Sean Aylmer speaks with Giacomo Tarantolo from UniSuper about the challenges faced by Australians approaching retirement. They discuss the increasing demand for financial advice amidst a declining number of financial advisors, highlighting the 'missing middle' demographic that is underserved.
They explore the complexities of the retirement system, the concerns of members, and the tools available to assist in retirement planning.
UniSuper is a supporter of Fear & Greed
Welcome to the Fear and Greed Business Interview. I'm Suan alma As millions of Australian's approach for retirement, demand for help is increasing, yet the number of financial advisors is declining. It's creating a growing gap and super funds are stepping up to play a bigger role in supporting members. Giakimo Tarantalo is Manager Retirement Solutions at Unisuper, which is a terrific supporter of this podcast. He joins me in the studio. Giakimo, Welcome to Fear and Greed.
Thank you, good afternoon and thank you for the opportunity.
We are seeing huge numbers of baby boomers and beyond retiring. How well is the system set up at the moment.
Yeah, I think let's put ourselves in the Australian shoes at the moment. They come to us with simple questions that have complex answers. How much do I need to retire? How long is my money going to last? And we're parties of a system that is a complex system and its challenging to navigate for that appage Australian. And if we take us if we zoom out and we look at the economics, we have a supply and demand issue. At a macro level, we have a wave of Australians entering the retirement phase, but we only have sixteen thousand financial advisors. We have three point six million Australians retiring in the next ten years, and if we zoom in on a UNISUPER perspective, we estimate one in six will be retiring and one in five will actually be reaching preservation age. For context, we have about ninety thousand members who are over the age of sixty who haven't actually retired yet. Now, of that wave, there's essentially three buckets. We've got the highly affluent, high net wealth individuals who are being served very well. We've got the mass market who will be served with those low balances who will be served by Social Security. But there remains a group of Australians in the middle who are not being well served at all, and we like to call this group the missing middle. At UNISUPER, we actually define this cohort as the Jennifer segment, and that is Jennifer is someone who's a primary school teacher, about forty five fifty years of age, two kids, divorced, is planning to retire with about two hundred thousand. She's relying on Social Security and is heavily in debt. This single income, she handles her day to day expenses in planning up to retirement, but she finds retirement extremely overwhelming. On the emotional side of things, she thinks that she's left things too late. She's worried about feeling judged, and she has this shame in terms of that she doesn't know what she doesn't know. She doesn't even know the right questions to ask. And it's that cohort of member that actually arguably needs the most help when it comes to retirement. And I don't think we're serving those well enough.
Why do we have that cohort? I thought you were talking about me, but then you said sort of mid forties, and I sort of had to put myself out and we went back to Jennifer. But let's talk about those in the mid fifties as well. So I mean it is that group who there is a sense of shame in a sense we should have thought about this twenty years ago. But I think that's okay. Why have we not looked after that cohort? And you are the uni serpers of the world doing that now? Or I mean, because there were a legislative change in the last couple of years around the covenant retirement income covenant and stuff like that, which sort of encouraged a lot of this stuff. Yeah, and I think again looking at that problem, that missing middle of the people that need the most help. If we look at those types of people and the issues that we observe is that that missing middle does not have the propensity or the willingness to pay for financial advice. And they hear about financial advice and think that's too expensive and that's not for me. And then if you look at the financial advice system at the moment, it's not geared to provide simple advice in a cost effective way. And as I mentioned to you before, we have sixteen thousand financial advisors, and if we buy our estimates, we actually think there's only about nine thousand of those that are actually client facing. And the analogy I like to use is in Australia we have approximate one hundred and thirty thousand doctors, and you'd argue that we actually have a doctor shortage and that's only servicing the people that are unweil need doctor assistance. You could argue that everybody moving to retirement actually would benefit from some form of advice or guidance or help. But we only have nine thousand client facing advisors for three point six million members retiring, so what's worked in the past won't necessarily work in the future, just purely due to the sheer volume. And when we think about what unisuper are doing to address this problem is just actually playing an active role and stepping up. I think there's always been a fear that we're competing with financial advisors, but in fact that cohort, that missing middle is not actually their target market. So we've got to think of it as complementing the financial advice system, not competing with it. So unisuper specifically, we're taking a digital hybrid approach to this, where members will go through a digital advice experience and work through the questions that they have about their retirement. The digital OFVI experience will provide answers to their questions and give some kind of guidance on terms of what members could do for their retirement, but leave the onus of the decision making up to them. And this is where unisupers is very well positioned, because if they're still unsure. We've got this advice ecosystem that they can tap into. Unisuper specifically, we own and operate our own AFSL. We have an end to end service model in terms of general advice, intrafund advice, as well as the full comprehensive advice side of things. So we're set up to answer the members' questions. We want them to go through this digital approach because we don't have enough people, enough advisors to see every single member, and most members who want those simple questions answered can go through that digital approach, but they's still that heavily reliance on that member seeing a human to actually validate before they actually go ahead with doing what they want to do. Stay with me, Jackomel, I want to talk to you about support for a tie reason after the break. We'll be back in a minute. I'm speaking to Giakama Tarantola from Unisuper. You've talked before the break a bit about what Uni Souper is doing. What are the biggest concerns you hear from members.
