Influential superannuation industry stakeholders had the opportunity to respond to the Productivity Commission's draft report at a public hearing held in Sydney this morning.
Challenger retirement income chair Jeremy Cooper said he welcomed Draft Recommendation 11 - Guidance for pre-retirees, but a problem by and large is the superannuation industry's focus on boosting assets over the accumulation phase.
What complicates this even more is the financial advice process and the remuneration tied to it, he added.
Cooper said the industry does a good job in guiding members during accumulation phase - but there seems to be a lack of engagement with members once they are ready to retire.
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The industry is good at gathering contributions from employers and members aged 30-40 years, but fail to give 80-year-olds a seat at the table or ask 'how they are going?'
Nor is the current system doing a good job of "paying money safely back to retirees," Cooper said.
Not only do super funds need to respond to this, but also financial advisers.
Cooper said advisers have limited training when it comes to the needs of retirees and should broaden their services outside of tax and investment strategies to factor in health issues that might impact their ability to deal with finances, such as cognitive decline.
While this type of advice might fall into the general versus personal advice grey area, Cooper said it's not insurmountable if new legislation stepped in.
However, he pointed out that advisers are remunerated based on the assets of members. When clients are spending money in retirement phase - valued at $760 billion - the incentive to provide that advice is not there, he said.
Adam Gee, a superannuation advisory partner at KPMG Australia, told the PC if the best-in-show proposal was to operate successfully for all parties, better quality data would be needed for meaningful comparisons. This would not only incentivise members to become more engaged with their super funds but also take action, he said.
CHOICE director of campaigns and communications Erin Turner said a "healthy consolidation" of super funds needs to take place in the short-term, and highlighted the historical evidence of advisers continually putting clients in poor performing funds - whether it be in SMSF or in products for the institutions they are aligned to.
She recommended that the PC develop a detailed operational plan for a best-in-show system as it would be beneficial for consumers, and that it was unclear of the transition process in the draft report.