Financial advice reforms a win for consumers and industry

New reforms to the financial advice industry are set to double the number of Australians accessing financial advice and increase private national savings to $130 billion.

A new report by Rice Warner Actuaries shows that the Future of Financial Advice reforms will boost the provision of financial advice in Australia by more than 100 per cent and increase the superannuation and other savings of individuals by an estimated $130 billion by 2026.

The report, commissioned by the Industry Super Network in December 2011, also shows that financial adviser numbers will remain broadly stable and that incomes for financial planners will continue to rise following the reforms.

The report indicates that the reforms will result in numerous benefits to consumers, the financial planning industry and national savings:

• The provision of financial advice will increase from 831,000 pieces of advice being delivered to 1.77 million pieces of advice in 2026 – an increase of more than 100 per cent. This will be driven by an increase in the provision of scaled advice by more than six-fold – from 169,000 to 1.1 million pieces of advice in 2026.
• Superannuation and other savings by individuals are estimated to increase by around $130 billion by 2026. This will flow from an increase in contributions (under advice) and the redirection of fees into savings.
• The cost of financial advice is anticipated to reduce, with the weighted average cost falling by around 44 per cent, from $2,135 in 2011-12 to $1,188 in 2025-26. For the first time, many Australians will begin to access financial advice at a price they can afford.
• Adviser numbers will remain broadly stable, with the most significant change being the proportion providing full service and scaled advice. However, factors such as an expected growth of super assets by 9.6 per cent a year compounding, the predicted reduction in the cost of the advice, an ageing population and an increase in the planned superannuation guarantee contribution to 12 per cent, will generate strong growth in the financial planning industry.
• Average adviser incomes are expected to grow strongly in real terms, from $182,000 per annum to $260,000 in 2026 (after inflation and in today’s figures). Total financial adviser employment will remain stable.

Matt Linden, Chief Policy Advisor, Industry Super Network said that the research provides a useful counterweight to the alarmist claims being made by the financial planning industry.

“The Rice Warner report is the only credible research conducted to date that investigates the impact of these reforms on the financial services industry and consumers. Based on sound methodology, the report clearly demonstrates that consumers and the industry will benefit from these reforms.

“All the indicators point to a vibrant and innovative financial services industry in future, which will be driven in part by compulsory superannuation. The expected large increase in scaled advice will also challenge the best and brightest in the industry to forge new business opportunities.”

For a copy of the full report, please click here.

Media Release: Financial advice reforms a win for consumers and financial services industry

Media release from ISN says new reforms to the financial advice industry are set to double the number of Australians accessing financial advice and increase private savings by $130 billion, according to a new report by Rice Warner Actuaries. The report also shows that financial adviser numbers will remain broadly stable.

To view the Rice Warner  report click here.

Financial advice reforms a win for consumers and financial services industry

Media release from ISN says new reforms to the financial advice industry are set to double the number of Australians accessing financial advice and increase private savings by $130 billion, according to a new report by Rice Warner Actuaries. The report also shows that financial adviser numbers will remain broadly stable.

To view the Rice Warner  report click here.

Rice Warner predicts super industry to grow to $3.3 trillion by 2026

New research by Rice Warner Actuaries outlines the key challenges for the superannuation industry over the next decade, including a shift to post-retirement assets.

According to new data by Rice Warner Actuaries, superannuation assets are set to grow to around $3.3 trillion by 2026, while the number of super funds in Australia will drop by 48 per cent in the next five years.*

Commenting on the figures, Michael Rice, Managing Director of Rice Warner, said, “The industry faces an unprecedented number of challenges over the next few years. Funds need to position themselves to be able to address these successfully while still focusing on delivering the best retirement outcomes possible to members – hence our prediction that the number of funds will continue to reduce substantially.”

One trend that has had a major impact on the superannuation industry in recent years is the growth of self-managed super funds (SMSF). Rice Warner predicts that the flow of assets to the SMSF segment will continue, largely driven by advisers and accountants, with total market share by assets to remain stable at around 30 per cent of the market.

