Changes to the delivery of intra-fund financial advice preclude recommendations to consolidate superannuation accounts or move from one fund to another, but still fall short of providing a level playing field, according to key industry stakeholders.
In announcing the rules, Assistant Treasurer and Financial Services Minister Bill Shorten said that intra-fund financial advice will be subject to key Future of Financial Advice (FOFA) regulations, including the best interests duty.
Shorten said this will promote a level playing field with other forms of financial advice, which is something that many key stakeholders in the financial services industry have long been calling for.
By removing the regulatory barriers to the provision of simpler forms of financial advice, various financial services providers, including financial planners and superannuation funds, can provide single issue or scaled advice while still meeting their regulatory obligations, according to a statement from Shorten.
Under the new rules, no switching advice can be given under intra-fund financial advice, apart from moving a member between products within the one registrable superannuation entity.
Financial advice also cannot be provided on financial products that the member holds outside of superannuation, or in relation to investment choices outside of the trustee-prescribed investment options.
But superannuation funds will continue to charge all members equally for the service regardless of whether they use it, and will not be subject to opt-in requirements.
Financial Services Council chief executive John Brogden said that millions of superannuation fund members will be paying for financial advice they do not receive, and the new rules create a framework where intra-fund advice in super will be exempt from full transparency.
"This runs against all of the Stronger Super/Cooper and FOFA reform principles. We cannot support a framework that creates two levels of transparency for financial advice," he said.
The Financial Planning Association (FPA) welcomed the long-awaited clarifications but said it fell woefully short of providing the level playing field between intra-fund advice and other forms of financial advice that had been promised.
FPA general manager of policy and government relations Dante De Gori said the new regulations still allow superannuation funds to charge indiscriminately and invisibly for their intra-fund advice.
"The FPA believes that any fees for intra-fund advice must be transparent to fund members. As long as the government allows financial planners to avoid disclosing fees, inequities will remain within the financial planning industry and those most affected will of course be the client," he said.
Association of Financial Advisers (AFA) chief executive Richard Klipin said the AFA absolutely endorsed the objective of getting more financial advice to more Australians, but he also strongly opposed the opaque bundled pricing model under which superannuation funds could offer intra-fund advice.
The idea that you can bundle a fee and not disclose to consumers where in the value chain it sits, with no ability to turn it on or off, goes right against the spirit of FOFA and consumers’ right to choose, he said.
The announcement was welcomed by Association of Superannuation Funds of Australia chief executive Pauline Vamos and Australian Institute of Superannuation Trustees chief executive Fiona Reynolds, who both said the new measures would benefit members.
"A fundamental principle is that people should be able to get access to genuine help with the money and benefits they have in their superannuation fund. This is the real benefit that will be delivered by the proposed arrangements," Vamos said.
People also don’t want to pay separately for a service they expect to be delivered by the fund itself, she added.
Reynolds said the demand for the service would grow as balances increased, and the way superannuation funds offered financial advice would likely be a key product differential once MySuper is up and running.
