In news that would seem to confirm the need for professional financial advice, analysis released this week shows that the early release of super has not worked as intended according to AlphaBeta founder Andrew Charlton. Meanwhile, in further pushback against the FASEA exam, one member group has called for advisers to boycott it, and a dominant player in financial planning software announced its intention to buy into the platform space…
64% of Early Accessed Super Spent on Discretionary Spending
Now, we don’t think people should be told how to spend their own money, but news of analysis around the 1st tranche of early accessed super this week revealed some startling facts that would seem to confirm the need for advice professionals. Transaction data crunched by the advisory firms AlphaBeta and Illion showed that many people dipping into their retirement nest eggs have increased spending on lifestyle items, rather than using the cash as a lifeline.
The analysis found that the early release of Super payments were indeed being spent and found that a third of the money was used up in the first two weeks after payment. On average, people withdrew $8000 and spent an extra $2855 in two weeks above their usual fortnightly spending. A sample of 13,000 people who accessed their super under the early release scheme shows 64 per cent of spending went on discretionary items. More than 10 per cent, or $327, was spent on online gambling - the second-highest spending in any category, behind repaying debts.
The scheme is intended to allow individuals facing financial stress due to the covid-19 pandemic to access funds and was meant to have eligibility criteria applied. These criteria included being unemployed, eligible to receive a job seeker payment, or have at least a 20% fall in their hours worked or turnover. But 40% of those who took advantage of the program either did not lose income, or had any loss compensated by schemes like JobSeeker and JobKeeper. There was no requirement for any supporting evidence, no income verification and no need to prove that the lost income hadn’t been made up with government support. Applicants just needed to tick a box.
The latest figures from APRA indicate 1.78 million Australians have applied to access their superannuation, with 1.63 million being paid. $12.2 billion has been paid since the inception of the scheme, totalling an average of $7,476. APRA indicated up to $15 Billon would be paid out in the first stage of the scheme.
Critics of the scheme have said it would cause people to crystallise losses in their investment portfolio when markets are low and would deprive savers of many years of compounding returns. In response to the report, Treasurer Josh Frydenberg endorsed the ability of people to use money how they saw fit, saying "This is their money. They will use that money for a range of purposes… so we are comfortable with the fact that people are accessing their money when they need it most." “This money is tax-free and that's been an important initiative by the Government, and it's been welcome”.
You can read how several advisers have responded to a consumer query about using early released super money for purchasing a property here.
Adviser Group Calls For Exam Boycott
The United Financial Advisers Association (UFAA) has said the FASEA exam is completely opaque, non-transparent in application and meaningless as an academic industry entry requirement and should be boycotted. The UFAA Chair, Alex Vagliviello said his group was “seeking a practical alternative that is both honest, transparent and filled with integrity”. “Regardless of the narrative put forward by the LNP or Labor, FASEA and the industry is confused and in disarray while over-regulated to the point where it is on the verge of collapse,” he said.
The aggressive words and stance may be supported in theory by many advisers who are feeling overwhelmed by pressure seemingly from all quarters, however, in reality, boycotting the exam will most likely see those advisers ejected from the industry and unable to practise. Though the government plans to extend to exam deadline, their appears no appetite or willingness on their part to have the exam canned or make wholesale changes to the FASEA regulatory regime.
The calls come at a time when there is increasing debate about the future direction of adviser member organisations such as the FPA and AFA. Many advisers have been critical of industry association representations on behalf of members in response to new legislation in recent years and the old chestnut of unifying advisers under one banner has again reared it’s head as part of a potential solution.
Iress Bid For OneVue
The rapidly changing landscape in advice had another jolt earlier this week when Iress said it had completed a $150 million placement that was announced earlier in the week, and that it had agreed to acquire 100 per cent of the shares in platform provider OneVue.
Iress chief executive, Andrew Walsh said “The combination of OneVue’s strength and position in administration of managed funds, superannuation, and investments, with Iress’ strength in software and data will drive innovation through technology. This includes the development of software and services that brings advice and investments closer together, resulting in greater efficiency and productivity for professional advisers and businesses in Australia”
If the acquisition proves successful, the words of Mike Taylor from Money Management may ring true: “The bottom line for the Australian platform industry is that a significant player has joined the fray with the potential to develop an offering derived of both planning software and fund administration which busy financial planners are likely to find compelling”.