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Good timely financial advice can make a big difference to retirement outcomes, yet super fund members are often unaware of the advice services offered by their fund.
Recent research by Otivio, a digital advice provider, found that while 84% of Australians trust their super fund, only one-third have researched the advice their super fund can offer them.
Separate research by Aware Super on 100,000 of their own members found that those who received advice had an average of $150,000 more in super at retirement and reported two and a half times more voluntary tax-efficient super contributions than non-advised members.
In an environment of increasing cost-of-living pressure, investigating your super fund’s advice services could not only improve your financial future, but save you money now. Many services are free or can be provided for a fee deducted from your super balance, so you can get the advice you need without needing to dip into your own pocket.
Types of advice offered by super funds
In 2013, super funds were given permission to give their members advice that is ‘collectively charged’. This means that the fund’s administration fees are used to cover the advice service, rather than individual members paying a fee at the time they receive advice. This is called ‘intra-fund advice’.
The advice currently being offered by super funds falls into three broad categories or levels of advice. Not all funds will provide all types of advice. If you have an ‘advised super product’, where you needed an adviser to access the product, it is unlikely the fund will provide advice services themselves. You will generally be referred back to the adviser who helped you open the account in the first place.
The name your fund uses might be different, but the first level of advice is the same across the board and is usually provided by your fund’s call centre. They can give simple advice on specific topics related to your account or the fund’s offerings to help you make decisions.
This advice cannot consider your personal circumstances. It may include statements such as ‘we suggest our younger members consider investment options with more growth assets because they have time to ride out any ups and downs and benefit from a higher long-term return. For members closer to retirement, options with a smaller growth allocation could be more suitable, as stability becomes more of a priority’.
In other words, general advice can help you make decisions but will not include a personalised recommendation.
You should also be aware that general advice can be given by staff who are not qualified financial advisers. They must however meet education and training standards specified by the Australian Securities and Investments Commission (ASIC). There is no cost to receive general advice.
Limited personal advice
The next step is personal advice on a single issue. For example, you might be in your fund’s default MySuper option but wonder if it’s the best option for you, or you might want to know the best way to contribute to your super. This type of advice is called ‘limited’ because it doesn’t consider all the topics that might be relevant to you, only the single issue you’re requesting advice about.
Super funds frequently provide this advice under the intra-fund advice rules. If this is the case, you won’t need to pay a fee because it is covered by the fund’s administration charges. This advice is personalised to your circumstances, and you will receive a statement of advice (SOA) that explains the recommendation you have been given.
Intra-fund advice commonly covers the following questions:
- I have $x I want to contribute to super each month, what is the most effective way to do that? (Maximising any co-contribution and tax saving)
- How much insurance (and what type) should I take out in the fund based on my personal situation?
- Which of your investment options is most suitable for me?
A fund may also provide advice about transition-to-retirement pensions or retirement pensions under the intra-fund service.
If the fund doesn’t use intra-fund advice provisions, you will need to pay a fee for limited advice. This can be deducted from your account balance (if the advice is about your super) or paid from savings outside super.
Comprehensive personal advice
The final tier is more complex financial advice that takes your full personal circumstances into account. This might include advice on insurance, tax structures, retirement planning, aged care and estate planning.
This advice starts with a free, no-obligation conversation with information about the fees you will be charged if you choose to proceed. Some funds offer face-to-face consultations, help with implementation and regular reviews.
Comprehensive advice may be delivered by advisers employed by the fund or by an external provider. Either way, any fee that directly relates to advice about your super can generally be deducted from your account balance. The cost of advice about non-super issues must be paid from other savings.
How is advice delivered?
One of the biggest innovations in the provision of financial advice by super funds is the way it’s delivered.
After years of rapid industry growth and consolidation, large super funds are finding that they can no longer get by with a handful of their own in-house advisers. To scale up the advice they can offer members, more funds are outsourcing and offering digital advice (robo-advice).
Many funds are beginning to see a digital first strategy as a means of reaching more of their members in an affordable way. As the technology becomes more sophisticated, digital advice is likely to become more widespread.
There are currently two models for providing non-digital advice:
- In-house: Some funds employ their own salaried advisers
- Outsource: Some funds fully outsource to external advisers while others retain some in-house advisers and outsource the overflow.
There is no right or wrong model, with good examples of innovation using both in-house and outsourced approaches. The following fund examples are for illustrative purposes only; they are not recommendations.
