Financial advice through super funds: What’s on offer?

Good timely financial advice can make a big difference to retirement outcomes, yet super fund members are often unaware of the advice services offered by their fund.

Recent research by Otivio, a digital advice provider, found that while 84% of Australians trust their super fund, only one-third have researched the advice their super fund can offer them.

Separate research by Aware Super on 100,000 of their own members found that those who received advice had an average of $150,000 more in super at retirement and reported two and a half times more voluntary tax-efficient super contributions than non-advised members.

In an environment of increasing cost-of-living pressure, investigating your super fund’s advice services could not only improve your financial future, but save you money now. Many services are free or can be provided for a fee deducted from your super balance, so you can get the advice you need without needing to dip into your own pocket.

Types of advice offered by super funds

In 2013, super funds were given permission to give their members advice that is ‘collectively charged’. This means that the fund’s administration fees are used to cover the advice service, rather than individual members paying a fee at the time they receive advice. This is called ‘intra-fund advice’.

The advice currently being offered by super funds falls into three broad categories or levels of advice. Not all funds will provide all types of advice. If you have an ‘advised super product’, where you needed an adviser to access the product, it is unlikely the fund will provide advice services themselves. You will generally be referred back to the adviser who helped you open the account in the first place.

General advice

The name your fund uses might be different, but the first level of advice is the same across the board and is usually provided by your fund’s call centre. They can give simple advice on specific topics related to your account or the fund’s offerings to help you make decisions.

This advice cannot consider your personal circumstances. It may include statements such as ‘we suggest our younger members consider investment options with more growth assets because they have time to ride out any ups and downs and benefit from a higher long-term return. For members closer to retirement, options with a smaller growth allocation could be more suitable, as stability becomes more of a priority’.

In other words, general advice can help you make decisions but will not include a personalised recommendation.

You should also be aware that general advice can be given by staff who are not qualified financial advisers. They must however meet education and training standards specified by the Australian Securities and Investments Commission (ASIC). There is no cost to receive general advice.

Limited personal advice

The next step is personal advice on a single issue. For example, you might be in your fund’s default MySuper option but wonder if it’s the best option for you, or you might want to know the best way to contribute to your super. This type of advice is called ‘limited’ because it doesn’t consider all the topics that might be relevant to you, only the single issue you’re requesting advice about.

Super funds frequently provide this advice under the intra-fund advice rules. If this is the case, you won’t need to pay a fee because it is covered by the fund’s administration charges. This advice is personalised to your circumstances, and you will receive a statement of advice (SOA) that explains the recommendation you have been given.

Intra-fund advice commonly covers the following questions:

1. I have $x I want to contribute to super each month, what is the most effective way to do that? (Maximising any co-contribution and tax saving)
2. How much insurance (and what type) should I take out in the fund based on my personal situation?
3. Which of your investment options is most suitable for me?

A fund may also provide advice about transition-to-retirement pensions or retirement pensions under the intra-fund service.

If the fund doesn’t use intra-fund advice provisions, you will need to pay a fee for limited advice. This can be deducted from your account balance (if the advice is about your super) or paid from savings outside super.

Comprehensive personal advice

The final tier is more complex financial advice that takes your full personal circumstances into account. This might include advice on insurance, tax structures, retirement planning, aged care and estate planning.

This advice starts with a free, no-obligation conversation with information about the fees you will be charged if you choose to proceed. Some funds offer face-to-face consultations, help with implementation and regular reviews.

Comprehensive advice may be delivered by advisers employed by the fund or by an external provider. Either way, any fee that directly relates to advice about your super can generally be deducted from your account balance. The cost of advice about non-super issues must be paid from other savings.

How is advice delivered?