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Adopt digital to retain industry fund members
Industry superannuation funds need to adopt digital advice into their offering to retain those members who eventually seek advice elsewhere and inevitably leave their industry fund.
A blog by NMG Group (parent company of Tria Investment Partners) said while industry funds had attempted to respond to the demand for advice, the results had been mixed thus far as they looked to avoid any signs of vertical integration, contemplated whether to insource or outsource the function, and how to charge members.
Senior consultant, Edmond Cheuk, wrote on the website industry funds have therefore been slow to promote their advice offering as they were concerned about how much it would cost to provide, meaning members did not associate advice with super funds and sought it elsewhere.
“So, what does this all mean for digital advice? Whilst there will be a continued and vital role for face-to-face personal advice, it is only through early engagement that funds will be able to build a pipeline of member interest in seeking retirement advice, and so establish themselves as the natural provider for it,” Cheung said.
Through digital advice, super funds should begin focusing on what Cheung terms as “incremental advice”.
Instead of providing just intra-fund and single-issue advice, super funds should provide members with the ability to deal with cashflow, debt management, or protection and insurance needs, as needed. But they should always provide these services in the context of long-term financial health.
“How different might member perceptions of their fund be? Would members be more likely to turn to their fund for advice at retirement? We think so,” Cheung wrote.
Cheung cited the example of major banks who were making portfolio plays in fintech by taking stakes in various start-ups where they saw potential for mutual benefits.
“But regardless of the journey to get there, industry funds simply can’t afford to treat personal holistic advice as a service they only provide when asked. If funds embrace all that digital advice can offer today, they can provide the platform for materially addressing Australia’s financial advice gap,” he said.
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The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
Superannuation funds will have two options for charging fees for the advice provided by the new class of adviser.
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
APRA’s latest data has revealed that superannuation funds spent $1.3 billion on advice fees, with the vast majority sent to external financial advisers.
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