In response to the government’s consultation on the retirement phase of superannuation, Vanguard Australia said that more personalised retirement solutions would help improve retirement outcomes and close the advice gap.
The firm recommended that the government should progress quickly with the Delivering Better Financial Outcomes reforms coming on the back of the Quality of Advice Review (QAR), while also supporting “urgent progress” on reforms to the safe harbour, statements of advice, and intra-fund advice rules to “streamline financial advice and assist with the affordability of personal financial advice”.
“Retirement is a critically important and often complex phase of life for many, and it can be challenging for Australians to access adequate guidance to help them navigate and plan for it,” said Daniel Shrimski, managing director of Vanguard Australia.
“This is troubling as recent Vanguard research revealed that planning and preparation are the keys to a successful retirement, with Australians who have a detailed retirement plan six times as confident as those who don’t.”
Shrimski added that there is no single product or advice solution that can effectively address every individual’s different needs and preferences in retirement.
“That’s why we fundamentally believe policy settings and industry practices that improve access to more forms of personalised support alongside the efficient delivery of comprehensive, full-service advice (such as greater flexibility in advice disclosures) are the most critical ways to drive improved outcomes for Australian retirees,” he said.
Vanguard put forth recommendations at a member, fund and system level:
Member-focused measures – improved financial literacy through education, insights and engagement.
Fund-level measures – personalised guidance, nudges, expanded low-cost intra-fund advice, and a broader suite of retirement products.
System-level measures – reducing complexity in the system, improving access to and affordability of financial advice and government services, including education and tools.
“These new forms of support will not replace the important role of professional financial advisers and the long-term financial and emotional value they bring. However, the delivery of financial advice has become more costly, in part due to compliance obligations, which has in turn reduced accessibility,” said Shrimski.
“Australians therefore have little support between basic product information or full comprehensive advice, which is why we believe nudges and personalised guidance could sit in the middle and help bridge this gap.”
Vanguard also outlined that a “principles-based boundary between personalised guidance and full financial advice” would increase access and provide greater clarity of the level of support consumers are receiving.
The goal, it said, would be for consumers to move between the different forms of financial advice “according to need and life stage”.
Government advice service
The submission also pushed for the creation of a publicly funded and independent government-offered financial advice service, pointing to the UK’s Pension Wise service as an example.
The Pension Wise service provides free guidance to over-50s to better understand their retirement options.
According to Vanguard, this service has been shown to improve retiree confidence and financial literacy.
“This has led to demonstrable benefits in the actions taken by customers which include increased engagement with their retirement and taxation planning, greater consideration of longevity factors, and consideration of how best to invest the money drawn down from their pensions,” the submission said.
“While a government service will not on its own be able to fully address the advice gap in Australia, we support further consideration of the benefits and implications of a government-offered advice service to supplement existing advice channels alongside the government’s Delivering Better Financial Outcomes reforms.”
