Intra fund advice: Under-utilised and under threat?

Advice is a clear and present opportunity within a superannuation industry that will grow to more than $3 trillion over the next 15 years according to Rice Warner analysis.

Yet, proposed changes to FoFA may make it more difficult for funds to deliver this service cost-effectively.  At present, all members pay the same fee, so those who access advice provided by the fund are subsidised by those who do not.

Appropriate advice, matched to the needs of the member, nurtures and protects savings and builds member loyalty, while at the same time leading to better engagement.

Superannuation funds fought hard for the right to offer so called ‘intra-fund’ advice as either general advice or single issue advice to members, and continue to seek better ways to deliver this to their members.

It is part of the engagement ‘kit bag’ deployed by funds that enables them to stay close to members, guiding savers on basic principles related to their superannuation account.

Intra fund is not holistic advice. By its nature, intra fund advice is restricted only to specific advice pertaining to a member’s superannuation account. Funds cannot digress to offer broader advice services on, for example, products that may lie outside of the member’s fund, or a full-blown financial plan requiring a ‘know the client’ needs analysis.

In any event, intra fund advice is a useful channel by which funds can guide members on basic questions like contribution levels or their risk insurance needs.

But are funds doing enough to thoroughly exploit the engagement benefits of the limited intra fund approach? It would appear not.

Rice Warner’s recent research conducted for Women in Super shows two primary points of note:

1: Females (and, yes, men too) are not saving enough.
2: Advice services are not being fully utilised by the fund member, even though awareness of the option is high.

Let’s take the example of low or middle income earning women making voluntary contributions to their savings. Seven in 10 do not.

And what about the proportion of women taking advantage of the Government co-contribution to their retirement savings? Almost 80 per cent of the females surveyed (all of whom were eligible recipients) were at least aware of the co-contribution scheme. However, few of those eligible take advantage of this generous benefit.

Australians need to save significantly more to build enough for a comfortable lifestyle in retirement.  The periodic calculations of the retirement savings gap which Rice Warner prepares for the FSC make daunting reading.

It is a large gap that will take many small efforts to fill. It would appear that engaging and educating fund members, of both genders, can go a long way to boost engagement, increase participation and fund a better retirement outcome for the nation.  Intra-fund advice is a cost-effective means of achieving this outcome.