Simple, scaled financial advice can be an important engagement tool for superannuation funds, according to a new paper by Mercer.
The paper, titled 'Financial Advice: risky business or critical growth engine?', authored by Mercer partner and financial advice expert Jo-Anne Bloch, was based on discussions with Mercer's clients and superannuation funds.
Superannuation members need low-cost, simple advice that can answer questions such as 'which investment option is right for me?' and 'can I increase my level of insurance?', she said.
"Unfortunately the level of literacy, while it's improving, is probably not quite where it needs to be relative to the size of people's superannuation balances," Bloch said.
Eighty per cent of members have advice needs that are relatively straightforward, and which can be provided over the telephone or via the Internet, she said.
It was especially important that the advice be affordable, with the cost for scaled superannuation advice bundled into management or administration fees, Bloch added.
Regulatory issues also threaten to increase the cost of scaled advice for members. The 'best interest' rules could "add cost without greater consumer protections," and if scaled advice is required to be fully compliant with the Future of Financial Advice reforms, fees may have to be split out and members may have to 'opt-in', Bloch said. Such regulations could have the effect of "putting members off" and increasing costs, she added.
"[Members] feel they're paying you already. They say: 'You're looking after my superannuation fund, I'm asking you a question and you're telling me you want to charge me for an answer!'" Bloch said.
