More people seeking super advice

New research shows an increase in people seeking advice when switching super.

More people seeking super advice

New research released by Roy Morgan shows an increase in people seeking professional advice when switching super, however, the advice given may not be compliant with the ‘best interest’ rules imposed on financial planners.

The findings from Superannuation and Wealth Management in Australia, which was released last week, are based on five years’ worth of interviews that included comprehensive coverage of superannuation. In total, over 250,000 interviews were carried out.

In the 12 months ending December 2014, of the 72 per cent of people who sought advice when switching superannuation funds, only 35 per cent consulted a financial advisor or accountant. The remainder sought advice from friends or employers. Recommendations from professional advisors were responsible for 43 per cent of retail super fund clients, but for only seven per cent of those new to industry super funds.

The research also indicated that there was a rise in the number of advisors who were tied to the larger financial groups and major banks and therefore recommending a product to which they were linked. Although the increase was only slight – one per cent up from 2013 to 77 per cent in 2014, this flies in the face of performance, with research showing that industry super funds have consistently outperformed retail super funds over this time.

The percentage of consumers seeking advice directly from financial institutions has risen from six per cent in 2010 to 9.3 per cent in 2014. The higher the super balance, the more likely a person is to seek advice, with the average balance of $102,000 for those consulting a financial planner, compared to $44,000 for those who don’t seek any advice. However, the reason for the difference in these amounts is more likely to be age-related (older people having accumulated higher balances) than salary related, as the difference in annual income is only $10,000.

As expected, those switching to a self managed super fund were more likely to seek the advice of a professional (71 per cent) and, of those opting for an industry super fund, only 13.2 per cent sought advice from a financial advisor.

Norman Morris, Industry Communications Director, Roy Morgan Research says:

“While it is a positive trend that more people are seeking advice when switching their superannuation fund manager, there are still some issues regarding where people get advice — not to mention the 28 per cent who don’t get any advice.

“This research shows that people with high superannuation balances are more likely to seek professional advice than those with less funds. Besides cost, the potential reasons for this include a lack of trust in financial advisers, low financial literacy, and lack of availability of scaled advice”.

Read more at Roy Morgan Research.  

Opinion: Trust still an issue

Superannuation is a complicated issue and despite how much of a handle you think you have on your finances, seeking professional advice is often the best course of action before making any major financial decision. Yet even though the Roy Morgan research shows that more people are seeking professional advice, those with lower super balances are more reluctant. This may be due to the belief that a low balance doesn’t warrant advice, however, a level of distrust with the financial planning industry is also likely to be a factor.

The band-aid solutions, such as a register of financial planners and the best interest rule, to inherent problems in the industry only serve to confuse consumers. They are also likely to give those seeking advice a false sense of security that their chosen planner is indeed acting in their ‘best interests’.

With the big four banks and AMP accounting for more than 80 per cent of financial planners in Australia, finding a planner who will offer truly independent, qualified advice is like looking for the proverbial needle in a haystack. But this shouldn’t deter you; you just have to be more prepared. To help you choose the right adviser for your retirement income needs, why not check out our list of 50 questions you should ask an advisor

Do you think there’s still a level of distrust with the financial planning industry? Should the government do more to ‘clean up’ the industry? Or is it an individual’s responsibility to ensure the safety of their own retirement funding?





