It’s a shame for super funds that so few of their members access advice in the years around retirement.
For members, accessing advice supports better financial decisions, which lead to better financial outcomes. And for super funds, members accessing advice means higher fund retention.
But the majority of members don’t access advice and one of the main reasons is price. For most Australians, advice is perceived as too expensive. In fact, most super fund members are unwilling to pay for advice at all and according to CoreData research those who are willing to pay think it should cost them just $250.
It’s likely that, after recent mainstream advice scandals, Australians are cautious because they don’t have enough information to differentiate between high quality advice and poor advice.
Economist George Akerlof won the Nobel prize for his work on what happens to markets when buyers lack information. Arguably his best-known paper is ‘The Market for Lemons’ and its ideas apply to the market for financial advice.
As we know, a ‘lemon’ is a slang term for a low-quality car. The premise of Akerlof’s paper is that most buyers can’t differentiate between a mechanically great car and a lemon. But the person selling the car knows.