CFS to close cash and term deposit products

A number of advisers have complained they have been caught on the back foot by a move by the CFS FirstChoice platform to close its FirstRate Saver (cash) portfolio as well as the FirstRate Term deposit products. 

The advisers have complained that they were only notified of the move by CFS on Tuesday and that the products will close on 14th and 29th May, respectively effectively giving them around five weeks to switch their clients from what have represented fee-free products. 

The products affected FirstChoice FirstRate Term Deposits and FirstRate Saver account-based products which will close on 14 and 28 May, respectively and the FirstWrap FirstRate Wholesale Saver option which will close on 28 May. 

In an e-mail to advisers, CFS attributed the move in part to the need to prepare to separate from the Commonwealth Bank stating that “as a result of the different structures that exist between investment products, and the current interest rate market conditions, we are unable to continue to offer certain cash investment options”. 

Confirming the move, a spokesman for CFS said it regularly conducted reviews of its products to respond to member expectations and changes in the external environment. 

“We will be contacting members who are impacted by these changes over coming weeks. We are committed to improving member services and expanding investment offerings to provide members with greater choice and value,” he said. 

In its e-mail to advisers, the company emphasised that the options would continue to be offered its superannuation and pension products. 

However, a number of advisers have claimed that the move will see some clients moved from a fee-free area to the FS Strategic Cash fund which entailed an ongoing management fee of 0.41% which was reduced to 0.29%.  

Advisers were only notified of this by email on 6 April, 2021 – so only have 5 weeks notice to switch clients from the fee-free FirstRate Saver cash account to the FS Strategic Cash fund. 

However, CFS has stated that investors holding term deposits on termination will be paid their full interest to maturity entitlement and that the proceeds from their term deposit(s) can be invested in other FirstChoice investment menu options as instructed by investors and/or their advisers. 

It said investors holding FirstRate Saver balances will receive the full interest entitlement to the final date they hold the investment option with balances paid out to investors. 




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Comments

Comments

This is just how CFS does business. It’s all about them. I just don’t understand the arrogance from management when they are suffering such huge outflows. Outflows that will just increase.

I can't see what the issue is? Why would the CBA continue to offer fee free bank accounts and term deposits to the super fund members when they're not the majority owner of the platform anymore. The rates on TD's were so low I can't believe any Adviser is recommending them and the First Sentier Cash option quoted as having a management fee 0.41% has recently reduced that fee to 0.29% and even before the reduction is was producing net returns higher than the firstrate saver.

Brett H, the cash option is. It true cash and has some fixed interest involved thus leading to potential negative returns. CFS will no longer have true cash options

Word on the street, this was a CBA dummy spit.

Curiously, what happens if a client makes no changes in the lead up to the deadline. They move them from FirstRate cash too...? Seems problematic to force them into FS Strategic cash.

The issue is that they get the funds deposited to their bank account outside the investment structure

For non super and pension products, they're posting a cheque or depositing it into a nominated bank account. Not even switching it to the alternative cash fund.

Typical from CBA - first they pulled the Accelerator Cash Account from advisers and now exiting CFS investments. The faster CFS can separate from CBA, the better in my view.

Hopefully they've also pulled all those Accelerator Cash Account pages from their interminably long application forms.

And a compulsory move to a new investment option with higher fees is in the members best interest because.......

Its a more actively managed fund with fixed interest as well as cash investments? Some super funds have admin fees over the whole portfolio, ive seen percentage based admin fees for clients in some funds just sitting in cash for example. Then you have the investment mers for anything actively managed and sometimes also trustee fees on top of that

There is no compulsory move to the fee account - if no action is taken it’s sent to their bank account. I’m not thrilled with it, but only have a handful of switches to do.

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