    COMMENTS

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    Travellersjoy
    13th Jul 2015
    10:21am
    I have had good support from Hesta and the Commonwealth financial people at Centrelink, to help with my small super balance.
    First I think about my options, then ask for likely outcomes. They don't give advice about decisions, but a lot of good information to aid decisions.
    They can also inform about options I had not thought of, and help find a way through to the result I want.
    I have never felt that they are biased, just wanting to give the best information and analysis they can. Then it is up to me.
    stupidgalah
    13th Jul 2015
    10:29am
    I went to a financial planner in connection with my Super fund, as my children thought Mum may not be up to managing . I put my money, after the planners advice, into eight different managed funds. I gave it twelve months . At the end of the time, six of the funds LOST money and the two others paid me dividends out of the principal.....what a great return..........I very quickly took my money back and have invested it myself, as I thought if I was going to lose it, I wasn't going to be paying someone else to do it for me. The financial planner had a wall full of awards, and I went to him on the advice of my ex accountant...... never again....and his fees were taken out on the first day.... lucky for him, as he wouldn't have been getting much if his fees were aligned his performance........oldies are not as stupid as the youngies think....
    Jen
    13th Jul 2015
    11:23am
    After all the adverse publicity, I doubt I'd ever trust a financial planner with my hard-earned.
    Tom Tank
    13th Jul 2015
    11:37am
    We received financial advice, for which we paid upfront, and it was very worth while. The adviser did have links with an Industry Fund but their advice covered a number of possible options clearly laid out so we could understand them.
    We took their advice and have an Income Stream from our investment in an Industry Fund and are very pleased with it.
    We only had a modest sum which qualified us for a full age pension, without doing anything artificial to qualify for that, and we live modestly but quite comfortably.
    I can heartily recommend Industry Funds to anyone as they do not rip you off and perhaps that is why there is a move on to make them more like the commercial funds who simply do not provide the same returns and service.
    LiveItUp
    13th Jul 2015
    11:39am
    Financial planners like any other profession need to be handled with care. Do enough research to give you enough nouse to be able to work out what they are saying is good advice or not.

    I currently have a situation that I'm lacking in knowledge but just common sense was enough to make me back off. I'm gradually working it all out but my biggest problem here is that the knowledge base available is very limited.

    The Centrelink FIS people are impartial in that they have nothing to gain from the advice they give and are free. But even here I found that one needs to do their homework and to use these people to find out mainly the rules. One even said to me that if you don't know the rules you can't play the game successfully.

    Remember financial planning is not one size fits all and as such you need to be comfortable with the advice given. An example is that to me bank term deposits are one of the most risky investments available today because with inflation and tax there is barely a year where one gets a positive return. I'm a lot more comfortable owning shares in the bank instead. But this is not for everyone.
    Theo1943
    13th Jul 2015
    11:49am
    Yes Bonny, Term Deposits don't pay much, if at all above the inflation rate but they do provide a safe parking space. On the other hand, risk-wise, with a Bank Term Deposit there is never a year when you lose half the capital.
    LiveItUp
    13th Jul 2015
    12:09pm
    Term deposits are only as safe as the bank itself. Only first $250,000 of your bank deposit is guaranteed the rest is not.

    No one should be losing half their capital owning banks?
    Anonymous
    13th Jul 2015
    3:02pm
    A term deposit is a savings product with not only a bank, but it can be with any Authorised Deposit-taking Institution (ADI) such as a credit union or building society.Term deposits are guaranteed by the government under the Financial Claims Scheme. This protects term deposits up to $1 million automatically and free of charge.For deposits over $1 million, there is a separate guarantee available from the government, but you will have to contact your ADI about how to access the government guarantee for these large deposits.
    LiveItUp
    13th Jul 2015
    3:30pm
    Only $250,000 according to APRA here

    http://www.apra.gov.au/CrossIndustry/FCS/Pages/fcs-adi-html.aspx
    Nan Norma
    13th Jul 2015
    3:37pm
    I have to agree with Bonny, $2500,000,- that is in each bank.
    Anonymous
    13th Jul 2015
    3:39pm
    You are both quite correct. This has been the case since 1 February 2012. I was think of the grandfathering provision prior to that date. So sorry.
    LiveItUp
    13th Jul 2015
    3:39pm
    It started out at $1m then was $500,000 now $250,000. How long will it stay $250,000?
    jackie
    13th Jul 2015
    11:52am
    The only people that make money out of your Super are the financial industries and the CEOs of the shared companies. Investing in shares is gambling just like betting on the horses.
    LiveItUp
    13th Jul 2015
    12:15pm
    So investing in super is gambling as shares plus their derivatives is where your money is invested.

