Super funds cite advice uncertainty as progress impediment

Superannuation funds have cited uncertainty around the new financial advice rules as one of the reasons they are struggling to deliver on their commitments with respect to the Retirement Income Covenant (RIC).

Their response indicates that the Government’s own slow delivery on advice policy implementation may be acting as an impediment to progressing the RIC.

While both the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) admonished some funds for not doing enough, their own analysis confirmed that continuing uncertainty around the financial advice setting was an issue.

Outlining the problems identified by superannuation funds, the two regulators revealed that 27 responses from superannuation funds had pointed to advice regime uncertainty.

According to the regulators, the key challenges identified were:

• the ability to meet members’ retirement advice needs, given the uncertainty around the financial advice framework, such as potential law reform (27 responses);
• the depth and availability of existing data pertaining to members, and privacy, security and cost concerns surrounding the need to collect more member data in order to better understand and support members’ needs (24 responses); and
• a general lack of member engagement and financial literacy relating to their superannuation and retirement phases (21 responses).

While accepting that superannuation funds are facing challenges in delivering on their RIC commitments, ASIC and APRA also implied that funds might be talking the talk rather than walking the walk.

“Approximately three quarters of RSE licensees selected ‘measuring retirement outcomes’ as one of their priorities. However, the limited mention of specific metrics in survey responses suggests that only incremental improvements have been made since the thematic review,” their report said.

“The thematic review report included examples of success metrics that focused on member outcomes by category, such as product, retirement income outcomes, and usage and quality of assistance. Based on the survey responses, the adoption of metrics aligned to the examples provided in the thematic review report is very low.

• Only two-thirds of survey responses confirmed the adoption of success metrics focusing on members’ retirement outcomes in more than one category.
• 1 out of 8 mentioned the adoption of metrics across all three categories.
• 9 responses did not mention any metrics outlined in the thematic review report at all, although 3 have provided additional measures.

“Moreover, only 8 RSE licensees indicated that tracking the effectiveness of retirement-focused assistance offered to members was a priority. Additionally, only 4 RSE licensees indicated that they are prioritising the enhancement of their understanding of members receiving assistance from external sources,” it said.