Retirement advice complexity = cost

Mike Taylor

Managing Editor and Publisher

8 May 2025

ANALYSIS

The intersection between intra-fund advice, the retirement income covenant and the new category of financial adviser was always going to be the most contentious area of the Government’s Delivering Better Financial Outcomes legislation.

The financial advice profession has never been particularly comfortable with the concept of intra-fund advice because of instances where advisers have perceived superannuation funds have pushed the edge of regulatory envelope, particularly on issues such as transition to retirement.

Thus, the Financial Advice Association of Australia (FAAA) is absolutely justified in seeking to establish some boundaries around retirement planning advice as part of its broader lobbying efforts around the successive tranches of the DBFO legislation.

Reading the exposure draft of the second tranche of the DBFO legislation and listening to the associated ministerial rhetoric there can be no doubting that Government’s agenda is to, as expected, deliver more accessible and affordable financial advice via superannuation funds.

The use of superannuation as a delivery mechanism was central to Michelle Levy’s Quality of Advice Review and it has been central to broader policy thinking over a long period of time.

Indeed, when taken together with the obligations imposed on superannuation funds via the Retirement Income Covenant it is clear that the boundaries between simple and complex advice are likely to be tested and inevitably blurred.

The FAAA is arguing that retirement planning advice “will always be complex and costly” and should therefore not be provided on a collectively charged basis – in other words, it should be the domain of fully qualified financial advisers.

It has also argued for limits on superannuation funds “nudging” members to get advice, particularly retirement planning advice.

In doing so, the FAAA has gone to the core of the issue by seeking to define the difference between simple or complex advice, arguing that simple advice will typically be single issue and often about straightforward and low-risk financial products.

“In our view, retirement planning advice is always going to be complex. It involves many different aspects of advice and the client’s circumstances, often complex products, a long time horizon, numerous interdependencies, multiple risks, with high levels of expertise required to deliver it,” the FAAA’s submission to Treasury says.

What it does not say, but what should be obvious, is that the very complexity of retirement planning advice makes it expensive and therefore, in the view of the FAAA, inappropriate for being collectively charged within superannuation fund.

The challenge for the FAAA in sustaining this argument will be to find superannuation funds, focused on other priorities, ready to agree with them.