    If you brought Commonwealth Bank when it floated at $5.40 the dividends alone would have more than paid for them. But today they are worth $86.03. So if that gambling then bring it on.
    Tom Tank
    13th Jul 2015
    12:57pm
    Refer my earlier contribution, We have never had a negative year on our money, low return yes but never negative but then it is an Industry Super Fund which is not controlled by banks or big financial institutions.
    They have union involvement yes but they also have employer involvement as well with a reasonably balanced Board of Directors. At least that has been opur experience.
    KSS
    13th Jul 2015
    1:11pm
    It should be noted though that shares do go down as well as up and so should be seen as a longer term investment. They also require nerves of steel to weather the down times and not withdraw the investment immediately any downturn occurs.
    LiveItUp
    13th Jul 2015
    1:17pm
    I know of a young fellow in the best performing industry fund who only has a casual job and his super return has been negative for the last 3 years.
    jackie
    14th Jul 2015
    11:56am
    Yes Bonny investing in shares is gambling. You win some and you lose some. So you had a lucky streak with CBA just like many have lucky streaks with the horses. Actually the horses can pay a lot more than CBA shares.
    LiveItUp
    14th Jul 2015
    9:57pm
    How do you explain why I have had many of these lucky streaks then? Yes I've had the odd potential disaster and lost a few dollars.

    Never worried about betting on the horses or the pokies. Why anyone would play the pokies is beyond me when they pay back much less than they take in. Odds are not on one's side at all. From what I've seen with horses then they are little better then the pokies. With Casinos one has only to see how rich people like James Packer are too realise that they must be getting that money from someone and it's not me.

    Nearly everyone I know buy goods when they are on special so why not buy shares when they are on special (down)? For some odd reason people buy shares when they are expensive and sell them when they are cheap. I've never been able to work that one out.
    Supernan
    13th Jul 2015
    12:13pm
    Yes the 4 big Banks & AMP do have a monopoly on the Finacial Planning Industry. Definitely make sure you have independent advice. Too often what happened to "stupidgalah"does happen. We'd sooner manage our own money any day. It can be confusing if you are not money savy but at least money in term deposits in Australia wont disappear or reduce - our banking laws are very strict & protect investors.
    LiveItUp
    13th Jul 2015
    12:23pm
    Even though banks are perceived to be safe I have always used multiple banks. A few times I have found myself wanting money but one bank wouldn't give me the money so have had use another bank instead. I also have multiple credit and debit cards for the same reason.
    Nan Norma
    13th Jul 2015
    2:58pm
    I invested in superanuation in two banks - and within a week I lost $15000 due to the GFC. I withdrew the whole lot and will now stick to bank interest. If I can stay ahead of the deeming rate I'm happy.
    Adrianus
    15th Jul 2015
    2:41pm
    Nan Norma, some of those types of investments have a "14 day free look period" which allows you to cancel without loss. I guess it didn't apply in your case?
    Nan Norma
    15th Jul 2015
    5:36pm
    Frank. It sure didn't and I feel the banks cheated too, or at least one did. When I withdrew the money one bank said you get what the balance was on the day you collected it, which gave me less. The other bank only gave what it was the day I applied to withdraw it, which was of course less value than the day I colleted it. can't trust anyone.

    13th Jul 2015
    5:40pm
    I think we need to introduce accountability, and end self-regulation. When advisers can charge up front and suffer no penalty for failing to deliver, the system is unworkable. Change the system to payment as a percentage of the outcomes achieved and see how quickly things change!

    The other issue is over-complexity. The rules are now so complicated that even the experts can't understand them. We consulted 6 different professionals on a particular question of law and got 2 different answers - 4 agreeing on one answer (the wrong one) and 2 getting it right. The 4 who were wrong had the most impressive reputations and charged the most.
    LiveItUp
    14th Jul 2015
    10:15am
    Everyone needs to educate themselves in these financial matters and not just take what financial planners say and act on it. After all no one looks after your money better than you do.
    Strummer
    14th Jul 2015
    9:11am
    I found Centrelink to be very helpful when researching my retirement options. Unbiased advice is the best advice.
    thommo
    14th Jul 2015
    9:20am
    Debbie.. As I said to you in the last week or so, you need to add a "rider" to these financial articles so that readers understand that whatever the rules are today, the Federal Govt can change them tomorrow without warning, and stuff up your retirement plans, just like they did with the 2015 budget changes to the pension assets test. Many part age pensioners retired on 'good' advice before Jan 2015 to take advantage of Centrelink's deeming income rules, only to have the rug pulled from under them by the unfair changes to the assets test. The age pensioners on the bottom rung of the latter so to speak (ie those with no or very few assets) will get an extra PALTRY $15 per week, while most won't get any extra benefit, but several hundred thousand will lose the part age pension altogether as from 1.1.17. They wouldn't even 'grandfather' those recipients already in the system, and their retirement plans are now torn to shreds.They will be enough to kick this govt out of office come next election.
    So much for relying on 'good' financial advice. What a load of BS.
    LiveItUp
    14th Jul 2015
    10:14am
    If a couple has a million dollars in assets they should not be getting the age pension so 2015 budget just fixed up an inequity in the system. Retirement plans torn the threads...well that's what happens when you rely on welfare. Rules change and will change even further especially if we get a Labor government in power.

