A ‘cone of silence’ exists around intra-fund advice that has created an unfair legislative environment that favours one group of financial advisers over others.
That is a central premise of a submission to Treasury by West Australian-based financial adviser, Steve Blizard who said he believed there had been excessive media focus on Future of Financial Advice (FoFA) legislation since 2013, but virtually nothing about intra-fund advice payments “whereby default super fund marketing representatives and their advisers are remunerated”.
Within his submission, Blizard has cited examples (contained within the Financial Services Guides (FSG) of industry superannuation funds of those funds paying ‘bonuses’ of up to $40,000 to financial advisers.
“While bank staff have been totally banned form earning sales bonuses, many Industry Super fund staff and advisers are permitted under the intra-fund system to earn ‘performance bonsues’, in additional to receiving complimentary gym memberships,” his submission said.
“While intra-fund advisers deliver a certain level of compliance information for clients (i.e.Statements of Advice for rollovers), they do not have to comply with any other form of FOFA red-tape, such as annual Fee Disclosure Statements, nor do they have to chase up bi-annual Opt Ins, simply to get paid.”
“Instead, most intra-fund staff and advisers are remunerated primarily from collective administration fees automatically deducted from all super fund members,” Blizard’s submission said.
His submission argued that collective administration should only be charged by superannuation fund trustees for simple administration and provision of general factual information to fund members.
“Collective fees should not be charged to members unless the fund trustee obtains annual consent from members for these fees to be charged as administration fees from their fund,” Blizard’s submission said.
He said that, alternatively, all advice fees provided by Default Funds should be charged on a ‘user pays’ basis with informed consent provided by the fund member in advance for those fees.
“Any other form of personal advice should be charged directly to the member seeking advice, and not paid for by other members who are not receiving that advice. All advisers employed by that Trustee, who are providing financial product advice should not be remunerated by other members in lieu.”