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Advice in super declines as funds ‘stuck’ on member engagement: SuperRatings
The government may have plans for superannuation funds to start providing more financial advice, but the evidence points to funds actually providing less advice in 2024 according to recent research from SuperRatings.
The proportion of funds offering scaled advice services has declined from 76 per cent to 62 per cent between 2019 and 2023, while the level of comprehensive advice being provided by funds dropped from 71 per cent to 59 per cent in the same span.
The proportion of superannuation fund members being issued a comprehensive statement of advice fell to 0.2 per cent in 2023, its lowest level since 2019.
According to SuperRatings executive director Kirby Rappell, members’ collective need for advice is still high – even more so now, when advice services outside super are getting harder to find and more expensive. Advice is the second most common theme brought up by members at super fund annual member meetings, he revealed, with 76 of attendees asking advice-related questions (behind only investment strategy, with 83 per cent).
Despite members being so keen on personal financial advice that they’re asking for it at a collective member forum, the amount of funds that actually offer comprehensive advice is remarkably low at 59 per cent. This is an improvement on the previous year’s figure of 55 per cent, SuperRatings reported.
According to Rappell, funds are struggling to communicate to members the value of advice, and convincing them that the spend is worthwhile to their financial wellbeing – in particular leading into retirement.
“The key challenge here is, how do you get a common understanding around the value of advice?” he said during a media launch this week. “You find that the internally offered advice is actually cheaper, it might be in the $2,000 to $5,000 range, whereas an external resource would be in the $4,000 to $7,000 range. But you do find that members are quite price sensitive with the super funds.
APRA regulated super fund members also tend to have lower fund balances than those that generally fall in the externally advised cohort, he added, which makes the cost of advice seem like a proportionally higher hurdle.
Eventually, he believes, funds will need to decide whether providing product and providing the advice and support they clearly need at a price that’s palatable.
“The industry is a little bit stuck trying to get an understanding the value of advice and finding a price point that members are willing and able to pay,” he said. “The key thing that seems to go through industry is [that] funds need to choose between providing advice and providing product. There are more super funds going back to providing the help and guidance and product and less so advice.”
The super funds’ collective struggles to deliver advice to members is incongruous with the government’s plan for them, alongside banks and insurance companies, to eventually offer consumers a broader suite of advice services as part of the Delivering Better Financial Outcomes reform package.
There will be a new class of adviser under the plan, who will provide a simpler version of advice (that has yet to be clarified by the government), without charging a fee or commission.
