If opt-in requirements are brought in as part of the Government’s Future of Financial Advice (FOFA), it could mean every corporate super fund member would be required to opt in to advice fees individually, costing members access to advice and other valuable services, according to the Corporate Super Specialist Alliance (CSSA).
This possible outcome of the current round of regulatory changes would result in two types of corporate fund – MySuper funds and Choice funds, and although most employers currently charge a fee rather than a trail commission, it’s not clear how this will be affected by opt-in proposals, according to CSSA president Douglas Latto.
"Currently, collective fees are agreed between employers and advisers, and apply equally across all members," Latto said.
Under opt-in, it’s possible only individual members would be able to agree to such fees. This would mean advisers would have to collect the signatures of hundreds of thousands of employees every two years, which would be impracticable if not impossible, he said.
Latto added, it is not clear how these proposals would affect corporate super members, and it is an area that hasn’t really been addressed.
"Other proposed remuneration solutions include a ‘user pays’ system, which has been shown to not work," Latto said.
"Under the current system, all users equally share the cost of additional services such as site visits, but a user-pays system is completely reactive rather than proactive, and services such as this could disappear altogether. Members always have the option to opt out through fund choice.
"One of the biggest services the CSSA performs is an advocacy role, including negotiating better terms for members with insurers, benefitting all members on an ongoing basis – another service that would be compromised under opt-in," he said.
Latto believes a proposed ban on group risk commissions within super seems to wrongly assume that group risk is unadvised simply because it is a default or group contract.
But, he said, corporate specialists provide a range of ongoing advice services which are available to all members of the corporate super plan at all times, including ongoing reviews, monitoring, seminars and underwriting assistance.
"If corporate super specialists cannot be fairly rewarded for their services then those services will have to be withdrawn and ordinary Australians will lose access to experienced financial advice professionals, leaving them in the hands of inexperienced call centre staff," Latto said.
