Retirement planning is increasingly on the radar for Australians, who have shown increased appetite for taking control of their super over the past couple of years.
According to the third ING DIRECT/Financial Services Council report, Your Super Future (2015), switching funds is on the rise, with the percentage of consumers holding multiple funds reducing from 28 per cent to 19 per cent since the inaugural report was published in 2012.
It’s encouraging progress, yet there are still aspects of retirement planning where consumers could benefit from additional support. Here are a few ways in which you could help your clients improve their super future:
1. Understanding super
Although Australians are becoming more engaged with their super, almost half (42 per cent) feel they don’t know enough about how superannuation works. Financial services literature can be complex, so bear in mind the importance of clarifying information for your clients.
This is also important when helping them create their retirement goals. While there is trust in the superannuation system as a whole, many consumers lack confidence that their super will deliver enough to maintain their lifestyle upon retirement. How much is ‘enough’ varies depending on household income, with 39 per cent of consumers thinking it necessary to accumulate more than $500,000 in super by the time they retire.
Increased knowledge often yields increased confidence, so help your clients work out a realistic goal depending on their lifestyle and aspirations, measure how they are tracking to date, and suggest ways to make up any shortfall.
2. Impact of fees
According to Your Super Future (2015), approximately half of Australians (49 per cent) are unaware of the fees they pay on super, yet fees can have a huge impact on your super balance over time
Only 29 per cent of Australians surveyed were aware there are no fee funds out there, even though fund performance and fees were given as the key drivers for switching funds. Furthermore, only 5 per cent claimed to pay no fees.
Reinforce the importance of checking fees, and consider ‘doing the maths’ with your clients to work out how much they may be able to save by switching to a fund which offers better value for money.
3. Choosing funds and investments
While consolidation is on the rise, Your Super Future (2015) found the majority of consumers tend to stick with their employer super fund rather than proactively choosing one themselves. In fact, only 11 per cent choose their super fund based on recommendations by a financial services professional, so I see plenty of scope for planners to work with their clients in this regard.
Consider also whether there are opportunities to educate your clients on the benefits of diversifying their investments. Depending on their needs, attitude to risk and life stage, this could mean helping them choose some investments which may generate higher returns than those which are part of the balanced option.
Overall, it’s encouraging to see Australians taking control of their super, but there’s plenty of room still for professional financial planners to add value to their clients financial wellbeing and improve their potential returns in retirement.
The information is general in nature and does not constitute financial advice. It does not take into account objectives, financial situation or needs and you should consider whether it is appropriate. ING DIRECT is a division of ING Bank (Australia) Limited ABN 24 000 893 292 AFSL 229823, Australian Credit Licence 229823.
