Advice Research

Lack of understanding of ‘advice’ results in low take-up, research finds

Super fund members’ lack of knowledge about what “financial advice” entails, and low levels of trust following the Global Financial Crisis (GFC), are the key barriers to seeking advice, research by Professional Associations Super has found.

Qualitative and quantitative member research by Professional Associations Super found that members don’t understand the types of advice on offer and what value it delivers, and this has become a barrier to seeking advice for 67% of respondents.

It also revealed that following negative returns and poor publicity during the GFC, 57% of respondents cited low levels of trust as a barrier to using a financial adviser.

“Super funds keen to expand their advice offering need to overcome the perception that financial advice doesn’t deliver value, and rebuild trust in those providing it, if they want to reach more members,” said Megan Bolton, CEO of Professional Associations Super.

The lack of knowledge surrounding advice has also resulted in a gap between its actual cost and what members believe is reasonable, according to the Fund. When asked if they would pay for broad advice on building super, only 27 per cent responded positively. When interviewed, some respondents said the service should be provided free of charge, as part of the membership fee, while others were happy to pay a fee as long as the adviser could justify the cost.

“If funds are going to offer advice, then they need to make it crystal clear what the service involves, what value it provides, and what benefits members receive for the costs involved. It needs to be as tangible as possible, without any smoke and mirrors to cause confusion.”

The more that members understand their options, Ms Bolton said, the likelier they are to get engaged in retirement planning.

“Low awareness and understanding of advice means the easiest option is to do nothing at all. That’s how we’ve come to a situation where 30% of people aged over 50 have not made any preparations for retirement – based on the 2010 Mercer Superannuation Sentiment Index,” Ms Bolton said.

The research also found that a significant number of members – across all age groups – would prefer advice to be delivered face-to-face (59 per cent on average). According to respondents, this format provides the opportunity to assess the adviser for competency and honesty, ask questions and build a trusted relationship, among other benefits.

“We found that members place a significant emphasis on having their advice conveyed in person. They want to feel comfortable with the person providing the advice, as it’s a personal and sensitive subject. Other forms of delivery such as phone, internet and email were deemed to be acceptable to members, but only after a personal rapport had been built face-to-face”, Ms Bolton said.

Despite the challenges, Ms Bolton says there is a demand for financial advice among super fund members, as long as they understand the value proposition.

“The challenge for funds is communicating the availability of this service and delivering the advice in a direct, uncomplicated manner. This needs to be a priority for fund providers if the service is to be a feasible and valued part of their offering.”

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Published: 20 December 2010