I think the biggest concern is not knowing where to start and understanding the nuances of the retirement system as they're set up today. If we think about accumulation and members going through their working life, decisions are made for them, and accumulation just works. They tell their employer who their super fund is, the money goes straight to the superfund. If the member doesn't make a decision, the super fund makes a decision for them, and everything just happens. But when you come to retirement, you've actually got to start making certain decisions and you actually have to take action to move from the accumulation phase into the retirement phase. We have an event coming up, an annual event that we do which is called our pre Retirement Outlook where we put on show unisuper specialties. We have our CEO, our CIO and our financial advice team put on a live sem for our pre retirees and it's coming up in the middle of May. But we've asked them to send in their questions in terms of what do they want to get out of this, and again going back to that earlier point, those simple questions have complex answers. We're getting questions around how much do I really need? Am I on track? Where will my income come from, am I eligible for the age pension? How long will my money last? What happens when I pass away? Do I need to put money away for age care? And the big one that really struck to me was who can I ask for help? And I think that's where the super funds are becoming an increase or playing an increasing role, is that members have got that expectation that they can go to a super fund and they will help answer those questions. But again, they just don't know where to start.
Okay, do most decent super funds are they in a position to answer those questions?
I wouldn't say most. I think all super funds have been really good at accumulating assets. And I think this is why we have the regulatory scrutiny and the industry focus on the retirement phase because we've been so good at growing wealth and now we actually have to shift from just having low fees and high returns to actually enabling members to make those confident decisions about their retirement. Where super funds are doing well and one of unisuper's competitive strengths are our online calculators. So we have two retirement calculators, and one is called the Retirement Savings Calculator, which is for those pre retiree members to estimate their balances at retirement and how much income that translates and through retirement. And then we have a retirement income calculator, which is for those who know their balance at retirement, are actually at the point of making decisions for their retirement and they can see how long their income will last. We've set up these calculators to have the ability to explore different market conditions, allocate a proportion of your super two lifetime income streams, set up life stage goals, and the way the calculators are set up. Before they put in any information, we ask them what are their goals, and the results are relative to their goals, not just a number coming out of there. So we ask them how much money do you want in retirement and they'll say fifty thousand dollars, the results will be relative to their target. What we then do is because we need to put a focus on the members who are self directed. So, going back to my earlier analogy, the people who are getting financial or comprehensive full personal financial advice are very well served. But there's a big proportion of members who aren't getting that financial advice and we need to help them. So what we do once they use the calculators, we then link it to their online app and when they log in online, and it's a seamless process where we integrate their goals and results into their online account and they can see some dynamic next best actions of what they can do to actually improve their outcome for retirement. So I was literally speaking to the painter who was painting my house last week, and he's a small business owner, and he's about fifty years old, and he rarely has any SUPER at the moment because he hasn't had to compulsory put it in there, and we're thinking about retirement and what his options are, and we logged on on our phone, we played with the calculator, and if we were using his previous data, he contributed zero last year. So when you project it forward, he's not going to have enough SUPER. But I showed him if you say, well, I plan on putting an extra hundred dollars a week into my SUPER or an extra three hundred dollars a week into my SUPER, he could see the difference in what his potential balance at retirement would look like. And it's such a useful tool to play with and see what your different plans are and how those outcomes can actually better your retirement.
Do people still want to leave money to the kids.
That's what we're seeing. So, going back earlier, what I mentioned in terms of accumulation, everybody has a homogeneous goal in terms of get my balance to be as high as possible for when we move into retirement. It's all relative to what their objectives are. We have some members that want to spend it all and go caravaning around Australia or traveling the world and leave nothing to their children.
You're talking my language, that's me.
Well, then you have the others who kind of like my grandmother, an immigrant from Italy who literally saves money on the government age pension. Yeah, because she wants to leave everything to her children. So this is the challenge with the difference between accumulation and retirement, is that you need the member's preference in order to provide the right advice for them. If you just go blanket and try to give the same advice to everything to everyone, one size doesn't fit all. It's all relative to their goals and objectives. It's a good place to leave it.
Thank you very much for talking to fear and greed, No problem, Thank you. That was Giacomo Tarantalo Manager Retirement Solutions at UNI Super. This is a Fear and Greed business interview. Join us every morning for full episode of Fear and Greed, a business needs for people who make their own decisions. I'm sure I Elma enjoy your day