The Retirement Income Covenant (RIC) may set a benchmark when it comes to what is good practice for retirement strategy without coming at a cost to the value offered by financial advice, according to Accurium.
Speaking at the SMSF Association conference in Adelaide, Accurium SMSF technical services manager, Melanie Dunn, said Australian Prudential Regulation Authority (APRA) funds were engaging consultants to understand key characteristics that may influence retirement solutions, addressing longevity and market risk.
“It might be things like age, level of savings in the super fund, and their expected Age Pension eligibility,” said Dunn.
“We're not actually going to know what they're going to produce; it'll be really interesting to see 1 July when they have to publish a public version of their retirement strategy on their websites.”
But according to Dunn, the key difference between APRA-regulated funds and financial advisers was that advisers knew more about their clients than superannuation funds knew about their members.
“The retirement strategies offered by super funds are a bit like your kit home, you might ask for a few key characteristics about your members, or you might identify these and you'll build a set of strategies that's going to suit those cohorts.
“Financial advice is a bit like an architecturally-designed house. You get that retiree, you can know what fixtures and fittings they want, how many bedrooms they need, what size garage they want, and you can tailor that house to what they want to live in.”
Dunn said there was a real opportunity for advisers to add value in response to the RIC, even for self-managed super fund (SMSF) advisers who were not bound by the covenant.
“As APRA funds start doing more engagement, about retirement, [SMSF advisers] might become more aware of the risks and the need to have a comprehensive retirement strategy.”
Dunn also said there was broad alignment between SMSF advisers’ investment strategy regulatory requirement to address liquidity risk and cashflow and the RIC.