Product feature comparisons integral to retirement advice

Financial advisers are facing a balancing act as they engage with clients around retirement income options in an environment in which advice must, almost inevitably, involve discussion and comparison of specific products.

The complexity of the situation is also heightened by the reality that, increasingly, advice clients will be receiving communications from their superannuation funds generated by the Retirement Income Covenant (RIC).

The RIC has imposed obligations on superannuation funds to come up with options based on analyses of their broad member cohorts, but the reality is that the options generated by RIC obligations will not necessarily suit advised clients and it will be up to advisers to explain why.

The Retirement Income Covenant came into force nearly 19 months ago (1 July, 2022) and requires superannuation fund trustees to develop a retirement income strategy for their members based on the lofty ambition of “improving long-term outcomes for members in or approaching retirement”.

From the Government’s perspective, the covenant places a positive obligation on superannuation fund trustees and represents an important step in broadening the industry focus beyond the accumulation phase.

More than a year into the exercise, the financial services regulators, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) found that the progress made by funds in meeting their obligations had been, at best, variable.

Indeed, the two regulators made it clear they wanted to see more progress on the part of superannuation funds.

At the same time, financial services companies, particularly insurers, have been developing and refining their own retirement income offerings which, in turn, have translated into some of the proposals being put forward to members by superannuation funds.

And it is this confluence of retirement income product development which has prompted suggestions that detailed product discussions become unavoidable for advisers who are expected to maintain a separation between product and advice, and educators who are expected to focus on strategy.

Allianz Retire+ Head of Technical Services, Justine Marquet has identified the challenge for licensees and education providers, most of whom seek to avoid perceptions that they are pushing specific products.

However, she says the diversity of retirement products now being brought to market make those sorts of conversations almost unavoidable.

“We’re not allowed to talk about product but that is problematic because there is a need for advisers to understand the features and benefits of products, because they are all different in retirement – retirement income streams are really diverse – whether they’re linked to markets, provide a death benefit etc”.

“The key for advisers and super funds is recommending the product that matches the client needs,” Marquet said. “They need to be able to talk about these things quite openly so people are making their choices quite openly.”

She said advisers and superannuation funds could provide case studies and materials but, inevitably, discussion would come down the features of the products and whether they suited particular clients’ needs and objectives.

Content Partnership sponsored by Allianz Retire+