Ian Fryer, general manager at Chant West, emphasized at the Professional Planner Researcher Forum that while industry funds excel in straightforward areas like accumulation through default options, they face challenges in navigating complex retirement products. "They’re not very good at hard stuff," he noted, underscoring the lack of default options for members at retirement.
Fryer pointed out that the variability in outcomes from different retirement choices remains substantial since optimal solutions can significantly differ based on individual circumstances. "The outcomes that you get from a range of different choices is going to vary so widely," he further elaborated.
The transition from a homogeneous environment, which favors large providers at scale, to a more diverse one as membership demographics shift presents a unique set of challenges for super funds. Fryer highlighted that retired individuals without the support of an adviser often receive "very little guidance," while many funds charge substantial fees for intra-fund advice, often estimated around $5,000.
"In the absence of that, I think they’re getting nothing," Fryer lamented, pointing towards a gap in the support system.
Complementing Fryer's observations, Matt Olsen, director of manager research ratings at Morningstar Australasia, shared that the variety in retirement income products leads to uncertainty among funds about which offerings will best suit their members. "One of the main things we really need to collaborate," Olsen stated, stressing the importance of adviser involvement in navigating these offerings.
Fryer echoed Olsen's sentiments, stressing that "the key to the retirement puzzle is advice," especially as retirement products grow increasingly varied and complex. He urged the necessity of personalized recommendations from advisers for retirees.
Recognizing the intricate nature of retirement products, Fryer pointed out that it is essential for advisers to be equipped to compare these diverse options effectively. "We need to have products that might be complex under the hood, but intuitively they make sense," he said.
According to David Bell, executive director of the Conexus Institute, the evolution in advice processes within super funds is inevitable and primarily driven by technological advancements. He stated that for advisers, becoming proficient in explaining these complex products is paramount. "Advisers have got to become experts," Bell affirmed.
Another layer of complexity arises from selecting the right product, with Fryer questioning how advisers can ascertain the best option for retirees. Olsen suggested that advisers consider the provider's financial stability and their capacity to fulfill promises when selecting from various products.
Bell concurred, labeling the comparison of products as a significant hurdle for advisers. He remarked, "A real challenge for the research community will be to say, well, how are we going to compare these products and their features and so forth and provide good guidance down to our end users, which is advisers." This points to the need for robust research and comparison frameworks to assist advisers.
Fryer proposed that licensees could play an integral role in facilitating the understanding of new retirement products among their advisers. He indicated, "There was a lot of work that licensees could do with their advisers to show them how these products can work and set expectations."
With a wave of new retirees approaching, the consensus among sector leaders is clear: it’s time for both advisers and super funds to deepen their knowledge and engage in collaborative efforts to better serve retirees. "If there’s ever going to be a right time, it’s now," Fryer concluded, signaling a crucial moment for change in the industry.
This insight is derived from discussions at the Professional Planner Researcher Forum and highlights the increasing need for industry-wide collaboration in addressing the complexities of retirement income planning.
