Super funds take on advisers…

By offering choice to employees, the superannuation industry is boosting the demand for financial advice. But super funds are going head to head with financial planning groups in a bid to quench the thirst for advice, reports Samantha Walker.

Planners lining up for their slice of the superannuation market in the wake of fund choice may be left with very little.

Superannuation funds and their service providers, facing an increasing demand for financial advice from members, are rolling out services to keep even the fussiest punters happy. And in most cases, they're providing these services inhouse.

As reported recently in Money Management, a host of funds are in the process of developing financial planning services which best met the needs of their fund members.

Sunsuper, for example, is in the process of setting up its own financial planning arm, while Queensland Coal Super and the Catholic Superannuation Fund have also indicated they are exploring various options to offer financial planning services to their members.

Local Authorities Superannuation Fund, a Victorian superannuation fund, has recently flagged plans to offer financial planning to members through the appointment of an external advisory group.

Meanwhile, Equipsuper's general manager Ian Ramsay, has indicated that Equipsuper is "most likely" to use William Mercer Financial Planning to provide advice to their members.

These are not isolated examples. Superannuation consultants Industry Funds Services (IFS) have five financial planners, one each in Melbourne, Sydney, Brisbane, Adelaide and Perth. These planners are employed full time by the group to provide advice and conduct education seminars to industry superannuation funds.

Australian Retirement Fund, C+BUS, HESTA and the Superannuation Trust of Australia all use the planning services.

IFS manager of member and employer services Louise Davidson says the seminars deal with a range of topics on "pretty basic financial areas" and are "extremely popular" with fund members.

According to Davidson, superannuation funds are the first point of reference for members who are intimidated by financial markets.

"We recognise that members of our funds require education about the financial planning area. Typically, they don't have a strong financial background and many members don't feel comfortable going to financial planners they don't know," she says.

This view is supported by Ian Kent, managing director of personal financial services at NSP Buck. He says members of superannuation funds for which NSP Buck provide administration services are more likely to be comfortable with a planner from the company's personal financial services division.

NSP Buck has 30 staff in this division, including 10 advisers, providing retail financial planning services nationally. And this group, Kent points out, are keen to exploit the need among superannuation fund members for financial planning advice.

"The level of understanding of superannuation issues among members is really quite frightening. Members weren't really putting their hand up asking for help, but it became quite apparent that people were wanting financial planning advice on their super," he says.

"Super is not a positive word. People see it as a black box because the legislation changes so many times," Kent says.

Another large industry fund, the Retail Employees' Superannuation Trust (REST), does not yet offer financial planning services though it does provide basic advice to members.

Michael Lillicrap, the fund's general manager, says members are not yet demanding a level of financial planning which would justify the appointment of a financial planner.

"It's something we think is a good idea in due course, as we feel financial planning advice would benefit members with more than $30,000 in their accounts. At the moment, though, we have few members in this category," he says.

Lillicrap says his staff receive several thousand calls a year from members on its investment choice line, however most of these are dealing with technical and administrative problems as opposed to investment queries.

Nonetheless, Lillicrap says all REST staff are licensed to give financial planning advice. Furthermore, he is prepared for a change in the attitudes of REST fund members.

"We recently surveyed our members and members did not rate financial planning advice very highly. However, if we did find any indication of demand, we'd do something straight away," he says.

Most other superannuation funds are finding an increase in demand for financial planning advice. An alternative response has been to offer these services through one planning firm exclusively. South Australian-based Statewide Superannuation Trust, which has about 80,000 members, has taken this approach.

"At the moment, we have a loose affiliation with the Savings and Loan Credit Union financial planners," says Soula Dagas, the fund's marketing manager.

Dagas believes the arrangement will suffice for the present, although she does say the strategy is likely to be reviewed in the near future. Taking advantage of the IFS financial planning service is one option the fund could take, she says.

However, Dagas says the demand for financial planning services will not increase as a result of choice of fund legislation. Instead, she argues that the demand already exists, with many superannuation funds already offering investment choice.

IFS's Louise Davidson shares this view.

"A lot of choice is already being offered in the marketplace, so I don't think choice of fund is a driver in the demand we are experiencing for financial planning advice," Davidson says.

One key driver in the demand for financial planning, though, is the need for unbiased advice. Most of the industry funds, in particular, are adamant that any planning services they implement will be purely on a fee for service basis.

IFS financial planners are full time salaried employees of the group. Davidson says industry funds do not pay commissions and any product outside of the industry fund which is recommended by the planner will result in the commission being reimbursed to the member.

"I think we have a responsibility to look at the needs of the fund member as a whole, so therefore we don't pay commission. Though, to be fair, we can't really call ourselves independent or impartial in terms of our advice, as our financial planners are tied to IFS," says Davidson.

It is a view which is spread across most of the superannuation industry.

If the market for advice to fund members is growing, so too are superannuation funds showing that they may have what it takes to retain their members, through offering a greater range of services and value for dollars.

And if superannuation funds offer the value add-ons to keep their members on board as they are suggesting, the slice of the rollover market available to financial planners may be slim pickings indeed.