Rice Warner also expects that with the baby boomer generation retiring, post retirement assets will increase to 42 per cent of all superannuation assets by 2026, compared to 30 per cent at 30 June 2011. Industry fund market share of post-retirement assets is predicted to triple from 5.1 per cent at 30 June 2011 to 16.5 per cent by 2026.

Alun Stevens, Principal of Rice Warner, said, “The market has reached a turning point against the backdrop of unparalleled legislative changes, market turmoil and the shift to SMSFs. Simultaneously, there is an accelerating movement of members and assets into the post retirement phase. In response, we expect significant product development and realignment of servicing models.”

For more information, visit www.ricewarner.com.au

*Includes Corporate, Industry Fund, Public Sector and Commercial Funds.

Intra-fund advice on the rise in industry super funds

A recent survey by ISN shows that intra-fund advice services offered by industry super funds are in higher demand than ever before. Robbie Campo, Manager – Strategy, ISN, sheds some light on this important member service.

The demand for intra-fund advice services by industry super funds has been growing steadily, according to new figures.

A survey of seven industry super funds conducted by Industry Super Network in September revealed that a total of 64,184 pieces of advice was delivered to consumers in the 2010/11 financial year – representing an increase of 17 per cent on the previous year.

In recent months, intra-fund advice has been in especially high demand – most likely due to ongoing market volatility. In August 2011, when markets crashed because of the Greek debt crisis, four of the major industry super funds experienced an average increase in calls of 26 per cent compared to the previous year.

Robbie Campo, Manager – Strategy, ISN, said that the delivery of intra-fund advice by super funds is clearly meeting consumers’ needs, many of whom are simply looking for basic advice on their super to maximise their retirement savings.

“The delivery of intra-fund advice by super funds is filling an important gap in the marketplace by providing consumers with basic advice on their super. It is also helping to make financial advice available to all Australians, irrespective of their age, income or superannuation balance,” she said.

Rice Warner Actuaries predict that by 2024, limited advice (which includes intra-fund advice) will constitute over 40 per cent of all pieces of advice. [1]

A number of large surveys of investors and superannuation members have also consistently found that limited advice, such as intra-fund advice, is preferred to comprehensive financial advice, and is in fact the most sought-after form of advice in Australia. [2]

“Research tells us that very few people who earn less than $100,000 will ever visit a financial planner. Yet many people in this category will increasingly tend to call their super fund with queries related to their super investment,” Robbie said.

“By providing intra-fund advice services to members, super funds are answering a key public policy challenge of ensuring that ordinary Australians are able to access the basic financial advice they need on their super.”

With the Superannuation Guarantee proposed to move to 12 per cent and market volatility expected to continue, Robbie believes that intra-fund advice will become even more important for Australian consumers in the future. She also believes that intra-fund advice should be a compulsory service offering of all MySuper funds, as recommended by the Cooper Review.

“Australians deserve access to basic financial advice that they can trust and that they can afford. The least Australians should be able to expect from our compulsory super system is help and advice on their savings from their super fund,” she concluded.

Survey findings

Two of the topics surveyed by ISN were the most popular subject matter for intra-fund advice and how intra-fund advice is delivered. The findings are outlined below.

Topics covered in intra-fund advice

While most advice offered by industry super funds is tailored general advice, there is an increasing provision of intra-fund advice. The most common topics for which intra-fund advice is sought are:  member investment choice, insurance options, making additional contributions and transition to retirement (TTR). TTR advice is becoming increasingly provided as intra-fund advice, for members with very straightforward financial and personal circumstances and advice needs at retirement.

Delivery of intra-fund advice

Most intra-fund advice is delivered over the telephone, with members being sent a Statement of Advice following the phone-based interview (if one is required). The advice is generally modularised, although some members will elect to receive advice on more than one topic. Email was a common channel for one super fund, while another had a primarily workplace-based model for delivering intra-fund advice, where advisers attend workplaces to hold scheduled appointments with members. Some super funds also offered members the opportunity to meet a financial planner in a more traditional face-to-face interview but this would certainly not be typical for intra-fund advice delivery.

 For more information on intra-fund advice or the survey findings, click here.