Areas of caution identified by regulators around digital advice

Two RSE licensees are exploring digital planning services and a third is considering a digital advice tool, per the latest APRA/ASIC Retirement Income Covenant (RIC) review.

The review examined 15 trustees responsible for 16 funds and their progress in implementing the RIC over the past year, how they understood member needs, offered assistance to members, and executed their strategy.

The funds have $862 billion and over 5 million members.

Financial advice is becoming a greater interest given the government’s formal response to the Quality of Advice Review that gave the green light for super funds to provide financial advice and digital is being considered as one method to do this.

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“Two RSE licensees were exploring digital planning services, which had been designed having regard to the characteristics of their membership. One was developing a product solution as part of its digital planning service that prompts members to consider their retirement goals and set action plans that can be regularly reviewed. This product solution will further provide information to members to explore various retirement topics, including the impact of choosing alternative investment options and making additional contributions,” it said.

“The other RSE licensee was exploring how to enhance its existing digital planning tools for members of a certain age with lower balances. The RSE licensee had ascertained that such members are less likely to seek advice and so is providing tools as part of intra-fund advice, making direct intervention for members approaching retirement to consider how much they need for retirement and how long their current balance will last.”

The third RSE is exploring a digital advice tool but has concerns regarding how it can achieve consistency between human and digital advice.

“Another RSE licensee was exploring whether to offer a new digital advice tool to members but was concerned about how to achieve consistency between advice produced by the digital tool and advice on similar issues given by human advisers,” it said.

“It was also considering how to manage the risks of the advice not being suitable at the time of implementation as a result of members delaying implementation and having a change of personal circumstances.”

However, the two regulators have warned caution is required regarding the charging of such advice.

“We observed that some RSE licensees were offering (or planning to offer) assistance with aged care planning, applying for the age pension, or accessing home equity release. In some cases, this involved RSE licensees arranging for an external provider to deliver this assistance,” it said.

“Where assistance is funded using the assets of the RSE, RSE licensees must be satisfied that any assistance they provide or arrange for members is consistent with the sole purpose test and is in the best financial interests of members.”

A second issue was around the use of outdated superannuation tools and calculators with 80 per cent of RSEs offering budgeting and expenditure calculators and 67 per cent offering super forecasts.

Some licensees indicated they plan to track the usage of these calculators but others are not tracking it or cannot state how often they are being used or by whom.  

“Further, ASIC observed some examples of superannuation calculators that used outdated or inappropriate assumptions. RSE licensees need to ensure they have appropriate assumptions and sufficient disclosures when providing forecasts (including, but not limited to, RSE licensees providing forecasts under ASIC’s relief).

ASIC has written directly to RSE licensees with problematic assumptions, to raise concerns and seek changes, it said.