimise their retirement income according to their circumstances.

This is where Vanguard believes advice can play an important role. According to the company, professional advisers “could significantly increase expected retirement outcomes using a greater extent of additional personal information”.

Superannuation funds are also highlighted as capable of playing a role, “particularly for members who cannot or do not want to engage a financial adviser, but they are currently limited in their ability to access and use personal information at scale”.

The study modelled three retirement income strategies: minimum withdrawal, superfund best efforts strategy and a full information strategy that incorporates comprehensive individual and household information.

The study found that the more personal and household data is included in a retirement income strategy, the better the outcomes were. The study showed that “as a person’s financial situation increases in complexity, so too does the potential value” of a full information strategy.

In order to incorporate the fullest extent of information that could be valuable in retirement planning, an adviser is essential, said Rachel White, Vanguard Australia’s head of financial adviser services.

“The study shows that the more personal and household information incorporated into a retirement income strategy, the greater the potential financial benefits,” White said.

“This underscores the critical role personalised financial advice plays in improving retirement outcomes, particularly as financial complexity increases.

“Comprehensive personalised advice, which combines financial acumen with a person’s full financial picture, is undoubtedly the gold standard. Unfortunately, the cost of comprehensive personalised advice and a shortage of advisers make it hard for people to access this level of advice.”

Given both the value advisers can provide and the increasing need for guidance in retirement, White pushed for a change to regulatory settings to encourage more advisers to enter the market.

“With millions of Australians expected to draw down on their super in the coming decade, there’s no time to waste in progressing reforms that uphold critical consumer protections and enable Australians to safely and easily access personalised advice to suit their individual needs,” she said.

Noting that not everyone requires comprehensive advice, White said the research is clear that “even the consideration of limited personal information and broad assumptions – as in the case of the hypothetical super funds’ best efforts strategy – can already lead to improved outcomes”.

“That’s a great reminder to make sure you’re engaging with your super fund and making the most of the information and services they provide,” she added.

“But the study shows that for people with more complex financial situations, there is a substantial gap in potential retirement outcomes compared to when the full information strategy is used. We think more can be done to close this gap.”

White added that there are also a host of emotional benefits from a personalised approach.

“The benefits of a more personalised approach are clear from a financial standpoint, but the emotional and behavioural benefits that come from having a personalised plan, and the confidence that brings, are also important,” she said.

The presentation of this study comes as Australian financial institutions continue to invest time and money into developing retirement advisory services. This includes MLC’s “Centre of Excellence” which will launch in August, and several developments with AMP, including a new online retirement advice portal and a new set of investment portfolios through North.