Superannuation funds could be losing members because they are not explaining services such as life insurance, says Mercer.

“Members might leave their existing fund because they believe they can get better life insurance elsewhere, or don’t understand they can purchase additional units of insurance cover from their existing fund,” the company says in a new paper on superannuation funds providing advice to members.

The paper was written following detailed discussions with Mercer’s clients and superannuation funds.

“Members are hungry for information,” Mercer Financial Advice Leader Jo-Anne Bloch said. “Many don’t know what level of insurance cover is suitable for their needs.

“Financial literacy remains lower than we would like.”

She says the recent consultative paper on scaled advice from the Australian Securities and Investments Commission should be a spur to look at the topic more closely.

“Scaled or simple advice via a superannuation fund is essential for 80% of members whose advice needs are likely to be straightforward,” Ms Bloch said.

“The advice also needs to be affordable because members are already paying for their super to be managed.”

Delivering advice on the services the fund offers, such as insurance, will help funds retain their members.

“Super funds could minimise their cost of retaining members if they used simple advice as a way of better communicating the benefits they offer, or clearing up misconceptions a member might have on issues such as insurance,” she said.

“Members who call their fund for advice may not understand, and definitely won’t care, about advice having to be treated under different regulatory requirements – they just want their questions answered.”