Ongoing financial advice support fees must become as low cost as a mobile phone with a five-year service support contract, according to a practicing financial adviser based in Western Australia.
The adviser has claimed that moving to a five yearly informed consent arrangements had the potential to see administrative costs across the industry fall from $28 million to only $5.6 million a year.
Utilising a submission to the Australian Securities and Investments Commission (ASIC) affordable advice review, Roxburgh Securities senior adviser, Steve Blizard has also called for the real of the financial advice opt-in requirements or, failing that, an amendment to make it less frequent.
“Annual opt-in creates extra red tape and forces advisers to only consider ongoing fee arrangements (OFAs with clients who are able to pay them enough so that they can deliver enough ongoing services to a client in a year to get them to actively opt-in,” his submission said.
And amid suggestions that ASIC is focused on scaled advice as a means of driving down advice costs, Blizard’s submission has attacked intra-fund advice claiming that most MySuper superannuation fund members had no idea “that they are paying over $100 million per annum in ongoing personal advice fees to 1,000 intra-fund personal financial advisers, none of whom are required to obtain annual renewals for their ongoing remuneration”.
“Intra-fund advice is being marketed as ‘free’, when in reality the fund member is paying for that advice through increased administration fees in their super fund,” Blizard’s submission claimed. “Some wealth super fund members take advantage of this cross-subsidised intrafund advice, subsidised by millions of other fund members, who never receive advice.”
He claimed that intra-fund adviser numbers had tripled over the past three years, whereas retail adviser numbers had fallen dramatically.
“Unaligned retail financial advisers now suffer an unlevel playing field, with default super fund product manufacturers and their intra-fund personal advisers permitted to manage any vertically integrated conflicts of interest, whereas, retail advisers are not,” Blizard’s submission said.
He said that collective fees should not be charged to default super fund members unless the fund trustee obtained annual consent for these advice fees charged from their fund.
