Canberra urges super funds to lift their game on retirement advice or lose out

The federal government wants super funds to fill the gap in providing financial advice to ageing Australians.

Australia’s super funds have been put on notice that they must begin offering good quality, data-driven retirement advice or risk being left behind in the race for members.

The warning comes from federal Financial Services Minister Stephen Jones, who says he expects a “dramatic change in their customer service culture and thinking”.

In an exclusive interview for The Deal magazine, to be published in The Australian on Thursday, Mr Jones said that while there were legal obstacles around the provision of investment advice, the funds could not hide behind them.

“It is not an excuse for them not getting their data up to speed and having the sort of information they need to help members in their retirement phase,” he said. “There is a lot more that super funds can be doing and a lot more we want them to be doing.

“For the past 30 years, super funds have been good warehousers of money, they have taken savings and grown them, and they’ve done that pretty well. But what they haven’t been good at is customer service.

“They are going to have to get a whole lot better at it, they are going to have a dramatic change in their customer service culture and thinking because that is what the next phase of superannuation is all about. Funds that are not good at it are going to be left ­behind.”

The Deal magazine will reveal the top 100 financial advisers in Australia, a list compiled by the US-based Barron’s magazine. It comes after the advice industry has lost thousands of practitioners, forcing the federal government to address the problems facing an ageing population without adequate access to professional advice.

Mr Jones said the government was looking at the qualifications of financial advisers from the perspective of consumer need.

“We have lost about 10,000 financial advisers over the last four years,” he said.

“If we do nothing, a whole heap of them are going to be dumped out of the industry in the next 12 to 18 months because of qualification restrictions. These are people who could be servicing existing and new clients and mentoring new entrants into the industry.

“If we think we have a problem now, it is going to get worse until we fix the existing problem.”

Last week, the parliament passed legislation to allow financial advisers with 10 years of experience to remain in the industry if they have a good record, even if they do not have specific educational qualifications.

Mr Jones said that even if the people entering the profession doubled over the next three years, it would not be enough to meet the needs of retirees.

He noted recommendations from the Levy report into the sector released earlier this year that banks, insurance companies and super funds should have the capacity to provide more information and advice. But he said it was important to have the “right protections and guard rails in place at the same time as we are providing more access points for advice”.

“Once I have dealt with the issue of qualifications (of financial advisers), I need to channel all this and see what is doable over the next two to three years in a way which ensures the industry doesn’t get completely knocked over in the process,” he said.

Superannuation funds were core to getting basic information and advice as people approached retirement but there were issues around the scope of the advice and the qualifications of the adviser.

“These are the things that have to be nailed,” he said.

Mr Jones said there had been about 15 years of “well-meaning” reforms to the sector but “when you put it all together what we have done is solved the same problem several times over. We have layered regulatory obligation on regulatory obligation and have not taken a step backwards and asked if we need all of those things”.

Asked what his ideal future looked like, Mr Jones said he wanted Australians to be able to have a “seamless conversation” with their adviser or their super fund and to be able to navigate the early years of retirement effortlessly.

The Deal/Barron’s Top 100 Financial Advisers 2023 in The Australian on Thursday