Advice left behind in retirement solutions debate

Super funds should be focused on strengthening advice channels and re-envisioning the advice process rather than being distracted by the trivialised issues that have clouded the debate around retirement income solutions.

A whitepaper from Lonsec and Milliman has challenged the traditional delivery of advice and a conventional model that has "benefited from a lack of member engagement", according to Milliman practice leader Wade Matterson.

Matterson said resolving retirees income solutions required financial planning that needed to begin with the members' objectives and work backwards - with product as the last piece of the puzzle.

He said super funds were lacking a true awareness of why members were leaving to join other providers or to join the growing throng of self-managed super funds.

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"People leave their current provider when they feel that that provider is not listening to them or not providing solutions that meet their needs, so adding a thousand bells and whistles is not the key solution. "The solution is to have a better or more tailored conversation with your members in the first place," Matterson said.

Lonsec head of investment consulting Lukasz de Pourbaix said the challenge for super funds was in information gathering and implementing segmentation strategies, which many of the larger industry funds had started to do.

But Matterson said industry funds would need to converge further with retail funds if they were to be successful in the delivery of advice. One-on-one advice models had failed to link strategies to client objectives, and the problem for super funds was exacerbated by large pools of default members.

"Funds are starting to talk about mass customisation, mass tailoring, and I guess the real challenge facing them is they've designed an entire model which is essentially a wholesale model. The way the demographics are moving against them, they're going to have to respond by moving more and more towards a retail model if they're going to survive," he said.