All advisers created equal?

Questions have been raised about whether financial advisers paid a salary by a superannuation fund will find their circumstances challenged as a result of an introduction of an explicit fiduciary duty rule in the Corporations Act.

There has been much discussion over recent days about what the introduction of the rules, as recommended by the Ripoll Inquiry, would mean for financial advisers under various remuneration structures.

Financial services lawyer Peter Townsend warned that under a purist definition, financial advisers paid a salary by a product manufacturer - such as those employed by banks - may find they cannot continue their client relationships.

Many have now questioned whether an adviser paid a salary by a superannuation fund would also be unable to meet strict fiduciary rules for acting in a client's best interest, particularly when the 'best interest' advice may be for the client to leave that super fund for another.

Industry consultant Tom Collins said the question is “who is the adviser’s master?”.

“The salaried adviser of a super fund’s prime role, including industry funds, is to keep the money in the fund,” Collins said.

In responding to the first recommendation of the Ripoll Inquiry, Industry Super Network spokesperson David Whiteley said the introduction a fiduciary obligation "prohibits all forms of financial planner remuneration that create a conflict of interest".

"To avoid a conflict of interest, individual advisers or licensees cannot receive any payments from product providers or fund managers."

Speaking later to Money Management on the implications for salaried superannuation advisers, Whiteley acknowledged that there are "quite clearly some issues that are going to have to be worked out".

Townsend said under a purist definition, the same rules would apply to advisers paid a salary by a superannuation fund as those employed by a bank.

One possible arguing point between the difference of being employed by a bank and superannuation fund is that superannuation is considered a tax structure, rather than a product.

But Townsend believes "to the extent that they're advising on what is essentially an investment - they're really not any different".

"If you're giving advice on what sort of investment profile [the member] should have you're providing a financial service and so you're covered by the usual regime," Townsend said.

"That's definitely a financial service, even to the extent that you're recommending that somebody stay in a fund or leave it and go somewhere else - again, that's a financial service."

Representatives of licensed superannuation funds have been given relief from the requirements of section 945A of the Corporations Act, allowing them to give personal advice to members about their existing interest in a fund on limited topics.

As such, questions remain about whether those representatives granted relief from section 945A would also be exempt from an explicit fiduciary duty if introduced into the Corporations Act.