Members of superannuation funds who seek advice are less likely to switch fund and incur extra costs, highlighting the value of advice, according to KPMG.
In a report by KPMG, the firm said seeking advice had prevented members from making costly decisions in a volatile market environment. The fear of losing money during the pandemic had led many people into cash or a more-conservative super fund option and many then failed to invest it again when markets improved.
“The funds we have spoken to tell us that members who sought any advice from their fund were less likely to switch than those who didn’t. Had they done so, they might well have saved themselves from the self-inflicted financial damage.
“They would most likely have been told that the option they were in suited their investment timeframe, that it was well-diversified into assets other than shares and that this would cushion the blow of the share market collapse, which proved to be correct. Even if they had switched out, advice would have been helpful to guide them back into their appropriate option.”
KPMG suggested trustees should consider the advice needs of members and how they can help them to find it if needed, particularly as products became more costly. This could include the development of digital advice solutions as it would be more likely people would look to their super fund than a holistic adviser who would be more expensive.
Digital advice solutions would provide a scalable way to satisfy the unmet advice needs of a large number of members and could assist members throughout their retirement journey, the firm said.
“Efficient delivery of advice will require development and deployment of digital solutions. The growing advice gap is being felt particularly among super funds and their members. Adviser numbers are declining while account balances and demand for advice is growing.
“The cost of a holistic adviser/planner is prohibitive for most and the lower-cost bank channels that might have previously satisfied the mass-affluent segments have departed the market. Super funds, on the other hand, should be looking for advice solutions to retain members who might look for a more comprehensive solution elsewhere.”
