CFS and the value of not providing holistic advice

2 June 2020

Colonial First State (CFS) spent $5,500,410.68 delivering intrafund advice in 2019, with an average cost to members of its superannuation funds of $20.71. 

This was down slightly on its experience in 2018 when it spent $6,289,062.69 on intrafund advice, at an average cost to members of $22.09 each. 

Yet, according to evidence delivered by CFS to the House of Representatives Standing Committee on Economics it did not provide comprehensive advice over the period and did not employ financial planners. 

This, of course, overlooked the relationship between CFS and the Commonwealth Bank and the role played by the CFS platforms. 

The CFS answers to questions on notice from the committee stated: “Colonial First State Investments Limited (CFSIL) does not provide financial planning or advice (other than general advice) to members”. 

“We have answered the following question on this basis,” it said. “However, we note that independent financial advisers and financial advisers under the CBA Group (related entity to CFS) use our products and platforms.” 

On the issue of general advice, CFS declined to be specific. 

It said “CFS has a number of customer facing staff who provide general advice as part of our wider member services offering. During the course of business, these same staff would also undertake activities that would not be considered general advice. CFS does not discreetly split these costs, therefore we cannot provide this answer”. 




CFS taking the infra fund advice route of industry funds? Where's the protests?

Hi Hedware - Definitely not impressed with CFS or the other big retail funds that are taking this route. I guess they have taken the view if you cant beat em...join em. Small commission based clients used to just call the adviser or if they called direct to the fund they would be told to call the adviser and we would deal with their request. This is no longer possible so advisers are dropping their smaller fee clients (or those that were happy to pay a commission but do not want to pay a full service fee) and the product provider is now having to pick up the tab - I expect this to increase over time which is why I beleive that many of the product providers that ceased paying commissions will not pass this back on to clients - they will direct it to intra-fund advice service costs instead of crediting the clients account directy.
All this does is move the revenue from the adviser to the product provider. Im not completely against the idea of intra-fund advice just against the uneven playing field. Advisers were once paid by the product provider to provide this service - that has been outlawed for financial advisers but it is perfectly legal for the product provider to take that role over and charge collectively without the need to provide that service to all members that paid for it or all of the opt-n FDS rubbish that we must adhere to. The lines blur in the Intra-Fund advice world with no requirements for BID or FASEA CoE...are the clients Best Interests actually being met? or is it more a tool of FUM retention? Dont get me wrong I think alot of advisers no longer support the wrold of commissions (investment/super)

Agree with your sentiments. I guess intra fund advice is acceptable if it sticks to its knitting. But I know operation creep works to take over the work of professional advisors. Also people get the false impression that the intra fund advice is all they need and they don't need a professional advisor.

CFS is not the only non-industry fund doing this. I get surprised by the blind eyes here who only see industry funds doing this infra fund advice stuff.

Interesting to see that there are no comments re, intrafund advice being akin to commissions and should be subject to scrutiny.

I am not sure why those in this forum have such a biased view to constantly bash industry funds at every chance they can get.

The CFS intrafund fees mentioned in the article above are much higher than i have seen in any industry fund... where is the outrage?

I think that the whole issue is a mess. So many carve outs of the laws, so many inconsistancies in training levels, and the information is simply not sufficient to make any reasonable conclusion. For example How many staff were employed to give intrafund advice, what is the cost of the advice per item of advice. What advice was included? or was it including call centre staff telling people how to address details? This information is worse than useless. I do agree with many others. We need a simple system that everyone understands and has the same rules. If CFS and HESTA can provide advice without needing qualified financial advisers, then can't everyone provide that level of advice.

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