Advice cost impeding tailored MySuper solutions
The high cost of financial advice is hindering superannuation funds from tailoring their MySuper products to their members' needs.
This is the view of Centre for International Finance and Regulation research director Dr Geoff Warren, who said super fund executives would like to get members engaged via financial advice and are investing in advice to do this.
But while members want advice and can get limited, general advice for free, in-depth advice is costly to provide and members are not willing to pay for it.
Warren said the cost of advice is a barrier to tailoring MySuper products.
"There's a limit to how much advice can do [tailoring] because this is very costly; you need a person to speak to somebody so that's a barrier," he said.
The super industry is moving towards tailoring to their specific member base, which can vary across funds.
Funds want to move further and even tailor to each individual member and offer more advice to help them make decisions.
"But that of course is going to be costly because you've got to build the whole infrastructure to do it," Warren opined.
"I think we heard at least one fund say there are so many members out there you can't service them all for advice. It's not practical, and it's just not cost efficient. So advice is an important part but it's never going to be the total solution," Warren said.
Warren said the super industry is examining ways to use advice to better tailor their products, with many acknowledging that a one-size-fits-all approach will do members a disservice.
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