Independent planners have been squeezed out of tendering for corporate superannuation – or so it seems for now.
While legislation for Future of Financial Advice (FOFA) regarding conflicted remuneration came into play on 1 July, the Corporate Super Specialist Alliance (CSSA) was on Thursday of the previous week still waiting to hear back from Minister for Financial Services and Superannuation, Bill Shorten’s office regarding its suggestions on how to resolve the corporate super conflicted remuneration problem.
FOFA legislation means that independent corporate superannuation advisers cannot do the tendering and provide ongoing advice due to rules around conflicted remuneration.
“If you’re an employee (adviser) of one of the major super funds and somebody comes to you and says 'which super fund should I have?’, you’re obviously going to recommend your own fund,” CSSA president Douglas Latto said.
“That employee will then provide the ongoing service for a salary – but we who are independent, if we do that and charge a fee and provide the ongoing service, well – we’re not allowed to.”
Latto questioned how independent the process was.
CSSA’s solution to the issue involves due diligence and oversight by both the superannuation funds involved in the tendering process and from the employer.
The employer could agree to a brief prepared by the independent adviser which scoped out the funds involved. Once a statement of advice (SOA) was prepared, it could be signed off by the superannuation fund, Latto said.
CSSA lodged the suggestion with Shorten’s office in April and provided information on tighter controls to Treasury, at its request, on 3 June.
Latto said it was unlikely an adviser would offer a stand-alone tender service.
“We’re not going to do the tenders and lose the ongoing servicing and educational seminars,” he said.
“There’s no value in a business just doing tenders because there’s no ongoing income stream.”
“The answer is they’ll be left by themselves, they’ll make random decisions and probably not the best decisions.”
At time of writing the Financial Services Council (FSC) had made a call for an extension on FOFA which had been backed by the Coalition in a statement from the Shadow Minister for Financial Services, Mathias Cormann.
Australian of Financial Advisers chief executive Brad Fox said the AFA had requested an extension on parts of FOFA, particularly conflicted remuneration and corporate super advice.
“At no stage through the FOFA negotiations has there ever been a statement or a deliberate intent to remove corporate super advice from the marketplace, yet that appears to be the outcome of how the legislation and regulations now sit,” said Fox.
“So if this is not a deliberate intent, then it should be fixed.”