Funds with significant numbers of advisers employed in-house are Aware Super, UniSuper, Australian Retirement Trust (ART – created by the merger of SunSuper and QSuper in 2022), TelstraSuper and EquipSuper. As of April 2022, Aware, UniSuper and ART all had more than 120 advisers employed, while TelstaSuper and Equip each had more than 40. Some of these funds still refer their members to external advisers for comprehensive advice, limiting in-house advice to super matters only.
Historically, these funds were able to offer face-to-face advice services because their members were clustered geographically around central locations. For example, UniSuper’s advisers are generally located on university campuses – where all the fund’s members worked until the fund became public offer in 2021.
Post-pandemic we have all become more accustomed to meeting virtually, so in-house advisers can provide services to members wherever they are over the phone or via video conference.
REST is an example of a fund using an outsourced model to provide advice. Although the staff providing advice are employees of REST, they are licensed by Link Advice, making Link legally responsible for the service and their continuing professional education.
In addition, REST members can access a range of digital advice tools that can make recommendations on insurance levels, investment options and appropriate contributions. These tools are also provided by Link Advice.
By fully outsourcing, a super fund does not need to retain an Australian Financial Services Licence (AFSL) that permits them to provide personal advice.
Australian Retirement Trust (ART) is an example of a fund using a blended in-house and outsourced model to provide advice. Advisers employed by the fund provide one-off advice about super that is charged collectively, so members don’t need to pay a separate fee.
If members need comprehensive advice about more than their super, they are referred to an accredited adviser on ART’s National Advice Panel or they can source their own financial planner.
The cost of advice
While personal financial advice is getting easier to access via your super fund, it’s still difficult to know what it will cost until you contact your fund or their nominated adviser and agree on the scope of advice you want. The reason given is that each person’s needs will be different, but it could be a disincentive for many people.
The good news is that most funds do provide intra-fund advice at no additional cost, so this can be an excellent place to start. If your needs can’t be met using this service, it’s time to explore comprehensive advice.
Fees vary widely between and within funds. For example, Aware Super discloses that their fees for comprehensive advice range from $2,800 to $8,000. Specialist advice on personal insurance, aged care or estate planning comes with a cost of between $660 and $6,000. These prices include GST.
Read more about the cost of financial advice from a licensed financial planner. For example, Adviser Ratings estimates the median ongoing advice fee was $3,529 in 2021, up 41% from $2,510 in 2018. There was a wide range of fees, however, from a low of $800 to a maximum of $12,000, underlining the importance of shopping around.
Who pays for advice?
‘Free’ intra-fund personal advice is appealing but the downside is that it is subsidised by all members via the administration fees they pay.
Fees for more complex personal advice may be paid directly by the member or deducted from their super account, depending on the fund. It’s important to know that fees for advice that is not about super (for example about insurance products outside the fund) cannot be deducted from your super account.
Reform stemming from the Financial Services Royal Commission prohibits ongoing advice fees from being deducted from MySuper products. The deduction of fees for one-off advice is still permitted.
Quality of super fund advice
As things stand, the quality of advice offered by super funds is mixed. Some funds offer a similar service to external financial advisers, but most funds are still unable to offer anything beyond advice on your super account.
A recent ‘road test’ of intra-fund advice conducted by CHOICE was critical of the service overall, noting that participants were often left feeling that they needed to make decisions themselves, rather than receiving a personalised recommendation. One participant said her adviser recommended she make super contributions without weighing up whether she should prioritise those contributions over other needs such as repaying mortgage debt.
This shortcoming is likely due to the way funds interpret the regulation of intra-fund advice. Intra-fund advice can’t be about financial products outside the fund, such as your mortgage. This means a fund providing intra-fund advice won’t recommend whether to repay the mortgage or contribute to super, but only the best way for you to contribute to super (i.e. whether you should make concessional or non-concessional contributions or a mixture of both) based on what you tell them about your income and what you feel you can afford.
Funds giving intra-fund advice are also at a disadvantage because they don’t generally follow up with members, who are left to implement the advice themselves. Follow through is higher with a personal financial adviser because they do it for you.
Risks and remedies
When you use intra-fund advice you are only going to get advice about your super fund’s investment options and services (not any external products), so to that extent the advice you get is limited if not conflicted. However, under ASIC rules super funds are required to manage conflicts of interest in their dealings with members.
Fully outsourced advice does away with some of the concerns about conflict of interest because advisers can offer products from other funds, including advice on SMSFs.
If you are not happy with the advice you receive or have a complaint, you should take your complaint to your super fund to give them the opportunity to address it.
Then, if you are still not satisfied you can lodge a complaint with the Australian Financial Complaints Authority (AFCA). This is a free ombudsman service whose decisions are binding on superannuation fund trustees.