The government’s consultation and discussion paper on the retirement phase of superannuation, announced on Monday, noted that the complex retirement landscape is made more challenging when individuals lack access to the information and guidance they need or have trouble comprehending it.
“Around a quarter of people seek advice as they approach retirement age,” the paper said.
“The review found that a lack of assistance, guidance or advice, low financial literacy, and inherent complexity makes it hard for people to make well-informed choices about their retirement income.”
Speaking to ifa, Dr Irene Guiamatsia, head of research at Investment Trends, said that how clients understand advice does not always align with what advisers might expect.
“There’s no one size fits all and I think we’ve heard a lot about fit for purpose and so on. It seems important for, let’s say super funds, to have a really good understanding of the member cohort and what each cohort needs,” Dr Guiamatsia said.
“When we talk about advice and perhaps when members talk about advice, it’s actually a broader view of help and guidance.
“Of course, advice is part of that need that they are expressing, but I think it is important to acknowledge from the outset that perhaps on the spectrum of just information to full-fledged holistic advice, the needs are different and it will differ for different member cohorts and a different stage of their life, and at different levels of proximity to retirement.”
She added that when viewed in terms of superannuation funds assisting members, it’s important for them to identify what form it needs to take.
“How do super funds or service providers or what have you actually assist members with the right guidance that they need in the form that is required?” Dr Guiamatsia said.
“I think that then places back the onus on super funds, for example, to actually offer that full spectrum, if you will, of various advice that is needed.”
This bears out in research the firm has completed, including in the recent TAL and Investment Trends 2023 Retirement Income Report, with the achievement of small financial goals seen as a “really important trigger or prompt to actually seeking more advice”.
“If we, perhaps, allow ourselves to stop thinking about advice that’s almost like that binary state of I’m using the holistic proposition versus I’m not using it at all. If we see it as a gradual journey, then I think it offers a larger number of combinations of solutions,” she explained.
“It actually offers the ability for us to graduate members from smaller engagement, which helps achieve some goals and actually leads to the next level of engagement, which ultimately is likely to actually deliver more long-term commitment, rather than some of the outcomes that we’ve seen where people feel they need advice, but they use an adviser for a short period of time and then sever those relationships.
“We think the way to build that sort of really long-term commitment, which ultimately delivers better long-term outcomes is actually potentially through graduating members through different stages of the advice spectrum.”
One of the key findings of the TAL and Investment Trends report was that two-thirds of Australian non-retirees are unsure about their financial options in retirement and feel they need more information to make choices that will meet their needs at every stage of life.
Additionally, it found that 57 per cent of advised non-retirees said they were either somewhat or very well prepared for retirement, compared with just 35 per cent of the non-advised cohort saying the same.
According to Dr Guiamatsia, any measure that can help Australians be better prepared for retirement is a positive one, particularly increased access to advice.
“I think any approach that allows flexibility to respond to different members’ needs is a better approach than one that looks perhaps more restrictive,” she said.
“I think we all agree that, whether it’s designed in that way or otherwise, or if it’s just an unintended outcome, the current model does have some restrictions that I think the Quality of Advice Review clearly acknowledges and wants to pare back. I think we are already progressing in the direction of alleviating some of the restrictions that are in place.
“If we look at it in a broader level where some of the restrictions around the provision of advice currently are removed. Let’s think about the engagement model and how restrictive it is now, can we kind of alleviate some of those barriers, and always look at opportunities to get that best outcome for the member, for the client?
“Of course, while not compromising the quality because we wouldn’t want to do that, but it’s about how do we strike the right balance? I think the industry as a whole and the policy settings are being recalibrated in the direction that we think is positive indeed.”
“The review found that a lack of assistance, guidance or advice, low financial literacy, and inherent complexity makes it hard for people to make well-informed choices about their retirement income.”
Remind me again why commissions were Outlawed?
So far QAR Tranche 1 has provided MORE RED TAPE for Advisers.
Canberra Pollies & Bureaucrats say they want to Reduce Red Tape but at every turn for 20 years all they do is add more ever increasing, useless, costly Red Tape.
Dr Guiamatsia is living in fantasy land.
Few people will ever trade subsidized super fund advice for more expensive tailored advice.
Use the example of clients being charged for insurance vs paying via commissions, clients paying for mortgage advice via broker or taking their chances at the bank.
There is a massive difference theory and reality.