Low-cost, simple financial advice measures that increase engagement with superannuation should be incorporated into MySuper, Mercer has argued following the release of new research.
The latest Mercer Superannuation Sentiment Index, has highlighted the link between financial advice, preparedness for retirement and attitudes towards superannuation. Of the 1,028 working Australians surveyed, two in five (43%) of those who had sought financial advice were confident their savings would be sufficient, compared to only 30% of those without an adviser saying the same.
The study also revealed that people who had sought financial advice were generally more positive towards their main superannuation fund, rating it highly for being financially secure, trustworthy, and holding a positive view towards its investment performance. They were also more likely to rate their knowledge of superannuation as strong or sophisticated with 82% of those who have an adviser were confident in their knowledge about superannuation, compared to only 63% of those who did not have an adviser relationship saying the same.
Mercer said that one of the most important insights for the industry and policy makers in discussing how financial advice will be incorporated into MySuper is the role that superannuation funds play in providing advice to members.
The study found that when looking for advice, most people consider approaching their superannuation fund (40%), their financial adviser (42%) or their fund website (24%).
“The more people are engaged with their superannuation fund, the more secure they are with its performance, regardless of external factors. They will take a longer term view of superannuation which is the right way to look at it,” said Jo-Anne Bloch, Financial Advice Leader at Mercer. “Advice is the crucial link.”
“In the context of MySuper it is important to understand that while advice is highly valued by superannuation members it doesn’t need to be a high-cost, fully-fledged advice service to be an effective engagement tool.
“Further, members do not want to pay more for simple advice in relation to their current superannuation account, or pay for advice separately. Where the costs of simple superannuation advice are built into the cost of superannuation, more members access this advice.”
Ms Bloch said Mercer has provided limited advice for members of the Mercer Super Trust and other clients since 2003, and said it will extend this type of service to MySuper members in a cost-effective manner, as it develops options for its corporate and industry fund clients to adopt under the Government’s proposed MySuper arrangements.
“As the Stronger Super proposals continue to be debated, Mercer is of the view that the cost of limited superannuation advice must continue to be bundled into overall superannuation costs. The administrative support behind providing this advice needs to be simple and straightforward so costs can be contained,” she said.
Mercer provides limited and scalable advice to superannuation members via the phone or a workplace seminar. This caters for 80% of members’ needs. Those with more complex needs, which often extend beyond superannuation, are referred to Mercer’s strategic Financial Advice team.
Mercer's own tracking shows that members who attend a seminar are six times more likely to implement additional contributions or consolidate their super and are more than twice as likely to access their account online.
Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @MercerAU @MercerInsights