Government to allow super funds to give financial advice, banks snubbed

The Albanese government will make superannuation funds the primary source of financial advice for fund members – the vast majority of Australians – whose advice needs are relatively straightforward.

In a long-awaited response to the Quality of Advice Review conducted by Allens partner Michelle Levy, Financial Services Minister Stephen Jones told a closed-door meeting of super fund chiefs on Tuesday morning that the government expected super funds to play a greater role.

Financial services minister Stephen Jones has confirmed a central role for super funds in the provision of financial adviceCredit: Natalie Boog

“Superannuation funds must play an expanded and more effective role that serves the needs of their members,” Jones told the meeting of super fund leaders organised by the Association of Superannuation Funds of Australia (ASFA).

Funds are restricted to giving simple advice where fund members are collectively charged for the provision of the advice, even though most members do not access the advice.

Jones said there are 5 million Australians at or approaching retirement, who need more retirement income advice but are not always getting it because of the high cost of financial advice.

One of the review’s recommendations, accepted by the government, will likely make it easier for funds to charge members individually for advice they receive, where that advice is more tailored to the individual circumstances of the member.

The government looks set to reject a key recommendation of the review that would have seen banks and other financial institutions subject to providing “good advice” rather than advice in the “best interests” of the customer.

That was seen as a way of helping to plug the advice gap that has seen financial planner numbers drop by about 10,000 since 2019 to about 16,000 now.

Planners have left the industry in response to higher professional standards and the ending of payment by commissions following years of scandals in the financial planning industry. Financial planning fees have risen dramatically, making advice even more unaffordable for many.

“Most Australians will be retiring on a part pension, plus a superannuation contribution,” Jones told ABC Radio National on Tuesday morning.

“We want to ensure that they’re able to navigate that system with the best advice available to them in their own interests and ensure that they make that money work for them.”

Jones said super funds had told him that they have many retirees who have not switched from the accumulation phase to a tax-free pension account.

“I’m also told that there are thousands who miss out on the age pension and other benefits that they are entitled to, simply because they didn’t know who to ask, or because they assumed their super fund was already doing this for them,” he said.

Superannuation funds have existing obligations to act in their members’ best financial interests, said Glen McCrea, the deputy chief executive of ASFA.

“These reforms will improve access to financial advice and retirement outcomes; they will also increase the efficiency, cost-effectiveness, and consumer experience of advice,” McCrea said.

Andrew Gregory, head of financial advice and education at UniSuper, welcomed the expanded role of super funds in providing financial advice.

“We see the opportunity with these reforms for the ‘missing middle’; those members who wouldn’t ordinarily pay for comprehensive advice,” he said.

He says that is particularly true for those members looking to transition into retirement or move into retirement.

The government will adopt 14 recommendations of the 22 recommendations in full, or in principle. Legislation governing the changes is expected in the second half of 2023 or early 2024.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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