Digitally delivered intra-fund advice is the only realistic route to low-cost, consistent, compliant and robust personal advice at the scale being considered by the government’s Quality of Financial Advice Review, according to a paper from Ignition Advice.
The Going Digital with Intra-Fund Advice blueprint explores the opportunity and benefits of a digital advice solution for intra-fund advice for superannuation trustees to deliver cost effective, accessible advice to members to optimise their retirement outcomes.
Intra-fund advice refers to limited or scaled personal advice in relation to a defined set of topics that a superannuation trustee can provide to a member, with the cost spread across all members as part of standard annual fees.
Craig Keary, CEO Asia Pacific at Ignition, says there is a growing tension between the inexorably growing demand for personal advice, driven by rapidly increasing numbers of older members, and the limited human advice capacity of super funds, typically capped by headcount or spending constraints.
“To date, that tension has often been resolved by the member seeking advice elsewhere, also often resulting in the member leaving the super fund.
“Unsurprisingly, many super funds see that as an unwelcome and sub-optimal outcome after years, perhaps decades, of building the member’s account balance.
“As the number of older, higher-balance members within many super funds now grows rapidly, many exits by such members would be an outcome which undermines the fund’s desire to assist members in their transition to retirement.
“Our blueprint explores how the application of digital advice technology to greatly expand intra-fund advice capacity offers a solution to this problem, making high-quality and affordable financial advice accessible to every member who would benefit from it.”
The blueprint highlights ASIC’s intra-fund provisions that are intended to facilitate simple and one-off advice for super fund members, taking personal circumstances into account on the topics of insurance cover in superannuation, contribution levels, and investment options.
“Digital advice technology is well-suited to a fund’s intra-fund advice offer and can be delivered by a fund in different ways, including member driven, adviser-led and hybrid, where digital is used to leverage human intra-fund advice teams. Our international experience suggests a hybrid model leads to positive member and institutional outcomes.”
The blueprint also outlines the economic benefits of a digital advice solution for super funds, which are comparable to the substantial improvements achieved by funds in digitising other business processes.
“Digital advice fundamentally changes the economics of advice delivery by substantially increasing a fund’s advice capacity in a highly cost-effective manner, while improving member experience. A hybrid digital advice model allows a fund’s human advisers to be redeployed to support members requiring personal assistance or with complex needs, while technology addresses the most common intra-fund advice needs.”
“In essence, the hybrid model creates the capacity for a fund to deliver on underlying member demand for intra-fund advice. This means funds can address the advice gap, serve more members at lower costs and ultimately help more members access the benefits of advice to achieve better retirement outcomes.”
Access Going Digital with Intra-Fund Advice here.