Financial advisers could potentially benefit from a move by superannuation funds to provide more advice to their members as it is essentially pointing customers in their direction, a new industry paper has found.
The Mercer paper, “Financial Advice: risky business or critical growth engine?”, outlines different types of advice trustees and fund providers can offer, and the best delivery models to achieve their differing objectives.
“We are giving more and more people knowledge, information and advice and, in particular, exposure to the advice process, which means that if they change their circumstances, or they need more broader financial advice later, they have actually had really good experience which is relevant to their needs,” Mercer financial advice leader Jo-Anne Bloch told InvestorDaily.
“We are helping more people getting access to affordable advice, which exposes them to the benefits of the advice process so they can seek more advice if that’s what they need.”
Mercer’s paper argued that superannuation funds were missing out on a powerful tool if they failed to offer financial advice to clients.
“Members are hungry for information. Many don’t know how to pick up an investment option in their superannuation or what level of insurance offer is suitable for their needs. Financial literacy remains lower than we would like,” Bloch said.
She said super funds could minimise their cost of retaining members if they used simple advice as a way of better communicating the benefits they offered, or clearing up misconceptions a member might have on issues such as insurance or fees.
Funds and providers should also be able to continue to bundle the cost of providing scaled superannuation advice into their management or administration fees, she said.
They should also be able to deduct financial advice fees from members’ superannuation accounts where the advice is about their super fund.
“Removal of the ability to include simple superannuation-related advice into overall superannuation management fees will see demand for advice drop dramatically and the cost of advice increase as dramatically,” Bloch said.
The paper was written following detailed discussion with Mercer’s clients and superannuation funds.