    The house now needs to be included in the assets test to fix that big inequity too.
    thommo
    14th Jul 2015
    1:01pm
    What a cynic you are Bonny. Sounds like something Scott Morrison would say.
    LiveItUp
    14th Jul 2015
    9:25pm
    No just a realist in that welfare is for those that need it not those who get it just because they can. Yes I do think Scott Morrison is doing a good job but needs to go a lot further to make sure welfare gets to the right people.
    Debbie McTaggart
    15th Jul 2015
    10:21pm
    Of course you're correct Tommo and we've covered the affect these changes will have on retirement plans in several other articles. However, this article is about the regulation of planners who may not be giving the best advice in the first instance.
    jackie
    14th Jul 2015
    11:59am
    Australians should have the right to invest their super where ever they want to instead of these compulsory Super companies. Their fees are ridiculous. They are making the money from us not for us.
    Jen
    14th Jul 2015
    1:12pm
    Apparently not in Abbott's brave new world of control of everything. Corporations rule, profits before people.
    LiveItUp
    14th Jul 2015
    9:30pm
    My super is in a SMSF and I decide where it is invested so Australians do have the right to invest their super where they want. If I had to invest it in one of those managed super funds I would only have the minimum and I get it out ASAP.

    That said less than 10% of my wealth is in super as to me it's glory days are nearly over and I prefer other investments now.
    Mak
    14th Jul 2015
    6:05pm
    Superannuation untrustworthy, yes, 100%.
    The fund managers do not have any interest in anyone except themselves and their bonuses, superannuation is a con, possibly 'created' to make people forget that 7% of their taxes was first intended to be placed in a Pension Fund to be given to people retiring at 65 years of age.
    This 7% of tax is money OWNED BY TODAY"S PENSIONERS and the truth of the matter is,
    EVERY PERSON OF 65 PLUS TODAY IS A SELF-FUNDED RETIREE.
    Non of our politicians are capable of running a country, none of them have any respect for retired people who busted their guts to make Australia great, now they are wrecking Australia, and the all-important seniors.
    We have a current government couldn't run a 2,3, 4 or 6 family household, as opposed to
    the current Opposition Government who would, given the chance, run the country like a third-world brothel.
    Hopefully the current government can learn to run a household.
    LiveItUp
    14th Jul 2015
    9:33pm
    There are very few people over 65 today who are entirely self funded retirees. Most people put their hand out for some form of government welfare if they need it or not just because they can. This has to change as it's just too expensive for the tax base of today.
    MacI
    15th Jul 2015
    11:48am
    It bugs me when people say that Super is a rip off. Superannuation is simply a low tax vehicle for investments. In the accumulation stage contributions are taxed at 15% - for most people much less than their top marginal tax rate - and earnings are taxed at a maximum of 15%. In the income stage when you have retired earnings are tax free as is income after you have reached age 60. The only downside is that it is locked away until retirement. And that is the payback expected in return for tax concessions.

    The issue is not with Super but with the choice of investments and the quality and veracity of financial advice. Bad choices and bad advice will result in bad performance regardless of whether or not investments are inside or outside of Super. Unless you are financially savvy enough to make your own investment choices in an SMSF do some research to find the Super funds that have consistently over time provided good returns and charge lower fees. Determine your tolerance for risk and choose the pre-mixed investments on offer that matches your tolerance and stick with it. The information that you need is readily available on Super Fund websites and there are plenty of websites that do comparisons for you.


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