The Financial Services Council (FSC) has told the Government it should allow members of MySuper products to obtain financial advice in the form of one-off advice with no ongoing fees.
In a submission filed with the Treasury, the FSC has stopped short of the position adopted by the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) which have argued for advice within MySuper and instead suggested the one-off advice arrangement.
In doing so, the FSC said that banning all advice fees from MySuper was only justifiable under two incorrect assumptions:
- Advice about superannuation only includes advice about specific investments and is therefore not required by MySuper members; and
- All MySuper members are disengaged, and they do not seek advice.
However, it claimed that, in reality:
- Many people have actively chosen a MySuper product, potentially via recommendation from their adviser;
- Many default members later become engaged in their superannuation (for example as they approach retirement) and seek advice about their savings; and
- Significant protections are already in place to ensure advice is provided appropriately.
The FSC submission said that for members undergoing (or planning for) significant life changes such as a family separation or retirement, there was a significant need for members who may previously have been disengaged to seek financial advice.
In explaining the organisation’s position, the FSC submission said that there was a danger that totally banning advice within MySuper would significantly worsen outcomes for many superannuation fund members.
“This is because the change will create a two-tiered system that charges out-of-pocket advice fees to some members, but not others. The members most affected by this change would be those who are least able to afford these costs,” it said.
“It is inevitable that fewer people will receive financial advice as a result of this change, as some people would simply walk away when they were unable to meet the full cost. This could materially impact the decisions they make in relation to their retirement savings, and in some cases substantially reduce their savings at retirement.”