Advice related to retail superannuation is likely to disappear by 2030 as a result of industry reforms and market movements, with only SMSF-related advice remaining as a viable revenue stream for advisers, according to an online technical and business development services provider.
The prediction was made by wealthdigital in a newly released white paper, “2030: Advice, investment and superannuation in a brave new world”.
The paper claims reforms to life insurance, retirement income, adviser education and professional standards, as well as inquiries into superannuation, financial services, banking and aged care, will “completely alter the remuneration structures of financial planners, the services that planners offer and the characteristics of new entrants to the advice industry”.
“They also will alter the greater financial services environment, including the role of the super fund and purpose thereof,” the report said.
For this to take place, the report’s authors, knowIT chief executive Wayne Wilson and knowITdigital technical manager Rob Lavery, said they presumed the recommendations of the Productivity Commission and financial services royal commission would be executed in totality and currently implemented and planned reforms would be maintained and executed.
As a result of this, the superannuation sector would see retail advice subsumed into that provided by superannuation funds, while SMSF advice would survive but would be subject to more extensive best interest duty obligations.
The paper noted the development of a default super fund that followed a fund member throughout their life and the creation of a top 10 fund shortlist would remove super fund consolidation and selection from the range of advice provided to wealth-accumulating clients.
“Outside of recommending a self-managed super fund for strategic reasons, it would take a brave planner to claim they could select a better fund for a client than the independent body solely charged with that job,” it stated.
Wilson and Laverty also predict pre-retirement and retirement planning would be taken over by superannuation funds in line with a Treasury position paper that places the onus on funds and their trustees to do so, but would, in turn, make SMSF recommendations more appealing to advisers.
Despite this, SMSF recommendations would be faced with the likelihood of the removal of the current “reasonable investigation” step in the safe harbour provisions, forcing advisers to conduct broader product research.
“Iron-clad proof that an SMSF is in the client’s best interests will need to be provided when all reasonably available alternatives are considered,” the paper stated, adding an extension of the design and distribution obligations for product providers to SMSF advice would require proof the recommendation was appropriate.
The paper noted that while around 35 per cent of financial advice revenue was drawn from superannuation and retirement advice, and a further 20 per cent from SMSF advice, only the latter will survive intact and was unlikely to rise.
“The 35 per cent of advice revenue attributable to retail super advice will have all but dried up by 2030,” it predicted.
“The incentive will be there for advisers to increase SMSF advice, with retail super advice all but eliminated. That said, higher advice standards will crimp advisers’ ability to make such recommendations where clear justifications for an SMSF are not present. As such, the revenue attributable to SMSF advice is likely to only be comparable to current levels in 2030.”
